The refining industry is in upheaval.Caltex Australia chief executive Julian Segal has dismissed concerns that tough new rivals in fuels retailing will eat into the company’s market share and margins, despite pointing to a likely step-up in competition in specific areas.
After reporting a 27.5 per cent drop in benchmark full-year profit to $332 million, in line with guidance, Mr Segal retained Caltex’s forecast for 5 per cent annual growth in earnings before interest and tax for the marketing business. Marketing EBIT in 2013 rose 4 per cent to a record $764 million, a stark contrast to the $171 million deficit for the refining business, which is being restructured to stem losses.
Australia’s refining and marketing industry is in upheaval, with refinery closures, divestments and new international traders entering the market.
Last Friday, Shell announced the sale of its Geelong refinery and Australian petrol station business to crude oil trading giant Vitol for $2.9 billion, while Trafigura’s Puma Energy operation has made several acquisitions of fuel retailers in the past 12 months.
”We are a force of stability in this market,” Mr Segal said. ”It is about reliability of supply and also product quality.”
He said Caltex’s timely investments in infrastructure and the supply chain, in converting its Sydney refinery to an import terminal and sourcing more fuel from Singapore stood it in good stead in the new, tougher environment.
”What it takes to be successful in this industry, it’s about competitive supply,” he said. “The likes of the new players coming into the market are all about big volumes, one product kind-of shipments.”
UBS analyst Nik Burns said Caltex had a good record in growth in pre-tax earnings in marketing, getting close to its 5 per cent growth target even last year when it suffered an interruption to premium petrol supply in Sydney and a rapid weakening in the Australian dollar.
”They have delivered to date, so the market has been willing to give them the benefit of the doubt,” Mr Burns said.
Caltex’s first-half net operating profit was just higher than the mid-point of December guidance of $320 million-$340 million.
Bottom-line net income, which includes the impact of changing oil prices on the value of crude stockpiles, surged more than ninefold to $530 million from $57 million the previous year, when Caltex took $309 million of charges connected with the conversion of its Kurnell refinery in Sydney to an import terminal.
Caltex shares rose 2.2 per cent to $20.94, their highest close for almost eight months.
Caltex declared a final dividend of 17¢ a share. The full-year payout of 34¢ a share is down from 40¢ for 2012 as Caltex has cut the payout ratio while it is converting the Kurnell refinery, which is due to be finished in the December quarter.
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