Caltex releases half-year 2019 results
Caltex (ASX:CTX) today announces its financial results for the six months ending 30 June 2019.
Here are some of the key points:
- Replacement cost of sales operating profit (RCOP) NPAT of $135 million, towards the top end of guidance range
- Caltex is focusing on capital discipline and reducing costs across the business, with $100 million per annum cost out program announced today.
- Execution of Caltex’s retail strategy continues, leveraging learnings from Caltex’s work to date and a review of Caltex’s company-controlled sites to ensure capital is allocated to deliver maximum value for shareholders
- To date the review has identified ~500 sites that will deliver strong returns and growth from an enhanced convenience offer and disciplined execution and ~50 sites that have a higher and better alternative use and will be divested.
- The review continues on the remainder of the company-controlled retail site network. It will provide a clearer roadmap to deliver earnings growth with appropriate returns, while ensuring we maintain the presence of Caltex’s ~2,000 site-strong StarCard accepting network.
- Interim dividend of 32 cents per share (fully franked), representing a 59% payout ratio.
Managing Director and CEO, Julian Segal, said that while the result is disappointing overall, Caltex is responding by focusing on capital discipline and reducing costs.
“Economic weakness, soft retail fuel margins, lower refining margins and outages have impacted Caltex’s performance. Fuels & Infrastructure continues to deliver underlying growth and reliable cash flows and Convenience Retail has regained market share while remaining disciplined in a tough retail fuels market.
“We are responding to the tough conditions through a focus on capital discipline and by sustainably reducing Caltex’s cost base. We are also progressing Caltex’s retail strategy, leveraging learnings from Caltex’s work to date and a review of Caltex’s company-controlled network to ensure Caltex’s offer is tailored to meet individual site and local area customer requirements.
“Caltex has a history of adapting to operating conditions to continue to succeed and we will remain agile to deliver for Caltex’s shareholders.”
Convenience Retail network review
Caltex continues to progress its Convenience Retail strategy by leveraging learnings from the transition of retail sites to company-operations (500 sites and 5,000 employees), the roll out of 63 Foodarys and the review of Caltex- controlled retail network. This review is aimed at ensuring Caltex’s offer is tailored to meet individual site and local area customer requirements, and delivers earnings growth with appropriate returns.
Around 500 sites within the company-controlled network have been identified to deliver strong returns from an enhanced convenience offer, with clear opportunities to deliver growth through disciplined execution. Around 50 metropolitan freehold sites have also been identified as being able to deliver a higher value through alternative use and will be divested in tranches commencing in 2H 2019.
For the remaining sites in Caltex’s company-controlled network, there is further work to be done to determine the best way to capture value, while ensuring Caltex maintains its ~2,000 site strong StarCard accepting network.
Caltex is confident with the progression of its convenience retail strategy, and still anticipates it will deliver a meaningful growth opportunity. The learnings from the past two years and results of the review to date indicate that the previously guided uplift target of $120m-150m by 2024 will not be met. Caltex will take the necessary time to ensure the disciplined execution of the strategy, including tailoring the right format with the right cost base to the right local market, and will provide further updates as the retail strategy is executed.
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