Ampol Limited · ASX:ALD
Ampol — Caltex Australia — H1 2017 Earnings Presentation
62 slides from Ampol's earnings presentation, Aug 29, 2017
Slide 1: 2017 Half Year Results Announcement
2017 Half Year Results Announcement Caltex Australia Limited ACN 004 201 307
Slide 2: Agenda
AGENDA Operational Excellence Moment Half Year 2017: Key Highlights Strategy Update Financial Highlights Supply & Marketing Highlights Lytton Refinery Highlights Financial Discipline Result Take-Aways & Short Term Priorities Q&A Appendices 2
Slide 3: Operational Excellence (OE) Moment
Operational Excellence (OE) Moment Personal and Process safety Performance • Continues to deliver leading performance in personal and process safety in Australia, whilst maintaining an unrelenting focus to continuously improve • Strong Lytton Turnaround safety performance • Process Safety performanc
Slide 4: Agenda
AGENDA Operational Excellence Moment Half Year 2017: Key Highlights Strategy Update Financial Highlights Supply & Marketing Highlights Lytton Refinery Highlights Financial Discipline Result Take-Aways & Short Term Priorities Q&A Appendices 4
Slide 5: Key Highlights
Key Highlights Half Year 2017 Results Summary Consolidated Group Result RCOP NPAT $307 million. Supply and Marketing growth continues, Lytton continues strong RCOP NPAT $307 million up 21% operating performance. Interim dividend 60.0 cps declared (HY 2016: 50.0 cps) fully franked (51% payout; Ea
Slide 6: Agenda
AGENDA Operational Excellence Moment Half Year 2017: Key Highlights Strategy Update Financial Highlights Supply & Marketing Highlights Lytton Refinery Highlights Financial Discipline Result Take-Aways & Short Term Priorities Q&A Appendices 6
Slide 7: Strategy Update
Strategy Update Two businesses and cultures emerging, both with significant growth options 7
Slide 8: Strategy Update: Protect and Grow
Strategy Update Protect and Grow • Newport terminal Phase 1 upgrade on time, on budget. Forecast completion end 2017 (approx. $70m) Optimise • Kurnell decommissioning & demolition program progressing - on time, on budget. Total Kurnell transformation project remains on plan (expected infrastructure
Slide 9: Strategy Update: Extend
Strategy Update Extend • Fuel pricing transformation through new pricing capabilities, strategies and tools • Use of behavioural economics to drive consumer fuel buying behaviour (“Good”, Enhance the fuel “Better”, “Best” fuels) retail customer • Launched refreshed StarCard offer with Qantas Busines
Slide 10: Strategy Update: Foodary Pilot Progress
Strategy Update Create new customer solutions in the convenience market place - moved from strategic thinking to “test & learn” pilot phase • Foodary sites (10 sites to August 2017) rolled out across different geographies: Concord, Padstow, Bomaderry (NSW), South Yarra, Horsham and Beaufort (Victori
Slide 11: Slide 11
Slide 12: Proposed sale of Woolworths fuel business to BP
Strategy Update Proposed sale of Woolworths fuel business to BP • Woolworths has announced the sale of its fuel business to BP, subject to regulatory approval • Caltex’s 3.5 billion litre fuel supply arrangement with Woolworths is linked to Woolworths’ continued ownership of the business • ACCC Regu
Slide 13: Response to expected lost Woolworths volumes / earnings
Strategy Update Response to expected lost Woolworths volumes / earnings well advanced Caltex remains focused on delivering top quartile total shareholder returns by executing its strategy in a capital efficient manner Annualised Invested Comments EBIT Capital $M $M Acquisitions Milemaker 95 Complete
Slide 14: Continued evolution of the Operating Model (Quantum Leap)
Strategy Update Continued evolution of the Operating Model (Quantum Leap) • Continued evolution of the company operating model to allow Caltex to better execute its strategy, commenced second quarter of 2017 2017 Short term • Financial focus on delivering top quartile total shareholder returns (TSR)
Slide 15: Priorities
Key Highlights Priorities Short Term • Continue to protect, defend and grow core transport fuels business including growth in (Next 12 months) premium fuels • Continue the optimisation of the entire fuels value chain via: Optimising our leading infrastructure position, including our retail and ter
Slide 16: Agenda
AGENDA Operational Excellence Moment Half Year 2017: Key Highlights Strategy Update Financial Highlights Supply & Marketing Highlights Lytton Refinery Highlights Financial Discipline Result Take-Aways & Short Term Priorities Q&A Appendices 16
Slide 17: Financial Highlights
Financial Highlights Half Year Ending 30 June 1H 2017 1H 2016 % Change HISTORIC COST EBIT ($m) 408 488 (16) NPAT ($m) 265 318 (17) EPS (cps) 101 120 (15) REPLACEMENT COST EBIT ($m) 472 397 19 NPAT ($m) 307 254 21 EPS (cps) 118 96 23 Dividend (cps) 60 50 20 Net Debt ($m) 730 693 5 Gearing (%) 20 21 (
Slide 18: Reconciliation to underlying (RCOP) profit metric
Financial Highlights Reconciliation to underlying (RCOP) profit metric Half Year Ending June 1H 2017 1H 2016 (After Tax) (After Tax) HCOP NPAT 265 318 Add: Inventory loss/(gain) 44 (64) Add: Significant items (gain) (2) 0 RCOP NPAT 307 254 18
Slide 19: Significant Items
Financial Highlights Significant Items Half Year Ending June 1H 2017 1H 2016 $M $M Sale of fuel oil business 19 0 Franchisee Employee Assistance Fund (20) 0 Total Significant Items (Before Tax) (1) 0 Tax 3 0 Total Significant Items (After Tax) 2 0 19
Slide 20: HCOP EBIT bridge 1H 2016 to 1H 2017
Financial Highlights Strong Lytton operational performance supported by higher refiner margins; Supply & Marketing growth continues 1H 2016 v 1H 2017 HCOP EBIT 600 488 91 57 9 472 1 64 500 28 408 397 400 300 200 100 0 20
Slide 21: Financial Highlights: RCOP NPAT drivers
Financial Highlights Strong Supply & Marketing growth and stronger refiner margins (supported by strong Lytton operating performance) • Supply & Marketing EBIT up $28 million (+8%) $m Caltex RCOP NPAT to $377 million (including $4 million 650 unfavourable externalities) • Underlying EBIT growth +6%
Slide 22: RCOP EBIT by Segment
Financial Highlights RCOP EBIT by Segment $m RCOP EBIT 500 472 397 400 377 383 349 288 290 300 263 200 154 149 92 100 40 0 (38) (35) (44) (53) (100) Supply and Marketing Lytton Corporate Total 1H 2014 1H 2015 1H 2016 1H 2017 * RCOP EBIT excluding significant items 22
Slide 23: Cash Flow generation performance
Financial Highlights Cash Flow generation performance 1,200 Includes $95m acquisition of Higher inventory levels to support Milemaker completed May 900 BHU maintenance and timing 730 2017 136 98 600 454 472 59 104 186 21 6 300 154 107 64 28 - (300) Inventory loss driven Return to normalised payments
Slide 24: Agenda
AGENDA Operational Excellence Moment Half Year 2017: Key Highlights Strategy Update Financial Highlights Supply & Marketing Highlights Lytton Refinery Highlights Financial Discipline Result Take-Aways & Short Term Priorities Q&A Appendices
Slide 25: Supply & Marketing Highlights - Key Drivers
Supply & Marketing Highlights - Key Drivers Earnings growth driven by premium product focus and supply chain optimisation benefits 1H 2016 v 1H 2017 RCOP EBIT 440 Value chain benefits driven by: Operating costs generally well 1) strong margins with modest volume growth controlled. Higher depreciatio
Slide 26: Supply & Marketing Highlights: Diesel and Jet
Supply & Marketing Highlights Overall Diesel volumes up 7% to 3.8 BL with improved product mix, Jet volumes up 5% • Total diesel volumes up 6.9% (240 ML) to 3.76BL BL Caltex Diesel and Jet Sales • Retail diesel +5.8% to 1.62 BL with premium Vortex (retail) diesel up 97 ML (+9.3%) to 1.13 BL and base
Slide 27: Supply & Marketing Highlights: Petrol Sales
Supply & Marketing Highlights Petrol Sales - Premium petrols flat; Total Market and volumes down • Total petrol volumes fell 2.4% to 2.9 billion litres, driven by continuing trend of falling BL Caltex Petrol Sales ULP / E10 base grade volumes, down 2.9% (including E10 sales down 0.9%) reflecting: 3.
Slide 28: Supply & Marketing Highlights: Non Fuel Income (NFI)
Supply & Marketing Highlights: Non Fuel Income (NFI) Non-Fuel income down due to significant site transition costs (around 80 franchise sites) • Non Fuel income reflects the current $m Caltex Non Fuel Income predominant franchise model 170 • Non fuel income contribution (net) down 14% at $72 million
Slide 29: Franchisee underpayment of employees update
Supply & Marketing Highlights: Non Fuel Income (NFI) Franchisee underpayment of employees update • In 2016, Caltex identified instances where franchisees were underpaying their employees. Wage fraud, visa fraud or any other mistreatment of employees is unacceptable • Caltex’s approach to removing un
Slide 30: Agenda
AGENDA Operational Excellence Moment Half Year 2017: Key Highlights Strategy Update Financial Highlights Supply & Marketing Highlights Lytton Refinery Highlights Financial Discipline Result Take-Aways & Short Term Priorities Q&A Appendices 30
Slide 31: Lytton Refinery Highlights: RCOP EBIT
Lytton Refinery Highlights Strong operational performance leverages higher refiner margins 1H 2016 vs 1H 2017 RCOP EBIT External Drivers Controllable Drivers 200 Higher demurrage and coastal freight due 10 12 to BHU conversion project CRM up US$2.49/bbl to 63 6 US$12.59/bbl 0 0 149 150 Unfavourable
Slide 32: Regional supply and demand push regional margins higher
Lytton Refinery Highlights Regional supply and demand push regional margins higher 30 12.82 14 Caltex Refiner Margin 28 26 12 Build-up (US$/bbl) 24 10.50 1H 2017 1H 2016 22 8.68 20 10 Singapore WAM 12.73 11.21 18 7.27 16 6.32 8 Product freight 3.32 3.40 14 12 0.23 Quality premium 1.06 1.27 6 10 8 -0
Slide 33: Caltex Refiner Margin 2006-2017
Lytton Refinery Highlights Regional supply and demand push regional margins higher – SWAM up US$1.52/bbl 2006-2017 Caltex Refiner Margin*1 (US$/bbl) • Comparable Singapore Weighted 5 year average US$12.06/bbl Average Margin (SWAM) 20 (US$12.73/bbl versus US$11.21/bbl) year on year, despite volatilit
Slide 34: Strong controllable operational performance continues
Lytton Refinery Highlights Strong controllable operational performance continues Refinery Production, Utilisation (%) and Availability (%) • Strong controllable operating performance, underpinned by: BL % 3.5 98 100 96 97 97 97 97 97 97 Mechanical Availability (96.5%); 3.0 93 3.1 3.1 3.0 3.0 3.0
Slide 35: Balanced product slate
Lytton Refinery Highlights Balanced product slate petrols (46%) and middle distillates (diesel, jet 52%) provides flexibility LYTTON 2013 2014 2015 2016 1H 2017 Diesel 39% 38% 39% 39% 40% Premium Petrols 12% 13% 12% 14% 9% Jet 10% 12% 12% 11% 12% 61% 63% 63% 64% 60% Unleaded Petrol 35% 33% 32% 33% 3
Slide 36: Agenda
AGENDA Operational Excellence Moment Half Year 2017: Key Highlights Strategy Update Financial Highlights Supply & Marketing Highlights Lytton Refinery Highlights Financial Discipline Result Take-Aways & Short Term Priorities Q&A Appendices 36
Slide 37: Financial Discipline - Capital Management
Financial Discipline - Capital Management Returns Focused Capital Management Capital management objective • Caltex regularly reviews the options for capital management based on established priorities to ensure capital is deployed as efficiently as possible • Caltex’s overarching objective is to deli
Slide 38: Financial Discipline - Balance Sheet
Financial Discipline - Balance Sheet Higher period end debt position follows temporary increase in working capital (manage Lytton BHU maintenance) and funding Milemaker acquisition (closed May 2017) % $m Period end debt and gearing* $m Caltex net debt levels** 800 40 2500 700 740 742 730 35 693 2000
Slide 39: Financial Discipline - Capital Expenditure
Financial Discipline - Capital Expenditure Capital directed to reinvest and grow, whilst ensuring a safe, efficient business HY 2017 total capex of $261m $M Caltex Capital Expenditure Stay-in-business of $104 million; 900 800-880 Growth (excl. M&A) of $62 million, primarily FY 2017 guidance $800
Slide 40: Indicative Capital Expenditure
Financial Discipline - Capital Expenditure Indicative Capital Expenditure*, subject to change (includes T&I**) $ millions 2014 2015 2016 2017 Forecast* Lytton - Stay in business (includes T&I)** 58 94 35 30-50 - Growth 56 39 8 10-20 114 133 43 40-70 Marketing and Supply - Stay in business 104 143 15
Slide 41: Depreciation & Amortisation
Financial Discipline Depreciation & Amortisation $ millions 2014** 2015 2016 HY 2017 2017 Forecast* Lytton 34 48 56 27 50-60 Supply and Marketing 99 139 148 77 150-170 Corporate 33 6 6 3 5-10 166 193 209 107 205-240 Kurnell Refinery 37 0 0 0 0 Total 203 193 209 107 205-240 * Indicative forecasts onl
Slide 42: Financial Discipline - Dividend
Financial Discipline - Dividend Interim dividend of 60 cents per share (2016: 50cps); pay-out ratio 51% Caltex dividend history* Cents per share Payout Ratio** 140 60% 117 120 50% 102 100 40% 80 70 70 52 60 60 30% 40 60 45 34 25 30 50 20% 40 28 60 23 17 47 50 10% 20 25 30 17 17 17 20 0 0% 2009 2010
Slide 43: Agenda
Operational Excellence Moment Half Year 2017: Key Highlights Strategy Update Financial Highlights Supply & Marketing Highlights Lytton Refinery Highlights Financial Discipline Result Take-Aways & Short Term Priorities Q&A Appendices 43
Slide 44: Result Take-Aways & Short Term Priorities
RESULT TAKE-AWAYS & SHORT TERM PRIORITIES RESULT TAKE-AWAYS • RCOP NPAT $307 million, 21% above prior year • Interim dividend 60.0 cps declared (HY 2016: 50.0 cps) fully franked (51% payout; guidance 40% - 60%) • Supply & Marketing underlying EBIT up 6% (excl. $4m unfavourable externalities); Report
Slide 45: Q&A
Q&A 45
Slide 46: Appendices
AGENDA Operational Excellence Moment Half Year 2017: Key Highlights Strategy Update Financial Highlights Supply & Marketing Highlights Lytton Refinery Highlights Financial Discipline Result Take-Aways & Short Term Priorities Appendices 46
Slide 47: Appendix: Caltex's Strategic Journey continues
Appendix: Caltex’s Strategic Journey continues A focused multi-year transformation strategy, to deliver top quartile total shareholder returns 14 Quantum Leap 13 Retail Convenience 12 Refresh Vision & Strategy 11 Capital Management 10 Growth 9 Value Chain Optimisation 8 Tabula Rasa 7 Ampol Singapore
Slide 48: Appendix: Australian Fuels Demand Growth
Appendix: Australian Fuels Demand Growth Market volumes for premium petrol, diesel and jet fuel are forecast to continue to grow, although at lower rates compared to the previous five years • The declining trend in total petrol volumes is projected to accelerate out to 2020, due to ongoing improveme
Slide 49: Appendix: Regional Supply and Demand
Appendix: Regional Supply and Demand Regional product demand growth is projected to exceed refining capacity additions, next five years • Asian product demand growth is forecast to K bbl/d continue at 2-3% p.a. over 2017-21. • Petrol and jet fuel demand are projected to grow strongly (4-5% p.a.) due
Slide 50: Appendix: Asia Pacific and Middle East product balances
Appendix: Asia Pacific and Middle East product balances The region moved into a deficit for gasoline in 2016, but is still in surplus for diesel and jet • The Middle East has added complex refining capacity over the past 5 years, which has contributed to growing product surpluses for diesel and jet
Slide 51: Appendix: Australian and global electric vehicle sales
Appendix: Australian and global electric vehicle sales Electric vehicle sales currently represent only 0.1% of total Australian new vehicle sales Australian EV sales volumes and market share • Press coverage around electric vehicles (EVs) continues to increase. However Australian vehicle sales data
Slide 52: Appendix: Retail Infrastructure
Appendix: Retail Infrastructure Caltex Retail Service Station Network Ownership Structures • Caltex supplies 1,962 card accepting sites in Australia, including: Caltex owned (478) or leased (379) 857 (2016: 805) Dealer owned 581 (2016: 637) Woolworths supplied 524 (2016: 525) • In New Zealand,
Slide 53: Appendix: Infrastructure (excluding Retail)
Appendix: Infrastructure (excluding Retail) Caltex (Non-Retail) Infrastructure Network 53
Slide 54: Appendix: Terminal Infrastructure
Appendix: Terminal Infrastructure Caltex Terminal Network Terminal Nominal State National Terminal Nominal State National Capacity Capacity Capacity Capacity Capacity Capacity ML ML % ML ML % New South Wales South Australia Kurnell 515 Pelican Point, Adelaide 97 Banksmeadow 36 Port Lincoln 7 104 8%
Slide 55: Appendix: Balance Sheet
Appendix: Balance Sheet Includes post period end financing (follows acquisition & refinancing announcements) Takes into consideration: • Gull NZ acquisition: A$325m, completed 3 July 2017 • Redemption of A$550m subordinated notes (hybrid) to be replaced with existing bank facilities, effective: 15 S
Slide 56: AUD vs USD
Appendix AUD-USD Exchange Rate 0.85 AUD vs USD 0.80 0.75 0.70 0.65 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2015 2016 2017 Source = HSRA Reuters 56
Slide 57: Commodity Exposure - Oil Prices
Appendix Commodity Exposure - Oil Prices 57
Slide 58: Product Prices - Regional Traded Petrol
Appendix Product Prices - Regional Traded Petrol 58
Slide 59: Product Prices - Regional Diesel
Appendix Product Prices - Regional Diesel 59
Slide 60: Summary Financial Information
Appendix Summary Financial Information 1H 2017 2016 2015 2014 2013 Dividends Dividends ($/share) 60.0 1.02 1.17 0.70 0.34 Dividend payout ratio - RCOP basis (excl. significant items)* 51% 51% 50% 38% 28% Dividend franking percentage 100% 100% 100% 100% 100% Other data Total revenue ($m) 10,160 17,93
Slide 61: 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 months period ended 30 June; and • a high level overview of aspects of the operations of the Caltex Australia Gro
Slide 62: To be the market leader in complex supply chains
To be the market leader in complex supply chains and the volvin convenience ma i delivering the fuel and other everyday needs of. our diverse « ustomers through our networks. ~ CALTEX.