Slide 1: 2016 Full Year Results Announcement
2016 Full Year Results Announcement Caltex Australia Limited ACN 004 201 307
Slide 2: Agenda
AGENDA Operational Excellence Moment Full 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 Safety Performance • In addition to personal safety, Caltex also has a strong focus on process 4 safety with 2016 in line with our record 2015 performance 3.5 • Hydrocarbon spills are an example of a potential process 3 2.83 safety risk Per million hours worked 2.5
Slide 4: Full Year 2016: Key Highlights
AGENDA Operational Excellence Moment Full Year 2016: Key Highlights Strategy Update Financial Highlights Supply & Marketing Highlights Lytton Refinery Highlights Financial Discipline Result Summary & Outlook Q&A Appendices 4 4
Slide 5: Key Highlights
Key Highlights Full Year 2016 Results Summary Consolidated Group Result x RCOP NPAT $524 million, down 17% due to lower refiner margins. Supply & RCOP NPAT $524 million Marketing growth continues, Lytton delivers record operating performance Final dividend 52.0 cps declared (FY 2015: 70.0 cps) ful
Slide 6: Strategy Update
AGENDA Operational Excellence Moment Full Year 2016: Key Highlights Strategy Update Financial Highlights Supply & Marketing Highlights Lytton Refinery Highlights Financial Discipline Result Summary & Outlook Q&A Appendices 6 6
Slide 7: Strategy Update
Strategy Update The “Freedom of Convenience” - Aspiring for top quartile (total) shareholder returns 7
Slide 8: Strategy Update: Protect and Grow
Strategy Update Protect and Grow • Newport terminal upgrade approved with work starting 2H 2016. Activities are well advanced - on schedule and on budget. Forecast completion end 2017 (approx. $70m). FY2016 capex spend $31m. • Stage 2 Kurnell Engineering Conversion works are all complete. Other prod
Slide 9: Strategy Update: Protect and Grow
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 (21) / New to Caltex (9) retail outlets (30 completed) (Target 25+); and Retail site Knock Down Rebuilds (KDR)
Slide 10: Strategy Update: Extend
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 to “test & learn” pilot phase • Advantaged physical network (up to 800 sites owned / leased), large retail
Slide 11: Creating new customer solutions in retail convenience
Strategy Update Creating new customer solutions in the retail convenience market place Caltex Quick Service Restaurant Pilot Partners Caltex Service Pilot Partners 11
Slide 12: Proposed sale of Woolworths fuel business to BP
Key Highlights Proposed sale of Woolworths fuel business to BP • Woolworths has announced the sale of its fuel business to BP, subject to regulatory approval Caltex made a conditional and confidential proposal to continue the successful 13 year alliance. The proposal took into account the declin
Slide 13: Mergers & Acquisition (M&A)
Key Highlights Mergers & Acquisition (M&A) Announced 4Q 2016 acquisitions (Milemaker, Gull NZ) should complete 1H 2017 (pending regulatory approval) • Milemaker ($95 million) 46 Retail sites (majority located in and around Melbourne), leveraging 32 year relationship Secures retail position in un
Slide 14: Priorities
Key Highlights Priorities Short Term • Continue to defend and grow core transport fuels business including growth in premium (Next 12 months) fuels • Prioritise the optimisation of the entire value chain from product sourcing to customer via: Optimising our leading infrastructure position, includi
Slide 15: Financial Highlights
AGENDA Operational Excellence Moment Full Year 2016: Key Highlights Strategy Update Financial Highlights Supply & Marketing Highlights Lytton Refinery Highlights Financial Discipline Result Summary & Outlook Q&A Appendices 15
Slide 16: Financial Highlights
Financial Highlights Full Year Ending 31 December FY2016 FY2015 % Change HISTORIC COST EBIT ($m) 936 815 15 NPAT ($m) 610 522 17 EPS (cps) 232 193 20 REPLACEMENT COST EBIT ($m) 813 977 (17) NPAT ($m) 524 628 (17) EPS (cps) 199 233 (14) Dividend (cps) 102 117 (13) Net Debt ($m) 454 432 5 Gearing (%)
Slide 17: Reconciliation to underlying (RCOP) profit metric
Financial Highlights Reconciliation to underlying (RCOP) profit metric FY 2016 $m FY 2015 $m (After Tax) (After Tax) HCOP NPAT 610 522 Add: Inventory loss/(gain) (86) 135 Add: Significant items (gain) 0 (29) RCOP NPAT 524 628 17
Slide 18: Significant Items
Financial Highlights Significant Items Year Ending December FY 2016 FY 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 18
Slide 19: 2015 v 2016 HCOP EBIT
Financial Highlights Rising crude and product prices during the period gives rise to inventory gains 2015 v 2016 HCOP EBIT 1400 1200 193 32 977 37 201 1000 122 936 815 1 813 800 600 400 200 0 19
Slide 20: Strong Supply & Marketing growth, record Lytton production
Financial Highlights Strong Supply & Marketing growth, record Lytton production, refiner margins down on 2015 (but in line with long term average) • Integrated Supply & Marketing EBIT up $37 million to $709 million (after $29 million unfavourable externalities) or $66m in $m Caltex RCOP NPAT* underl
Slide 21: RCOP EBIT by Segment
Financial Highlights RCOP EBIT by Segment $m RCOP EBIT* 1,100 Active hedging program introduced 1 July 2010. Policy reviewed and increased to 80% of net USD payables from 1 977 1,000 August 2014. 900 The net FX loss of $4m in FY16 (HY2015: net FX loss $26m) was 795 813 800 net of hedging gains of $2
Slide 22: Cash Flow Generation performance
Financial Highlights Cash Flow Generation performance 2016 Cash Flow Generation 700 Favourable net working Many various movements Capital returns to capital movement driven by Includes 2015 bonus & shareholders $589 million, 500 timing of tax payments and restructuring payments. driven by maximising
Slide 23: Supply & Marketing Highlights
AGENDA Operational Excellence Moment Full Year 2016: Key Highlights Strategy Update Financial Highlights Supply & Marketing Highlights Lytton Refinery Highlights Financial Discipline Result Summary & Outlook Q&A Appendices
Slide 24: Supply & Marketing Highlights - Key Drivers
Supply & Marketing Highlights - Key Drivers Earnings growth driven by premium product focus, supply chain benefits and non-fuel income growth 2015 v 2016 RCOP EBIT 850 Value chain benefits driven by: 1) Good general cost control, allows for targeted investment around Unfavourable externalities Ongoi
Slide 25: Diesel and Jet sales volumes
Supply & Marketing Highlights Total Diesel volumes maintained with improved product mix, Jet volumes up 5% • Total diesel volumes maintained at 7.2BL (1H: 3.5 BL) BL Caltex Diesel and Jet Sales • Strong retail diesel volume growth continues, Vortex (retail) diesel 11.0 up 12% (226 ML) to 2.2 BL 10.0
Slide 26: Petrol Sales - Premium petrols volumes up
Supply & Marketing Highlights Petrol Sales - Premium petrols volumes up 2%; Base petrols down 4%; total volumes down 2% BL Caltex Petrol Sales Premium petrol sales up 2.1%, including Vortex 98 volumes up 7.6% 7.0 Premium now represents 33% of total 6.0 1.11 Consumer petrol sales (32.5% pcp) 0.98 0
Slide 27: Non Fuel Income (NFI)
Supply & Marketing Highlights Non Fuel Income (NFI) - Network development enables transport fuels & convenience growth, costs well controlled $m Caltex Non Fuel Income • Non fuel income contribution (net) up 300 3% ($5m) to $177 million 278 287 • Non fuel income remains an enabler for 250 265 Transp
Slide 28: Lytton Refinery Highlights
AGENDA Operational Excellence Moment Full Year 2016: Key Highlights Strategy Update Financial Highlights Supply & Marketing Highlights Lytton Refinery Highlights Financial Discipline Result Summary & Outlook Q&A Appendices 28
Slide 29: Record Lytton production, refiner margins down
Lytton Refinery Highlights Record Lytton production, refiner margins down on 2015 (but in line with long term average) $m EBIT 2015 vs 2016 RCOP EBIT 500 External Drivers Controllable Drivers 450 Sales from production +14% to 6.238 BL or ~39m Higher depreciation charges post 406 20 bbls (prior year
Slide 30: Caltex Refiner Margin build-up
Lytton Refinery Highlights Regional supply and net freight markets drive Caltex Refiner Margin (CRM) lower. Higher crude premium reflects geographic source (more overseas crude in 2016). Low yield loss highlights Lytton reliability US$/bbl A cpl Caltex Refiner Margin Build-up (US$bbl) 14.03 FY16 FY1
Slide 31: Caltex Refiner Margin lower than 2015
Lytton Refinery Highlights Caltex Refiner Margin (CRM) lower than 2015, but in line with long term average 2007-2016 Caltex Refiner Margin*1 (US$/bbl) • Lower CRM than 2015 (return to long term historic levels) 20 • Singapore Weighted Average Margin (SWAM) (US$10.94/bbl versus US$14.95/bbl) year on
Slide 32: Record production and operating performance
Lytton Refinery Highlights Record production. Strong controllable operational performance metrics continue post 2015 T&I Refinery Production, Utilisation (%) and Availability (%) • Strong controllable operating BL % performance including increased 3.5 97 97 98 97 100 reliability, underpinned by: 97
Slide 33: Balanced product slate
Lytton Refinery Highlights Balanced product slate petrols (47%) and middle distillates (diesel, jet 50%) provides flexibility. Premium petrols production increasingly skewed towards 98 octane LYTTON 2012 2013 2014 2015 2016 Diesel 40% 39% 38% 39% 39% Premium Petrols 13% 12% 13% 12% 14% Jet 10% 10% 1
Slide 34: Financial Discipline
AGENDA Operational Excellence Moment Full Year 2016: Key Highlights Strategy Update Financial Highlights Supply & Marketing Highlights Lytton Refinery Highlights Financial Discipline Result Summary & Outlook Q&A Appendices 34
Slide 35: Returns Focused 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 36: Capital Management - Initiatives to Date
Financial Discipline Capital Management - Initiatives to Date • Early repayment of final US Private Placement (FY 2015) $15m in interest savings (16mth period: Jan. 2015 to original maturity date on April 2016) • Available debt facilities reduced (FY 2015) $1.55 billion from $2.1 billion Reduc
Slide 37: Capital Expenditure
Financial Discipline - Capital Expenditure Capital directed to reinvest and grow, whilst ensuring a safe, efficient business 2016 total capex of $353m (1H $125m; 2H $228m) $M Caltex Capital Expenditure Towards low end of guidance ($350m - $400m, excluding M&A) 600 Stay-in-business of $205 million;
Slide 38: 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 30-45 - Growth 56 39 8 10-20 114 133 43 40-65 Marketing and Supply - Stay in business 104 143 15
Slide 39: Newport Terminal Upgrade
Newport Terminal Upgrade - vr + * , gh
Slide 40: Depreciation & Amortisation
Financial Discipline Depreciation & Amortisation $ millions 2013 2014** 2015 2016 2017 Forecast* Lytton 24 34 48 52 50-60 Supply and Marketing 91 99 139 152 175-185 Corporate 8 33 6 6 5-10 123 166 193 209 230-255 Kurnell Refinery 42 37 0 0 0 Total 166 203 193 209 230-255 * Indicative forecasts only,
Slide 41: Dividend
Financial Discipline - Dividend Final dividend of 52 cents per share (2016: 70cps); pay-out ratio 50.5% Caltex dividend history^ Cents per share Payout Ratio^^ 140 60% 117 120 50% 102 100 40% 80 70 70 52 60 30% 40 60 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 2
Slide 42: Additional Capital Returns
Financial Discipline - Additional Capital Returns $270 million Off-Market Buy-Back successfully completed (April 2016) • $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 (
Slide 43: 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** 900 40 2500 876 800 35 700 740 742 2000 30 600 617 639 25 544 1500 500 20 454 400 432 15 10
Slide 44: Result Summary & Outlook
AGENDA Operational Excellence Moment Full Year 2016: Key Highlights Strategy Update Financial Highlights Supply & Marketing Highlights Lytton Refinery Highlights Financial Discipline Result Summary & Outlook Q&A Appendices 44
Slide 45: Result Summary & Outlook
RESULT SUMMARY & OUTLOOK RESULT TAKE-AWAYS • RCOP NPAT $524 million, 16.5% below prior year • Final dividend 52.0 cps declared (FY 2016: 70.0 cps) fully franked (50.5% payout; guidance 40% - 60%) • Supply & Marketing underlying EBIT up 9.5% (excl. $29m unfavourable externalities) • Strong Lytton ope
Slide 46: Q&A
Q&A 46
Slide 47: Appendices
AGENDA Operational Excellence Moment Full Year 2016: Key Highlights Strategy Update Financial Highlights Supply & Marketing Highlights Lytton Refinery Highlights Financial Discipline Result Summary & Outlook Appendices 47
Slide 48: Caltex's Strategic Journey continues
Appendix: Caltex’s Strategic Journey continues A focused multi-year transformation strategy, to deliver top quartile total shareholder returns 13 Retail Convenience 12 Refresh Vision & Strategy 11 Capital Management 10 Growth 9 9 Value Chain Optimisation 8 Tabula Rasa 7 Ampol Singapore 6 Invest in D
Slide 49: Australian Fuels Demand Growth
Appendix: Australian Fuels Demand Growth Continued demand growth forecast for diesel and jet fuel CAGR (% p.a.) Australian Transport Fuels Market Growth • Total petrol volumes are projected to 5% 4.5% continue to decline, due to ongoing 3.8% improvements in vehicle fuel efficiency and 4% continued s
Slide 50: Regional Supply and Demand
Appendix: Regional Supply and Demand Regional product demand growth projected to exceed refining capacity additions over next 5 years K bbl/d Asia Pacific Product Demand Growth vs CDU Capacity Additions • The outlook for the next 5 years is for a 2,000 continuation of the trend observed in 2015/16,
Slide 51: Middle East Product Balances
Appendix: Middle East Product Balances Middle East region forecast to have growing surpluses of middle distillates (diesel, jet), but moves further into a gasoline deficit by 2020 kb/d Asia Pacific and Middle East Product Balances • Growth in Middle East refinery output is 1,500 expected to impact t
Slide 52: 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 plug-in vehicle sales volumes and market share • There are ~17m light vehicles in the Australian fleet, of which ~4,000 are plug-in electric ve
Slide 53: Retail Infrastructure
Appendix: Retail Infrastructure Caltex Retail Service Station Network (incl. diesel stops) • Caltex supplies 1,967** card accepting sites, including: Caltex owned (476) or leased (332) 805 Dealer owned 637* Total Caltex (Caltex and dealer owned) 1,442 Woolworths supplied 525 • Caltex’s contr
Slide 54: Infrastructure (excluding Retail)
Appendix: Infrastructure (excluding Retail) Caltex (Non-Retail) Infrastructure Network 54
Slide 55: 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 56: Balance Sheet
Appendix: Balance Sheet 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 Australian and global banks 850 Inventory 250 Australian bank 150 finance
Slide 57: AUD vs USD
Appendix AUD-USD Exchange Rate 1.00 AUD vs USD 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 2014 2015 2016 Source = HSRA Reuters 57
Slide 58: 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 2014 2015 2016 Source = Reuters 58
Slide 59: 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 $20 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2014 2015 2016 Source = Reuters 59
Slide 60: Product Prices - Regional Diesel
Appendix Product Prices - Regional Diesel USD/bbl $140 Diesel (Platts 10 ppm) $130 $120 $110 $100 $90 $80 $70 $60 $50 $40 $30 $20 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2014 2015 2016 Source = Reuters 60
Slide 61: Summary Financial Information
Appendix Summary Financial Information 2016 2015 2014 2013 2012 Dividends Dividends ($/share) 1.02 1.17 0.20 0.34 0.40 Dividend payout ratio - RCOP basis (excl. significant items) 51% 50% 38% 28% 24% Dividend franking percentage 100% 100% 100% 100% 100% Other data Total revenue ($m) 17,933 19,927 24
Slide 62: 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 12 months period ended 31 December; and • a high level overview of aspects of the operations of the Caltex Australi
Slide 63: 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.