Caltex Australia posted record profits, a result managing director and CEO Julian Segal told C&I Week was “further demonstration of the success we have had in adapting our business to circumstance”.
Caltex posted a record full year replacement cost of sales operating profit (RCOP) NPAT of $628 million, excluding significant items. According to the company the RCOP calculation excludes the impact of the fall or rise in oil prices (a key external factor) and presents a clearer picture of the company’s underlying business performance. On a full year historic cost profit after tax (HCOP) the company recorded a result of $522 million, including significant items.
“Over the past five years, we have successfully transformed our business. We are on a stronger footing to navigate the evolving market place and successfully deliver top quartile total shareholder returns,” Mr Segal told C&I Week.
“Our 2015 review of strategy builds on Caltex’s core competitive advantage provided by the strength of our integrated fuel value chain. We intend to initially concentrate on leveraging our assets and consumer facing capabilities in convenience and mobility to build a new and differentiated convenience offer for customers across multiple formats, products, locations and channels.”
Mr Segal said Caltex’s approach will centre around two key drivers, firstly the assets and capabilities Caltex has today and secondly the evolving retail environment.
“Many people don’t recognise it, but we are already one of the largest retail platforms in Australia.We have over 800 sites that we control conveniently located on key commuter routes, and over 3 million customer visits every single week. We have convenience sales in excess of $1 billion a year, manage over 500 franchisees and run a sourcing and distribution business delivering to over 450 locations up to four times weekly.”
Mr Segal said the company sees the model of convenience expanding to reflect today’s digitally connected and time poor consumers.
“We think that ‘mobility’ – or involvement in how people move around and their decisions around transport, will be an additional element of the expanded convenience. Caltex is well placed to use our current assets, capabilities and customer base to make mobility decisions easier and more efficient. As we explore this theme, we have taken an initial step with a small investment in a peer to peer car sharing business, the Car Next Door.”
While Caltex looks to new opportunities, Mr Segal said the key focus remains on its core integrated transport fuels business. From a product mix perspective, Caltex continues to drive premium fuels sales (including Vortex Diesel). Higher sales of premium grades of petrol and retail diesel continue to offset the long term decline in demand for unleaded petrol, including E10. The increased penetration of premium Vortex products has been driven by targeted investment in growth, including new retail service stations, the refurbishment of existing service stations and increased marketing spend.
The company’s balance sheet remains strong with net debt at December 31, 2015 of $432 million – lower than the two previous years and reflects stronger second half earnings, disciplined capital expenditures, and the net impact of lower crude prices and a lower Australian dollar on working capital balances.
Caltex announces off-market buy-back
Caltex also plans to conduct a $270 million off-market buy-back, reflecting balance sheet strength and availability of surplus franking credits.
Caltex closed its Kurnell refinery in 2014 and cash flows have been significantly improved by the continued evolution into an integrated transport fuels value chain business, enhanced by the company’s ongoing cost and efficiency program.
According to the company, its overarching objective is to deliver top quartile total shareholder returns and therefore its capital management framework is designed to provide a balanced approach to the allocation of capital between maintenance to ensure a safe and sustainable business, investing for growth and returning capital to shareholders.
The buy-back is expected to be completed during the second quarter of 2016 and details will be set out in a booklet which Caltex shareholders should start to receive from March 3, 2016.