CANBERRA: Caltex Australia has reported a more than doubling in first-half net income, while core profit jumped 45 per cent to $251 million. Tough competition from new players is ramping up the pressure on Caltex Australia, which has abandoned its target for 5 per cent annual growth in earnings in its marketing business.
But chief executive Julian Segal insists the company is holding its own thanks to its improved supply chain, despite a drop in business-to-business sales in the first half.
Caltex reported a 45 per cent first-half core profit to $251 million, in line with its pre-released numbers last month. But the half saw a 4.4 per cent dip in sales volumes of transport fuels on the loss of a major diesel supply contract while jet fuel sales sank 8 per cent.
The Australian fuels market has been transformed in recent years by the entry of aggressive new players such as traders Trafigura, Glencore and Vitol, while rival BP is investing to defend its position. After converting one of its two refineries to an import terminal, Caltex has invested more in terminals and distribution networks, and relies on a Singapore-based division to source oil and fuels for imports to improve efficiency of supply.
“There is a new game in town but I think we’ve done extremely well adjusting to it,” Mr Segal said. “We are defending our position and winning new business.”
Still, Caltex shares dropped 6.5 per cent to $29.85, even after the interim dividend more than doubled to 47¢, to near the mid-point of the 40 to 60 per cent payout ratio it reinstated in February. The drop under-performed the energy sector, which sank 6.15 per cent.
UBS analyst Cameron Hardie said the move probably reflected some disappointment that the payout fell short of the top end of the target range. Nor did shareholders get firm news of any additional capital management despite Mr Segal flagging in February that was likely in the absence of any significant acquisition.
Mr Hardie said any chance of an acquisition of BP’s petrol stations had faded with the oil major’s recent decision to increase investment in its network, increasing the likelihood of an off-market share buyback, Caltex’s preferred method to return funds to shareholders.
