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Caltex Australia - Marketing and Distribution growth continues(ENP Newswire Via Acquire Media NewsEdge) ENP Newswire - 26 August 2014 Release date- 25082014 - Caltex Australia Managing Director & Chief Executive Officer Julian Segal said, 'This result is at the upper end of our recent half year profit guidance. Our balance sheet remains strong and, despite operating within a competitive and ever changing environment, the outlook for our business continues to be positive. We are well progressed in restructuring our supply chain, with the conversion of our Kurnell refinery to a leading import terminal on schedule and the refinery closure sequence to commence in October this year. This has enabled us to commence a company-wide cost and efficiency review, which will establish a stronger platform for the business going forward. We also continue to invest to support growth in our Marketing & Distribution operations.' Historic Cost Profit On an historic cost profit basis, Caltex's after tax profit was $163 million for the first half of 2014. This compares unfavourably to the $195 million after tax profit for the first half of 2013. The 2014 half year includes crude and product inventory losses of $10 million after tax, compared with a crude and product inventory gain of $24 million after tax for the previous half year to 30 June 2013. Replacement Cost Operating Profit On a replacement cost of sales operating profit (RCOP) basis, Caltex's after tax profit was $173 million for the first half of 2014. This compares with $171 million for the first half of 2013. Marketing & Distribution earnings growth continues Marketing & Distribution achieved an EBIT of $393 million for the first half of 2014. This exceeded both the prior year equivalent (1H 2013: $365 million) and the previous first half record set in 2012 ($367 million). The first half 2013 Marketing & Distribution result included two one-off impacts (the significant fall in the Australian dollar and the Sydney premium petrol supply interruption) of approximately $11 million. After normalising for these events, Marketing & Distribution continues to deliver strong underlying earnings growth of approximately 5%. The first half result excludes any earnings impact of the Scott's Fuel Divisions acquisition, which was completed on 4 June 2014, and the Sydney bitumen business, which was sold in December 2013. Total sales volumes of high value transport fuels were 8.1 billion litres, an increase of 4% on the prior corresponding period (7.8 billion litres). After normalising for the Sydney premium petrol interruption in 2013, volume growth was approximately 3.5%. Higher sales of premium grades of petrol and diesel, and jet fuel have offset the long term decline in demand for unleaded petrol, including E10. Total petrol volumes fell 2.2% to 3.1 billion litres, in line with industry trends. Total diesel volumes grew 7.5% to 3.7 billion litres. This was driven by strong commercial diesel volumes (led by mining and marine sectors) and the retail substitution of petrol sales. The strong growth in the premium Vortex diesel product occurred across both commercial and retail segments. Jet volumes grew strongly with volumes up 11% versus the prior corresponding period. Caltex continues to invest in its retail site and terminal network, including the recent opening of its new 85 million litre Adelaide terminal. This demonstrates our commitment to the Australian market at a time when our traditional global competitors are scaling back their presence. Refining & Supply performance Refining & Supply delivered an RCOP EBIT loss of $65 million in the first half. This compares unfavourably to a RCOP EBIT loss of $43 million in the first half of 2013. The 2014 half year result includes the impact of a lower CRM and a number of one-off Kurnell refinery production impacts as Kurnell makes the transition from refining operations to a leading import terminal. These impacts to Kurnell's production mix and yield were anticipated and are the natural result of operational constraints during the shutdown and conversion process. The Singapore Weighted Average Margin was US$12.87/bbl for the first half of 2014, compared with US$14.52/bbl in the prior corresponding period. The average CRM for the six months to 30 June 2014 was US$9.20/bbl, below the prior year equivalent of US$11.76/bbl. Operationally, production volumes of high value transport fuels increased 4% to 5.4 billion litres (1H 2013: 5.1 billion litres). A strong Lytton refinery operational performance delivered record transport fuel production, mechanical availability and yield recovery rates. The improved Lytton refinery production has been offset by lower planned production from the Kurnell refinery due to the conversion process. The conversion of Kurnell refinery to a leading import terminal continues to progress to plan. Caltex has made its final crude purchase for Kurnell and has now commissioned both jet and diesel systems. The Kurnell refinery closure sequence is scheduled to commence in October this year. Strong balance sheet Net debt at 30 June 2014 was $827 million, compared with $742 million at 31 December 2013. This equates to a gearing ratio of 23% (net debt / net debt plus equity). On a lease adjusted basis, gearing was 33%. Caltex's strong balance sheet has provided the financial flexibility to enable Caltex to successfully convert Kurnell to a leading import terminal and continue to invest in growth opportunities, including the recent Scott's Fuel Divisions acquisition. Company-wide Cost and Efficiency Review Following the supply chain restructure, which includes the conversion of Kurnell refinery and the procurement of Caltex's refined product requirements through Ampol Singapore, the business will evolve into one value chain from product sourcing to customer. As part of this transition, Caltex is undertaking a company-wide cost and efficiency review to give it the financial strength to maintain its market leadership position and to enable Caltex to capture future growth opportunities. As a result of the review, headcount will reduce by approximately 350 people across operational and support functions. The reduction is in addition to the previously announced reductions relating to the closure of the Kurnell refinery. The reduction will take place over time with the majority expected to occur within the next 12 months. 'As we have done previously, we are committed to supporting our people with the highest level of care and respect. We are discussing with our employees redeployment opportunities and their redundancy entitlements. We are also providing them with outplacement support,' Mr Segal said. The review will result in restructuring costs of between $130 million to $155 million before tax (including redundancy costs, other cash and non-cash costs), being recognised in the second half of 2014. The restructuring is expected to deliver associated benefits of approximately $100 million (before tax) per annum, with the full annual run rate expected to be achieved in 2016. Another element of the review is a focus on the efficiency of capital expenditure and working capital management in the new supply chain. This includes a planned reduction in working capital, with the company expecting to realise an inventory reduction of approximately one million barrels in the second half of 2015 following the Lytton major turnaround and inspection (T&I) maintenance program. This is in addition to the previously announced two million barrel reduction targeted following the Kurnell refinery closure. Given the advanced stage of the supply chain restructure, management has now commenced a capital management strategy review. Interim dividend The Board has declared an interim fully franked dividend of 20cps for the first half of 2014, in line with the revised dividend pay-out ratio of 20% to 40%. This compares to Caltex's 2013 interim dividend of 17cps, fully franked. The record and payment dates for the interim dividend are 9 September 2014 and 1 October 2014, respectively. Investor Contact: Rohan Gallagher Tel: 02 9250 5247 Email: [email protected] Media Contact: Sam Collyer Tel: 02 9250 5094 Email: [email protected] (c) 2014 Electronic News Publishing - |