Ampol Limited · ASX:ALD
Ampol — Caltex Australia — H1 2016 Earnings Presentation
58 slides from Ampol's earnings presentation, Aug 23, 2016
Slide 1: 2016 Half Year Results Announcement
2016 Half Year Results Announcement Caltex Australia Limited ACN 004 201 307
Slide 2: Agenda
AGENDA Operational Excellence Moment Half Year 2016: Key Highlights Strategy Update Financial Highlights Supply & Marketing Highlights Lytton Refinery Highlights Financial Discipline Result Summary & Outlook Q&A Appendices 2
Slide 3: Operational Excellence (OE) Moment
Operational Excellence (OE) Moment Process safety Performance • Caltex continues to deliver leading Australian performance in personal safety • Caltex also has a strong focus on process safety • Hydrocarbon spills are an example of a potential process safety risk • Business performance in hydrocarbo
Slide 4: Agenda
AGENDA Operational Excellence Moment Half Year 2016: Key Highlights Strategy Update Financial Highlights Supply & Marketing Highlights Lytton Refinery Highlights Financial Discipline Result Summary & Outlook Q&A Appendices 4
Slide 5: Key Highlights
Key Highlights Half Year 2016 Results Summary Consolidated Group Result RCOP NPAT $254 million, 1% above prior year despite lower refiner RCOP NPAT $254 million margins Interim dividend 50.0 cps declared (HY 2015: 47.0 cps) fully franked (52% payout; guidance 40% - 60%) $270 million off-market
Slide 6: Agenda
AGENDA Operational Excellence Moment Half Year 2016: Key Highlights Strategy Update Financial Highlights Supply & Marketing Highlights Lytton Refinery Highlights Financial Discipline Result Summary & Outlook Q&A Appendices 6
Slide 7: Strategy Update
Strategy Update “Refresh Vision & Strategy”…whilst still aspiring for top quartile (total) shareholder returns 7
Slide 8: Strategy Update
Strategy Update Protect and Grow • Newport terminal Phase 1 upgrade approved. Work commencing 2H 2016. Forecast completion end 2017 (approximately $70m) • Completion & commissioning of Kurnell product storage capacity - on time, on budget Optimise • Kurnell decommissioning & demolition program progr
Slide 9: Strategy Update
Strategy Update Protect and Grow • Network development continues, though growth rate temporarily slowed to reflect the findings from our convenience retail strategy review New to Industry / New to Caltex retail outlets (8 completed) (Target 25+) Retail site Knock Down Rebuilds (4) (Target around
Slide 10: Strategy Update
Strategy Update EXTEND: Invest in businesses and capabilities that leverage our existing consumer and mobility assets Create new customer solutions in the convenience market place - now moving from strategic thinking to “test & learn” pilot phase • Advantaged physical network (up to 800 sites owned
Slide 11: Strategy Update
Strategy Update Creating new customer solutions in the retail convenience market place 11
Slide 12: Key Highlights: Priorities
Key Highlights Priorities Short Term • Continue to protect, defend and grow core transport fuels business including growth in (Next 12 months) premium fuels • Prioritise the optimisation of the entire value chain from product sourcing to customer via: Optimising our leading infrastructure position
Slide 13: Agenda
AGENDA Operational Excellence Moment Half Year 2016: Key Highlights Strategy Update Financial Highlights Supply & Marketing Highlights Lytton Refinery Highlights Financial Discipline Result Summary & Outlook Q&A Appendices 13
Slide 14: Financial Highlights
Financial Highlights Half Year Ending 30 June 1H 2016 1H 2015 % Change HISTORIC COST EBIT ($m) 488 551 (11) NPAT ($m) 318 375 >100 EPS (cps) 120 139 >100 REPLACEMENT COST EBIT ($m) 397 383 4 NPAT ($m) 254 251 1 EPS (cps) 96 93 3 Dividend (cps) 50 47 6 Debt ($m) 693 715 (3) Gearing (%) 21 21 1 Gearin
Slide 15: Reconciliation to underlying (RCOP) profit metric
Financial Highlights Reconciliation to underlying (RCOP) profit metric 1H 2016 1H 2015 (After Tax) (After Tax) HCOP NPAT 318 375 Add: Inventory loss/(gain) (64) (95) Add: Significant items (gain) 0 (29) RCOP NPAT 254 251 15
Slide 16: Significant Items
Financial Highlights Significant Items Half Year Ending June 1H 2016 1H 2015 $M $M Sale of surplus land 0 32 Total Significant Items (Before Tax) 0 32 Tax 0 (3) Total Significant Items (After Tax) 0 29 16
Slide 17: 1H 2015 v 1H 2016 HCOP EBIT
Financial Highlights Rising crude and product prices during the period gives rise to inventory gains 1H 2015 v 1H 2016 HCOP EBIT 800 700 600 551 136 85 62 91 488 500 32 9 397 383 400 300 200 100 0 17
Slide 18: Caltex RCOP NPAT
Financial Highlights Strong Supply & Marketing growth offset by lower refiner margins (despite strong Lytton operating performance) • Integrated Supply & Marketing EBIT up $85 million to $349 million (including $10 million $m unfavourable externalities) Caltex RCOP NPAT* 650 • Underlying double-digi
Slide 19: RCOP EBIT by Segment
Financial Highlights RCOP EBIT by Segment $m RCOP EBIT* 500 Active hedging program introduced 1 July 2010. Policy reviewed and increased to 80% of net USD payables from 1 August 2014. The net FX loss of $2m in HY16 (HY2015: net FX loss $17m) was 397 400 net of hedging gains of $14m (HY 2015: hedging
Slide 20: Agenda
AGENDA Operational Excellence Moment Half Year 2016: Key Highlights Strategy Update Financial Highlights Supply & Marketing Highlights Lytton Refinery Highlights Financial Discipline Result Summary & Outlook Q&A Appendices
Slide 21: Supply & Marketing Highlights - Key Drivers
Supply & Marketing Highlights - Key Drivers Earnings growth driven by premium product focus and supply chain optimisation benefits 1H 2015 v 1H 2016 RCOP EBIT 400 380 Value chain benefits driven by: 1) Value 12 9 chain optimisation and other Tabula 46 2 1 359 2 8 360 Rasa benefits 2) Full year benef
Slide 22: Supply & Marketing Highlights: Diesel and Jet
Supply & Marketing Highlights Overall Diesel volumes maintained with improved product mix, Jet volumes up 7% • Total diesel volumes maintained at 3.5BL BL Caltex Diesel, Jet Sales • Strong retail diesel volume growth continues, Vortex (retail) diesel up 14% (120ML) 5.0 • Total Vortex and differentia
Slide 23: Supply & Marketing Highlights: Petrol Sales
Supply & Marketing Highlights Petrol Sales - Premium petrols volumes up; Total Market and volumes down • Premium petrol sales up 3.1%, including BL Caltex Petrol Sales Vortex 98 volumes up 8.3% Premium now represents 32.5% of total Consumer petrol sales (31.0% 3.00 0.55 0.50 0.46 0.39 pcp) 0.32 0.
Slide 24: Non Fuel Income
Supply & Marketing Highlights Non Fuel Income (NFI) - Network development enables transport fuels and convenience growth $M Caltex Non Fuel Income • Non fuel income contribution (net) up 175 14% at $92 million • Non fuel income is an enabler for 147 125 Transport Fuels volume growth, 130 132 125 128
Slide 25: Agenda
AGENDA Operational Excellence Moment Half Year 2016: Key Highlights Strategy Update Financial Highlights Supply & Marketing Highlights Lytton Refinery Highlights Financial Discipline Result Summary & Outlook Q&A Appendices 25
Slide 26: Lytton Refinery Highlights
Lytton Refinery Highlights Lower refiner margins reduce EBIT, despite strong operating performance, sales from production up 21% 1H 2015 vs 1H 2016 RCOP EBIT 250 External Drivers Controllable Drivers External Drivers Controllable Drivers CRM down US$5.90/bbl to US$10.10/bbl Sales from production +21
Slide 27: Caltex Refiner Margin build-up
Lytton Refinery Highlights Regional supply and freight markets drive Caltex Refiner Margin (CRM) lower. Higher crude premium reflects geographic source 30 14 12.82 28 Caltex Refiner Margin 26 12 Build-up (US$/bbl) 24 22 1H 2016 1H 2015 8.68 10 20 Singapore WAM 11.21 14.51 18 7.27 8 Product freight 3
Slide 28: Lower Caltex Refiner Margin
Lytton Refinery Highlights Lower Caltex Refiner Margin (CRM) driven by regional product oversupply, higher crude premium and lower (net) freight benefits 2007-2016 Caltex Refiner Margin*1 (US$/bbl) • Lower CRM driven by regional 25 product oversupply, higher crude premium and lower net freight costs
Slide 29: Lytton operational performance post Turnaround & Inspection
Lytton Refinery Highlights Strong controllable operational performance metrics post 2015 Turnaround & Inspection (T&I) Refinery Production, Utilisation (%) and Availability (%) • Strong controllable BL % operating performance, 3.5 97 97 97 97 98 100 underpinned by: 96 3.0 93 3.1 Mechanical Availab
Slide 30: Lytton product slate
Lytton Refinery Highlights Balanced product slate petrols (47%) and middle distillates (diesel, jet 49%) provides flexibility. Premium petrols production increasingly skewed towards 98 octane LYTTON 1H 2016 2015 2014 2013 2012 2011 Diesel 38% 39% 38% 39% 40% 38% Premium Petrols 13% 12% 13% 12% 13% 1
Slide 31: Agenda
AGENDA Operational Excellence Moment Half Year 2016: Key Highlights Strategy Update Financial Highlights Supply & Marketing Highlights Lytton Refinery Highlights Financial Discipline Result Summary & Outlook Q&A Appendices 31
Slide 32: Financial Discipline - Capital Management
Financial Discipline - Capital Management Returns Focused Capital Management Capital management objective • Given the company’s improved cash flows and strong balance sheet, Caltex has reviewed the options for capital management based on established priorities to ensure capital is deployed as effici
Slide 33: Financial Discipline - Balance Sheet
Financial Discipline - Balance Sheet Average daily borrowings well managed (higher debt position post buy-back) - financial flexibility maintained % $m Period end debt and gearing* $m Caltex net debt levels** 800 40 2500 700 740 742 35 693 2000 600 639 30 617 500 544 25 1500 400 432 20 300 15 1000 2
Slide 34: Capital Management - Initiatives to Date
Financial Discipline Capital Management - Initiatives to Date • Refreshed FX Hedging strategy completed (FY 2014) Hedging of net USD exposure increased to 80% (from 50%), effective 1 August 2014 Use of vanilla foreign exchange options provides the ability to participate in AUD strengthening • Ea
Slide 35: $270 million Off-Market Buy-Back completed
Financial Discipline $270 million Off-Market Buy-Back successfully completed • $270 million buy-back completed April 2016 • Price paid $29.39/share (incl. capital component $2.01/share, Fully franked dividend $27.38/share) • Shares repurchased: 9.2 million (3.4% of issued capital) • Scale-Back: 86.0
Slide 36: Financial Discipline - Capital Expenditure
Financial Discipline - Capital Expenditure Capital directed to reinvest and grow, whilst ensuring a safe, efficient business • HY 2016 total capex of $125m: $m Caltex Capital Expenditure Stay-in-business of $71 million; and Growth (excl. M&A) of $54 million, primarily 600 retail network investme
Slide 37: Indicative Capital Expenditure
Financial Discipline - Capital Expenditure Indicative Capital Expenditure*, subject to change (includes T&I**) $ millions 2013 2014 2015 2016 Forecast* Lytton - Stay in business (includes T&I)** 93 58 94 30-40 - Growth 13 56 39 5-10 106 114 133 35-50 Marketing and Supply - Stay in business 116 104 1
Slide 38: Depreciation & Amortisation
Financial Discipline Depreciation & Amortisation $ millions 2013 2014 2015 HY 2016 2016 Fct. * Lytton 24 34 48 27 50 - 60 Supply and Marketing 91 99 139 70 140 - 150 Corporate 8 33 6 3 5 - 10 123 166 193 99 195 - 220 Kurnell Refinery 42 37 0 0 0 Total 166 203 193 99 195 - 220 * Indicative forecasts
Slide 39: Financial Discipline - Dividend
Financial Discipline - Dividend Interim dividend of 50 cents per share (2015: 47cps); pay-out ratio 52% Caltex dividend history^ Cents per share Payout Ratio^^ 140 60% 117 120 50% 100 40% 80 60 70 70 30% 60 40 50 45 34 25 30 50 20% 40 28 23 17 47 50 10% 20 25 30 17 17 17 20 0 0% 2009 2010 2011 2012
Slide 40: Agenda
Operational Excellence Moment Full Year 2015: Key Highlights Strategy Update Financial Highlights Supply & Marketing Highlights Lytton Refinery Highlights Financial Discipline Result Summary & Outlook Q&A Appendices 40
Slide 41: Result Summary & Outlook
RESULT SUMMARY & OUTLOOK RESULT TAKE-AWAYS • RCOP NPAT $254 million, 1% above prior year • Interim dividend 50.0 cps declared (HY 2015: 47.0 cps) fully franked (52% payout; guidance 40% - 60%) • Supply & Marketing underlying EBIT up 14% (excl. $10m unfavourable externalities) • Lytton strong operati
Slide 42: Q&A
Q&A 42
Slide 43: Appendices
AGENDA Operational Excellence Moment Full Year 2015: Key Highlights Strategy Update Financial Highlights Supply & Marketing Highlights Lytton Refinery Highlights Financial Discipline Result Summary & Outlook Appendices 43
Slide 44: Appendix: Australian Fuels Demand Growth
Appendix: Australian Fuels Demand Growth Continued demand growth forecast for diesel and jet fuel Australian Transport Fuels Market Growth • Total petrol volumes are projected to 6% continue to decline, due to ongoing 5.1% improvements in vehicle fuel efficiency. 4% 3.2% 3.4% Substitution away fro
Slide 45: Appendix: Regional Supply and Demand
Appendix: Regional Supply and Demand Regional product demand growth projected is offset by high refinery utilisation and high product inventory levels K bbl/d Asia Pacific Product Demand Growth vs CDU Capacity Additions 2,000 • Product demand growth in the Asian region is forecast to remain robust o
Slide 46: Appendix: Middle East product balances
Appendix: Middle East product balances Middle East region is forecast to have growing surpluses of middle distillates (diesel, jet) but forecast to move into a gasoline deficit by 2020 kb/d Asia Pacific and Middle East Product Balances 1,500 • Growth in Middle East refinery output is expected to exa
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 12 Refresh Vision & Strategy 11 Capital Management 10 Growth 10 9 9 Value Chain Optimisation 8 Tabula Rasa 7 Ampol Singapore 6 Invest in Distribution Infrast
Slide 48: Appendix: Retail Infrastructure
Appendix: Retail Infrastructure Caltex Retail Service Station Network Caltex Service Station Retail Network • Caltex supplies 1,971 card accepting sites, including: Caltex owned (477) or leased (319) 796 Dealer owned 653 Woolworths supplied 522 • Caltex’s controlled 796 sites are either compan
Slide 49: Appendix: Balance Sheet
Appendix: Balance Sheet Increased balance sheet flexibility following post period end refinancing Diverse funding sources in excess of funding requirements; Tenor extended Current sources of funding Debt maturity profile A$m Source Australian and Asian A$ notes* 150 institutional Bank facilities 850
Slide 50: Appendix: Productivity
Appendix: Productivity Company-wide efficiency and organisation structure review “Tabula Rasa” - Benefits Tabula Rasa 2016 Expected Recurring Savings $M Comments Head count reduction (net 250-300 FTEs, previously approx. 350FTEs) 40 - 45 Previously $40m - $50m Head count down Cost savings per headco
Slide 51: Appendix: Kurnell Closure Cash-flow versus provision
Appendix Kurnell Closure Cash-flow versus provision - Remains on track Indicative Item Description Timing amount Closure costs Includes redundancy, $(430)m* Majority of redundancies took place 2014, decommissioning and $9m outstanding at 30 June 2016 remediation Decommissioning largely complete
Slide 52: Appendix: AUD-USD Exchange Rate
Appendix AUD-USD Exchange Rate 1.10 AUD vs USD 1.05 1.00 0.95 0.90 0.85 0.80 0.75 0.70 0.65 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2016 2015 2014 2013 Source = HSRA Reuters 52
Slide 53: Appendix: Commodity Exposure - Oil Prices
Appendix Commodity Exposure - Oil Prices USD/bbl Dated Brent Prices $120 $110 $100 $90 $80 $70 $60 $50 $40 $30 $20 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2016 2015 2014 2013 Source = Reuters 53
Slide 54: Appendix: Product Prices - Regional Traded Petrol
Appendix Product Prices - Regional Traded Petrol USD/bbl Unleaded (Platts 92Ron) $140 $130 $120 $110 $100 $90 $80 $70 $60 $50 $40 $30 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2016 2015 2014 2013 Source = Reuters 54
Slide 55: Appendix: Product Prices - Regional Diesel
Appendix Product Prices - Regional Diesel USD/bbl Diesel (Platts 10 ppm) $140 $130 $120 $110 $100 $90 $80 $70 $60 $50 $40 $30 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2016 2015 2014 2013 Source = Reuters 55
Slide 56: Appendix: Summary Financial Information
Appendix Summary Financial Information 1H 2016 2015 2014 2013 2012 Dividends Dividends ($/share) 0.50 1.17 0.70 0.34 0.40 51% 50% 38% 28% 24% Dividend franking percentage 100% 100% 100% 100% 100% Other data Total revenue ($m) 8,507 20,027 24,231 24,676 23,542 Earnings per share - HCOP basis (cents p
Slide 57: 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 58: 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.