Any doubts as to why Julian Segal is leaving Caltex were put to rest today with the company reporting a dismal half-year profit report with earnings down from $443 million to $255m for the half year.
Granted the weak Australian dollar has played a huge role in weak fuel margins which was reflected elsewhere in the industry, with Viva reporting weak numbers yesterday and its stock price down again today bringing the fall in its share price to 18 per cent since its July 24 high of $2.43 a share.
Caltex is down nine per cent from its recent high of $26.96 a share on July 31.
While oil prices have fallen, the local dollar has fallen by more and, as oil is imported, in a weak market the petrol retailers have nowhere to run.
That much is out of Segal’s control but its his convenience store strategy that really concerns because he walked away from previous guidance which said Foodary was going to lead the way to a $150m boost in earnings.
On the same day Segal backtracked, his rival BP signalled a major competitive hit by teaming up with David Jones to launch an up-market convenience war.
David Jones is owned by South African based Woolworths Holdings which supplies BP conveniences stores in that country.
It also has close ties with Marks & Spencers who are BP’s long term partner in the UK where it has operated convenience stores for the last 15 years.
The strategy might not work in Australia but the point is the new opponents know their way around the block which raises the bar for Caltex.
This won’t be Segal’s problem because he has signalled his intention to retire after 10 years in the job.
As highlighted previously fuel and infrastructure boss Louise Warner is tipped as the lead internal candidate for the job.
Segal spent around $120m buying back his franchisee sites over the last couple of years in the wake of an underpayment scandal.
Now 50 of these are up for sale after an internal review of the 550 metropolitan sites.
The company is yet to look at his 250 regional sites.
Just how much will be raised by the site sale remains to be seen but suffice it to say the environmental clean up pre-sale will minimise the profit uptake.
Segal has also chopped 200 head office jobs as part of a $100m cost cutting drive as he attempts to establish a decent base for his successor.
Extracted from The Australian