Slide 1: ASX Announcement: 2014 Half Year Media Release and Results Presentation
BY ELECTR RONIC LOD DGEMENT A ASX ANNOU UNCEMENT CALTEX A AUSTRALIAA LIMITED CN 004 201 307 AC LEVEL 24 4, 2 MARKET T STREET SYDNEY NNSW 2000 AUSTRALIA A 25 August 2014 Company A Announcem ments Office e Australian Securities Exchange E CALTEX A AUSTRALIA A LIMITED 2014 HALF YEAR ME EDIA RELE EASE A
Slide 2: ASX/Media Release
Caltex Australia ASX/Media Release For immediate release Monday 25 August 2014 Marketing & Distribution growth continues; Kurnell refinery to commence shut down in October Key points: First half HCOP NPAT of $163 million (includes a $10 million after tax inventory loss) First half RCOP NPAT of $
Slide 3: Historic Cost Profit and Replacement Cost Operating Profit
-2- 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
Slide 4: Company-wide Cost and Efficiency Review
-3- 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.
Slide 5: 2014 Half Year Results Announcement
2014 Half Year Results Announcement Caltex Australia Limited ACN 004 201 307
Slide 6: Agenda
AGENDA Safety Half Year 2014: Key Highlights Strategy Update Financial Highlights Marketing & Distribution Highlights Refining & Supply Highlights Financial Discipline Result Summary & Outlook Q&A Appendices 2
Slide 7: Operational Excellence Moment
OPERATIONAL EXCELLENCE MOMENT 3
Slide 8: Operational Excellence Moment: Safety Performance
Operational Excellence (OE) Moment Safety performance levels maintained throughout Kurnell conversion 10 8.82 9 • Strong process and personal safety focus continues, with 8 significant improvements Per million man hours worked 7 largely being maintained through 2014 6 5 4.57 • During the conversion
Slide 9: Agenda
AGENDA Safety Half Year 2014: Key Highlights Strategy Update Financial Highlights Marketing & Distribution Highlights Refining & Supply Highlights Financial Discipline Result Summary & Summary Q&A Appendices 5
Slide 10: Key Highlights: Half Year 2014 Results Summary
Key Highlights Half Year 2014 Results Summary Consolidated Group Result $173m RCOP NPAT, at upper end of recent profit guidance Interim dividend 20cps declared (2013: 17cps) fully franked, representing 31% payout Balance sheet remains strong, BBB+ / Stable Credit rating reaffirmed Marketing gr
Slide 11: Key Highlights: Outlook
Key Highlights Outlook Short Term • Marketing & Distribution growth expected to continue, despite (Next 12 months) competitive environment • Prioritise the optimisation of the entire supply chain - Conversion of Kurnell refinery to a leading import terminal remains on schedule and on budget - Ampol
Slide 12: Agenda
AGENDA Safety Half Year 2014: Key Highlights Strategy Update Financial Highlights Marketing & Distribution Highlights Refining & Supply Highlights Financial Discipline Result Summary & Outlook Q&A Appendices 8
Slide 13: Strategy Update
Strategy Update Caltex’s strategy is very clear CALTEX’S VISION Outright leader in transport fuels across Australia MEASURE OF SUCCESS Safely and reliably deliver top quartile total shareholder returns KEY STRATEGY PILLARS Comprehensive targeted offer to Organisational Corporate Superior supply chai
Slide 14: Caltex Value Chain
Caltex Value Chain Our Competitive Position: To optimise the entire value chain Product sourcing Infrastructure Customer Controlled Retail Offshore supply agreement (Chevron) Woolworths Caltex Consumer sites sales Lytton Refinery Independent & branded resellers Terminals, tankers, pipelines, depots,
Slide 15: Strategy Update: Growing close to our core
Strategy Update Growing close to our core (with lower earnings volatility; lower cash flow volatility) GROW IMPROVE TRANSFORM • Target high growth channels / • Lytton (Brisbane) Refinery • Last crude purchased July 2014 geographies / products • Operational Improvements • Jet and Diesel systems • Con
Slide 16: Kurnell Conversion – key milestones
Strategy Update Kurnell Conversion – key milestones, On time, On Budget Time Proposed Work Status 1H 2013 • Marine EIS submission / Public Exhibition Feb-Mar 2013 • Complete • Land EIS submission / Public Exhibition May-Jun 2013 • Complete • Demolition of Kurnell Propane De-asphalting Unit (PDU) • C
Slide 17: Agenda
AGENDA Safety Half Year 2014: Key Highlights Strategy Update Financial Highlights Marketing & Distribution Highlights Refining & Supply Highlights Financial Discipline Result Summary & Outlook Q&A Appendices 13
Slide 18: Financial Highlights
Financial Highlights Half Year Ending 30 June 1H2014 1H2013 % Change HISTORIC COST EBIT ($m) 275 319 (14) NPAT ($m) 163 195 (17) EPS (cps) 60 72 (17) REPLACEMENT COST EBIT ($m) 290 284 2 NPAT ($m) 173 171 1 EPS (cps) 64 63 1 1 Dividend (cps) 20 17 18 Debt ($m) 827 729 13 Gearing (%) 23 24 (3) Gearin
Slide 19: Reconciliation to underlying profit metric
Financial Highlights Reconciliation to underlying profit metric 1H 2014 $m 1H 2013 $m (After Tax) (After Tax) HCOP NPAT 163 195 Add: Inventory loss/(gain) 10 (24) RCOP NPAT 173 171 15
Slide 20: Segmented Reporting: HCOP EBIT
Financial Highlights Segmented# Reporting 1H 2013 vs 1H 2014 HCOP EBIT 500 450 400 350 319 284 28 0 290 300 275 250 34 15 22 200 150 100 50 0 #Segment results are based on a transfer price between Refining & Supply and Marketing & Distribution determined by reference to relevant import parity prices
Slide 21: RCOP Earnings – Marketing up, Refining down, Corporate flat
Financial Highlights RCOP Earnings – Marketing up, Refining down, Corporate flat $m Caltex RCOP NPAT* 500 450 • Marketing & Distribution growth 400 continues 350 • Refining & Supply losses 261 impacted by lower CRM and 300 Kurnell conversion 250 155 161 • Strong Lytton operational 200 performance dr
Slide 22: Segmented Reporting: RCOP EBIT
Financial Highlights Segmented# Reporting RCOP EBIT* ($M) 500 Refining & Supply segment includes exchange impacts (before tax) on payables in: • 1H10 of ($36m) loss 400 • 1H11 of $11m gain 393 • 1H12 of ($4m) loss 367 365 300 341 • 1H13 of ($39m) loss • 1H14 of $13m gain 329 292 284 290 200 Note: Ac
Slide 23: Integrated Transport Fuels Margin
Integrated Transport Fuels Margin Integrated margin down on lower CRM, despite fuel Marketing margin expansion Caltex Integrated Gross Transport Fuels Acpl Margin* 13.00 • Transport fuels margin expansion 11.7 11.3 (5.00 cpl from 4.38 cpl) due to 11.0 10.5 favourable premium product mix 11.00 10.2 s
Slide 24: Agenda
AGENDA Safety Half Year 2014: Key Highlights Strategy Update Financial Highlights Marketing & Distribution Highlights Refining & Supply Highlights Financial Discipline Result Summary & Outlook Q&A Appendices 20
Slide 25: Marketing & Distribution Highlights
Marketing & Distribution Highlights Growth continues on stronger fuel volumes, favourable product mix shift, despite divestment of bitumen business $m Marketing Gross Contribution EARNINGS GROWTH CONTINUES 600 • Record first half result • Stronger volume growth for diesel 500 84 and jet, favourable
Slide 26: Marketing & Distribution Growth – Key Drivers
Marketing & Distribution Growth Marketing & Distribution – Key Drivers 1H 2013 vs 1H 2014 RCOP EBIT 500 480 460 440 64 5 22 420 10 400 4 5 393 380 365 360 340 320 300 22
Slide 27: Diesel, Jet Fuel Sales
Marketing & Distribution Highlights Diesel, Jet Fuel Sales – Market share gains, continuing growth in premium diesel • Total diesel volumes up 7.5% BL Caltex Diesel, Jet Sales • Retail diesel volume growth of 8.6% 6.0 • Premium diesel sales volumes up 55% (includes Vortex retail diesel, TecDiesel),
Slide 28: Petrol Sales – Premium Petrols Up
Marketing & Distribution Highlights Petrol Sales – Premium Petrols Up; Total Market down BL 4.00 Caltex Petrol Sales • Total petrol volumes down 2.2%, approximately in line with market 0.3 3.00 0.6 0.5 0.5 • Premium petrol sales up 2.2%. 0.4 0.6 Premium now represents 28.6% of 0.7 0.8 0.9 0.9 total
Slide 29: Non Fuel Income
Marketing & Distribution Highlights Non Fuel Income (NFI) – Accelerated store investment impacts near term NFI expenses, whilst enabling greater premium fuel sales. $m 250 Caltex Non Fuel Income • Non fuel income contribution down 5.6% on 1H13 200 • Card income and Retail shop sales up year on year
Slide 30: Marketing & Distribution: Other Developments
Marketing & Distribution Other Developments • Scott’s Fuel Divisions acquisition (total outlay ~$95m) – 4 June 2014 • Network development continues − New to Industry / Caltex retail outlets (4 completed YTD; ~10-15 sites targeted p.a.) − Retail site rebuilds & refurbishments (including 21CC Retail f
Slide 31: Agenda
AGENDA Safety Half Year 2014: Key Highlights Strategy Update Financial Highlights Marketing & Distribution Highlights Refining & Supply Highlights Financial Discipline Outlook & Summary Q&A Appendices 27
Slide 32: Refining & Supply Highlights
Refining & Supply Highlights Impacted by lower CRM and Kurnell conversion; Strong Lytton operational performance 1H 2013 vs 1H 2014 RCOP EBIT 200 EXTERNAL DRIVERS CONTROLLABLE DRIVERS 150 CONTROLLABLE DRIVERS 100 Approximately $30m relates to impact of Kurnell conversion(e.g. low value exports due t
Slide 33: Caltex Refiner Margin driven by lower Singapore WAM
Refining & Supply Highlights Caltex Refiner Margin (CRM) driven by lower Singapore WAM, tightening quality premium and freight differential The CRM was supported by a favourable market price timing lag of US$0.27/bbl 20 (A$10.6m EBIT) in 1H14 9 Caltex Refiner Margin Build-up (US$/bbl) 18 1H14 1H13 1
Slide 34: Supply Chain Highlights: Caltex Refiner Margin
Supply Chain Highlights Caltex Refiner Margin (CRM) driven by lower Singapore WAM, tightening quality premium and freight differential 2006-2014 Caltex Refiner Margin*1 (US$/bbl) 25 • Softer Singapore Weighted Average Margin (SWAM) (US$12.60/bbl versus US$14.91/bbl) 20 • Lower SWAM exacerbated by ti
Slide 35: Lower freight differential
Refining & Supply Highlights Lower freight differential driven by product freight rates USD/bbl 6.00 • Product freight rates fall on increased 5.00 regional product shipping supply (down 9.6% to US$4.89/bbl, US$5.41/bbl pcp) 4.00 2.55 1.19 • Crude freight costs down 2.9% to 1.59 2.11 average US$2.78
Slide 36: Strong Lytton operational performance
Refining & Supply Highlights Strong Lytton operational performance drives record first half production Refinery utilisation (%) and Availability (%) % 96 95 95 97 Lytton delivers record 5 100 94 year (first half) 81 performance for: 80 75 75 70 88 66 76 71 72 74 76 74 75 ‐ Utilisation (88%); 60 68 5
Slide 37: Refinery transport fuel production
Refining & Supply Highlights Strong Lytton operational performance drives record first half production Refinery transport fuel production BL 6.00 5.4 5.5 5.5 • Lytton delivering 5.4 2.9 5.1 5.1 2.8 5.1 2.8 on operational 2.5 5.00 4.7 2.4 2.7 2.6 improvement plan 4.3 2.4 2.5 4.00 • Despite impending
Slide 38: Enhanced Product Mix
Enhanced Product Mix Production of higher value products* increase at Lytton, Kurnell impacted by conversion ML % 1,800 16 • Lytton’s HVP production up 14% compared to 1H 2013 1,600 14 1,574 1,585 1,400 12 1,200 • Overall decline in 1H 2014 due to 10 impact of Kurnell conversion. 1,152 1,000 1,058 8
Slide 39: Refining & Supply Production Mix
Refining & Supply Production Mix Lytton’s product slate (% of total volumes) assists earnings differential LYTTON KURNELL 1H 2014 2013 2012 1H 2014 2013 2012 Diesel 38% 39% 40% 31% 29% 26% Premium Petrols 13% 12% 13% 13% 16% 14% Jet 12% 10% 10% 21% 20% 19% 63% 61% 63% 65% 65% 59% Unleaded Petrol 34%
Slide 40: Refining & Supply Result Composition
Refining & Supply Profitable Lytton result, offset by sub-optimal Kurnell production; and conversion costs • Lytton performed well, Refining & Supply Result Composition utilisation and high value EBIT ($ millions) 1H14 1H13 product up – remains Lytton - Underlying 47 68 profitable, despite lower CRM
Slide 41: Agenda
AGENDA Safety Half Year 2014: Key Highlights Strategy Update Financial Highlights Marketing & Distribution Highlights Refining & Supply Highlights Financial Discipline Result Summary & Summary Q&A Appendices 37
Slide 42: Cost and Efficiency Review “Tabula Rasa”: Restructuring Costs
Cost and Efficiency Review “Tabula Rasa” Estimated restructuring costs (pre-tax) to be recognised in 2014 $ million Cash Costs - Redundancies 50-60 - Asset Rationalisation (primarily depot closures) 20-25 - Early repayment of final USPP tranche (net 2014 impact) 15 - Other Costs and Fees 20-25 Total
Slide 43: Efficiency review: Expected benefits
Strategy Update Company-wide efficiency and organisation structure review – Benefits Expected Recurring Savings * ($m) Head count reduction (approximately 350 FTEs) 40 - 50 Increased offshoring of IT services 10 Improved procurement of non-fuel goods and services via Singapore 10 procurement functio
Slide 44: Capital Expenditure
Capital Expenditure Capital directed to grow Marketing & Distribution and ensure safe, efficient business $m Caltex Capex Spend • 2014 total capex spend is forecast to 700 be $520m - $585m (previously 520‐585 $580m - $670m) 600 568 500 • 1H 2014 actual total capex spend of $251m (includes Scott’s Fu
Slide 45: Financial Discipline: Indicative Capital Expenditure
Financial Discipline Indicative Capital Expenditure, subject to change (includes T&I**) Average $ millions (FY11-13 inclusive) 2013 1H 2014 2014 Forecast * Marketing & Distribution - Stay in business 85 108 35 120-130 - Growth 148 173 125 215-225 233 281 160 335-355 Refining & Supply (R&S) - Stay in
Slide 46: Financial Discipline: Debt and Gearing
Financial Discipline June 2014 net debt includes Scott’s Fuel Divisions acquisition (total outlay $95m) % $m Period end debt and gearing* $m Caltex net debt levels** 900 40 2500 800 827 35 2000 700 740 742 30 600 617 25 1500 500 544 487 20 400 1000 15 300 10 500 200 100 5 0 0 0 Jun‐10 Dec‐10 Jun‐11
Slide 47: FX Hedging Policy
FX Hedging Policy Review of FX Hedging policy (increasing hedging from 50% to 80% of net USD Payables) • Review of FX Hedging Strategy Completed • Review undertaken following decision to close Kurnell refinery • Previous Policy: 50% hedge of net USD exposure (using forward exchange contracts) • Poli
Slide 48: Dividend
Dividend Interim dividend of 20 cents per share (2013: 17cps) Caltex dividend history^ Cents per share Payout Ratio^^ 70 60% 60 60 50% 50 45 30 40 40% 40 34 23 30% 30 28 25 17 20 20% 20 30 25 10% 10 17 17 17 20 0 0% 2009 2010 2011 2012 2013 YTD 2014 Interim Dividend Final Dividend Payout % ^ Dividen
Slide 49: Agenda
AGENDA Safety Half Year 2014: Key Highlights Strategy Update Financial Highlights Marketing & Distribution Highlights Refining & Supply Highlights Financial Discipline Result Summary & Outlook Q&A Appendices 45
Slide 50: Result Summary & Outlook
RESULT SUMMARY & OUTLOOK RESULT TAKE-AWAYS • $173m RCOP NPAT, at upper end of recent profit guidance ($155m - $175m) • Marketing & Distribution earnings growth continues (another record half) • Refining & Supply impacted by lower CRM and anticipated operating inefficiencies during Kurnell conversion
Slide 51: Q&A
Q&A 47
Slide 52: Agenda
AGENDA Safety Half Year 2014: Key Highlights Strategy Update Financial Highlights Marketing & Distribution Highlights Refining & Supply Highlights Financial Discipline Result Summary & Outlook Appendices 48
Slide 53: Appendix – Demand Growth
Appendix – Demand Growth Transport Fuels demand growth (though moderating from previous estimates) • Modest transport fuels demand growth forecast for CAGR CAGR CAGR CAGR Australia medium term ‘81-’90 ‘90-’05 ‘05-’13 ‘13-’20 BL • Diesel demand underpinned 30 by GDP growth, petrol 2.5% substitution 2
Slide 54: Appendix – Regional Supply Capacity
Appendix – Regional Supply Capacity Regional refining utilisation anticipated to remain flat over medium term Asia Pacific Product Balance Net Additions Crude Unit Utilisation kbd % • New regional refining capacity additions 3,000 90 should be partly offset by capacity 2,700 closures in Japan (~400k
Slide 55: Appendix – Regional Supply and Demand
Appendix – Regional Supply and Demand Asian and Middle East refining capacity additions will increase product supply out to 2017 Asia Pacific Product Demand Growth versus CDU Capacity Additions kbd 2,500 • 2014 regional product demand growth is projected to match net refining capacity additions (pos
Slide 56: Flexible Balance Sheet Supporting Growth
Financial Discipline Flexible Balance Sheet Supporting Growth and Company Transformation Diverse funding sources in excess of funding requirements Current sources of funding Debt maturity profile A$m Source US$ notes* 182 US institutional Australian and Asian A$ notes 150 institutional Bank loans 1,
Slide 57: Appendix: Kurnell Closure Cash-flow
Appendix Kurnell Closure Cash-flow Indicative Item Description Timing amount Closure costs Includes redundancy, $(430)m* Majority of redundancies to take place 4Q decommissioning and 2014 remediation Dismantling and removal 2015 Remediation post removal Terminal conversion Conversion and expan
Slide 58: Appendix: AUD-USD Exchange Rate and Oil Prices
Appendix AUD-USD Exchange Rate and Oil Prices 54
Slide 59: Summary Financial Information
Financials Summary Financial Information 1H 2014 2013 2012 2011 2010 2009 Dividends Dividends ($/share) 0.20 0.34 0.40 0.45 0.60 0.25 Dividend payout ratio - RCOP basis (excl. significant items) 31% 28% 24% 46% 51% 21% Dividend franking percentage 100% 100% 100% 100% 100% 100% Other data Total reven
Slide 60: Important Notice
IMPORTANT NOTICE This presentation for Caltex Australia Limited is designed to provide: • an overview of the financial and operational highlights for the Caltex Australia Group for the 6 month period ended 30 June 2014; and • a high level overview of aspects of the operations of the Caltex Australia