Ampol Limited · ASX:ALD
Ampol — Caltex Australia — FY2019 Earnings Presentation
39 slides from Ampol's earnings presentation, Feb 25, 2020
Slide 1: 2019 Full Year Results Presentation and Investor Discussion Pack
Caltex Australia Limited ACN 004 201 307 Level 24 ASX RELEASE 2 Market Street Sydney NSW 2000 2019 Full Year Results Presentation and Investor Discussion Pack Tuesday 25 February 2020 (SYDNEY): Caltex Australia Limited provides the attached 2019 Full Year Results Presentation and Investor Discussion
Slide 2: 2019 Full Year Results
Caltex Australia Limited 2019 Full Year Results ACN 004 201 307 25 February 2019 25 February 2020
Slide 3: Introduction and overview
3 Introduction and overview Julian Segal MD and CEO
Slide 4: Working to improve personal safety performance
Working to improve personal safety performance Action being taken to reduce injuries across our business Fuels & Infrastructure Personal Safety Process Safety and Spills 12 12 10 10 8 8 6 6 4 4 2 2 0 0 2016 2017 2018 2019 2016 2017 2018 2019 Days Away from Work Injury Frequency Rate Spills >1bbl and
Slide 5: 2019 result in line with guidance
2019 result in line with guidance Weak refining and retail fuel market conditions, 1H Lytton outages and EG wholesale fuel supply contract reprice 2019^ 2018 % Δ 2018 EBIT – Fuels & Infrastructure (Ex Lytton)* $380m $409m -7% Caltex has taken action EBIT – Fuels & Infrastructure (Lytton) $70m $161m
Slide 6: Economic weakness in 2019 impacted domestic volumes
Economic weakness in 2019 impacted domestic volumes Australian Industry Fuel Sales Wholesale Fuel BL F&I Australian Fuels Volumes annual change 20 6% Australian fuel demand down 0.9% on pcp, continued 16 2.8 4% economic weakness (Agriculture activity^ –7% on pcp, 2.8 2.7 Construction activity# –10
Slide 7: F&I delivered a solid underlying result in a weak market
F&I delivered a solid underlying result in a weak market Continuing to find ways to grow underlying earnings, underpinned by Caltex’s International strategy A$m F&I (ex Lytton) EBIT 450 EG supply contract re-price reduced EBIT by 400 ~$47 million in 2019 vs pcp 350 International: 300 ‒ EBIT incr
Slide 8: 2019: an important year for Caltex
2019: an important year for Caltex $260m off-market buyback Retail network review completed Tiered format strategy including Focus remains on returning first Metro, HBU divestments, and franking credits to shareholders property IPO targeted for mid 2020 International capability Announced reinvigorat
Slide 9: Caltex – high quality resilient business with a focus on capital discipline
9 Caltex – high quality resilient business with a focus on capital discipline Large resilient cash flow from core business Targeted action to manage market dynamics Transport fuels focused Initiatives to increase balance sheet capacity Strong competitive advantages Capital discipline integra
Slide 10: Well-positioned to deliver potential $195m earnings uplift by 2024
Well-positioned to deliver potential $195m earnings uplift and unlock value by 2024 Continuation of F&I Use our strong Continual focus international position in retail fuel on capital expansion to deliver to deliver potential efficiency to potential $70m $85m non-fuel release franking earnings uplif
Slide 11: Group financial result
11 Group financial result Matt Halliday CFO
Slide 12: 2019 result impacted by weak economic conditions
2019 result impacted by weak economic conditions Weak refining and retail margins, Lytton outages, EG contract re-price 2019 v 2018 RCOP EBIT 1000 950 900 850 826 91 800 750 47 $m 1 12 115 700 650 39 607 5 25 600 4 550 500
Slide 13: $100m cost-out ahead of schedule
$100m cost-out ahead of schedule Cost-out a core part of our continuous improvement program Ahead of schedule, compared to run-rate target of >50% by end 2019 $60m* of savings delivered in 2019; ~$30m Corporate, Retail ~$15m CR, ~$15m F&I procurement $40m* balance to be delivered in 2020 ~$5m
Slide 14: Fuels & Infrastructure highlights
Fuels & Infrastructure highlights Weak refining margins, Lytton 1H outages, EG contract re-price and freight market impacts partially offset by resilience in F&I across the supply chain, with growth in international earnings 2019 v 2018 F&I RCOP EBIT 700 600 570 54 38 500 10 10 47 18 4 8 12 450 13 $
Slide 15: Refining margins have been volatile
Refining margins have been volatile Optimising value in challenging conditions Caltex Refiner Margin (US$/bbl) CRM of US$8.08/bbl in 2019, -US$1.91/bbl pcp 20 2019 CRM sales from production of 5.5BL T&I in August 2019 executed on schedule and budget 15 Landed crude oil premiums rose in 4Q 20
Slide 16: We are actively monitoring two significant market disturbances
We are actively monitoring two significant market disturbances IMO2020 Coronavirus (COVID-19) Initial demand from ship owners for Low Sulfur Fuel Oil Chinese demand erosion from government controls and (LSFO), driving lower diesel margins and higher LSFO cancelled international flights premiums
Slide 17: Convenience Retail highlights – key drivers
Convenience Retail highlights – key drivers 2019 v 2018 Convenience Retail RCOP EBIT 400 350 307 115 300 250 28 14 $m 10 5 201 200 150 100 50 0 NOTE: Higher and Better Use site divestments treated as a significant item
Slide 18: Retail fuel margins impacted by cyclical headwinds
Retail fuel margins impacted by cyclical headwinds Refocus on fuel has seen Caltex restore market share Economic weakness and heightened competitive dynamic impacted 2019 result Margins historically impacted by the economic cycle Industry gasoline margin recovery in 2H 2019; Caltex has continu
Slide 19: Balance sheet & cashflow
Balance sheet & cashflow Maintaining optimal capital structure to maximise value and shareholder returns Period end net borrowings and $m gearing % $m $m 1000 40 1,200 955 955 844 35 950 500 142 129 868 900 30 900 868 25 600 850 20 814 270 15 800 300 0 10 750 5 - 700 0 Net borrowings Lease adj. gear
Slide 20: Maintaining Balance Sheet headroom
Maintaining Balance Sheet headroom Focus on operating and capital efficiency Capital Allocation Framework What We Are Doing $100m p.a. cost savings by end of 2020 Stay-In-Business Capex Cost-Out 1 Focused on safety and reliability of supply Cost savings sustainable Capex Medium term capex ~$
Slide 21: Proposed listed property structure for ~250 high quality retail sites
Proposed listed property structure for ~250 high quality retail sites Anticipated to create significant balance sheet capacity for incremental growth and returns Proposed structure Proposed unlisted Ampol Property Trust established to own Caltex’s core portfolio of ~250 Convenience Retail assets:
Slide 22: Closing Remarks
22 Closing Remarks Julian Segal CEO
Slide 23: We are committed to operating a sustainable business
We are committed to operating a sustainable business People Communities Environment 82% employee engagement score Bushfire and drought relief Climate scenario analysis through StarCash donations completed inline with TCFD 37.4% women in leadership roles framework Operational support provid
Slide 24: 2020 outlook and actions
2020 outlook and actions Fuels & Convenience Group Infrastructure Retail “I’m as Australian as Ampol” Improve safety performance Improve safety performance Deliver remaining $40m of cost-out Targeting 2020 CRM sales from production Maintain focus on fuel and optimise value 2020 capex of
Slide 25: Well-positioned to deliver potential $195m earnings uplift by 2024
Well-positioned to deliver potential $195m earnings uplift and unlock value by 2024 Continuation of F&I Use our strong Continual focus international position in retail fuel on capital expansion to deliver to deliver potential efficiency to potential $70m $85m non-fuel release franking earnings uplif
Slide 26: Q&A
26 Q&A
Slide 27: Appendix
27 Appendix Fuels & Infrastructure Financial Highlights......... 28 Lytton Refinery EBIT – Key Drivers.…………………. 29 Lytton Refinery Highlights................................. 30 Convenience Retail Fuel Volumes…………………….. 31 Convenience Retail Financial Highlights.............32 Financial Discipline –
Slide 28: Fuels & Infrastructure financial highlights
FY 2019 FY 2018 Change (%) 28 Total Fuels Sales Volumes (BL) 21.1 20.4 3 Australian Volumes (BL) 16.3 16.9 (3) Resilient International Volumes (BL) 4.8 3.5 36 Lytton CRM Sales from Production (BL) 5.5 6.0 (9) performance Lytton Total Production (BL) 5.8 6.2 (6) from core Australian F&I (ex Lytton) E
Slide 29: Lytton refinery EBIT – key drivers
Lytton refinery EBIT – key drivers Lower result driven by regional refiner margins and operational impacts, partially offset by CI benefits 2019 v 2018 Lytton RCOP EBIT 300 External Drivers Controllable Drivers 250 200 31 84 161 $m 150 38 100 14 5 3 10 70 4 50 0
Slide 30: Lytton refinery
Lytton refinery Operational performance in 2019 impacted by power supply outages High Value Transport Fuels Production Volumes, Production Utilisation (%) BL and Availability (%) % CRM impacted by regional refining margin weakness and increased landed crude premiums 3.5 97 97 97 97 98 97 97 97 97 97
Slide 31: Convenience Retail fuel volumes
Convenience Retail fuel volumes BL Convenience Retail Fuels Volumes 5.5 0.1 5.0 0.1 0.1 0.1 0.1 4.5 1.2 1.3 1.4 4.0 1.4 1.4 3.5 0.9 0.9 0.9 3.0 0.9 0.9 2.5 1.0 1.0 1.0 2.0 0.9 0.9 0.3 0.2 0.2 1.5 0.2 0.2 1.0 1.5 1.5 1.4 1.3 1.2 0.5 0.0 2015 2016 2017 2018 2019 ULP E10 Premium Petrol Diesel Vortex Di
Slide 32: Result impacted by soft retail fuel margins
32 FY 2019 FY 2018 Change (%) (1) Period end COCO sites (#) 631 516 22 Period end CORO sites (#) 152 277 (45) Total Sales volumes (BL) 4.76 4.87 (2) Result Total Sales volume growth (%) Premium Fuel Sales (%) (2.2%) 49.3% (4.5%) 48.0% 2 1 impacted by Total Fuel Revenue ($m) (2) 4,283 4,376 (2) soft
Slide 33: Financial discipline – dividend
Financial discipline – dividend Final dividend of 51 cents per share (2018 : 118cps) fully franked; full year dividend pay-out ratio 60.3% Caltex dividend history* Payout Ratio Cents per share 140 70% 120 60% 100 50% 61 61 80 70 40% 52 60 51 30% 30 50 40 20% 28 60 57 23 17 47 50 20 10% 25 30 32 17 1
Slide 34: Financial discipline – balance sheet
Financial discipline – balance sheet Diversified funding sources and prudent debt maturity profile Debt Maturity Profile (A$m) Current Sources of Funding A$m Source Medium Term Notes 300 Australian and Asian Institutional 1,213 Bilateral Bank 400 2,349 Australian and Global banks Facilities* 300 $2,
Slide 35: Financial discipline – capital expenditure
Financial discipline – capital expenditure Indicative Capital Expenditure*, subject to change (includes T&I**) Depreciation and Amortisation*** $ millions 2018 2019 2020 Forecast 2020 $ millions 2018 2019 Forecast Lytton Stay in business (includes T&I)** 38 66 ~85 97 193 205 - 215 Convenience Retail
Slide 36: AASB 16 Impact
AASB 16 Impact AASB 16 impacts on EBIT and NPAT is summarised as follows Convenience F&I F&I $ millions Lytton Corporate Total Retail Australia International Lease Depreciation (94) (16) (12) (2) (5) (129) Rental Expense Payment 123 24 12 2 8 169 EBIT 28 8 0 0 3 39 Lease Interest Expense (42) (12) (
Slide 37: Our assets – retail infrastructure
Our assets – retail infrastructure Caltex Australian Retail Service Station Network Dealer Owned Leased Total Owned Company Operated (Calstore)^ 306 268 0 574 Company Operated (Diesel Stop) 23 32 0 55 Company Operated (Depot Fronts) 10 3 0 13 Franchised 76 75 1 152 Supply Agreement 53 13 583 649 Age
Slide 38: 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-month period ended 31 December 2019; and a high level overview of aspects of the operations of the Caltex Aust
Slide 39: Thank You
CALTEX Thank You