Ampol Limited · ASX:ALD
Ampol — Caltex Australia — FY2017 Earnings Presentation
72 slides from Ampol's earnings presentation, Feb 27, 2018
Slide 1: 2017 Full Year Results Announcement
2017 Full Year Results Announcement Caltex Australia Limited ACN 004 201 307
Slide 2: Agenda
2 Agenda Values Moment Full Year 2017: Key Highlights Financial Highlights Supply & Marketing Highlights Lytton Refinery Highlights Financial Discipline Strategy Update Result Take-Aways & Short Term Priorities Q&A Appendices
Slide 3: Values Moment: Personal and Process Safety Performance
Values Moment 3 Personal and Process Safety Performance Personal safety A safety culture is fundamental to who we are at Caltex. It is our first priority. This is reflected by consistently strong safety records. Tragically, in 2017 a Caltex tanker driver was fatally injured by a 3rd party vehicle du
Slide 4: Agenda
4 Agenda Values Moment Full Year 2017: Key Highlights Financial Highlights Supply & Marketing Highlights Lytton Refinery Highlights Financial Discipline Strategy Update Result Take-Aways & Short Term Priorities Q&A Appendices
Slide 5: Key Highlights
Key Highlights 5 Full Year 2017 Results Summary Consolidated Group Result RCOP NPAT $621 million (2H 2017: $314 million) RCOP NPAT $621 million up 18% Acquisitions of Milemaker & Gull (NZ) completed; SeaOil investment announced (completion expected by end 1Q 2018) Earnings per share up 23% Fin
Slide 6: Agenda
6 Agenda Values Moment Full Year 2017: Key Highlights Financial Highlights Supply & Marketing Highlights Lytton Refinery Highlights Financial Discipline Strategy Update Result Take-Aways & Short Term Priorities Q&A Appendices
Slide 7: Financial Highlights
Financial Highlights 7 Full Year Ending 31 December FY2017 FY2016 % Change HISTORIC COST EBIT ($m) 929 936 (1) NPAT ($m) 619 610 1 EPS (cps) 237 232 3 REPLACEMENT COST EBIT ($m) 935 813 15 NPAT ($m) 621 524 18 EPS (cps) 238 199 20 Dividend (cps) 121 102 19 Debt ($m) 814 454 79 Gearing (%) 21 14 49 G
Slide 8: Financial Highlights: Reconciliation to underlying profit
Financial Highlights 8 Reconciliation to underlying (RCOP) profit metric FY 2017 $m FY 2016 $m (After Tax) (After Tax) HCOP NPAT 619 610 Adj: Inventory loss/(gain) (12) (86) Adj: Significant items loss / (gain) 14 0 RCOP NPAT 621 524
Slide 9: Financial Highlights: Significant Items
Financial Highlights 9 Significant Items Year Ending December FY 2017 FY 2016 $M $M Sale of fuel oil business 19 0 Franchisee Employee Assistance Fund (20) 0 Restructuring Costs (23) 0 Total Significant Items (Before Tax) (24) 0 Tax 10 0 Total Significant Items (After Tax) (14) 0
Slide 10: Financial Highlights: 2016 v 2017 HCOP EBIT
Financial Highlights 10 Reliable Lytton operational performance enables capture of higher refiner margins; Supply & Marketing growth continues 2016 v 2017 HCOP EBIT 1200 1000 936 122 103 5 935 24 18 929 813 24 800 600 400 200 0
Slide 11: RCOP EBIT by Segment
Financial Highlights 11 RCOP EBIT by Segment $m RCOP EBIT* 1,100 2017 Profit outlook guidance (released 19 December 2017): • Supply & Marketing $715m - $735m EBIT 977 1,000 935 • Lytton Refinery Around $310m EBIT; and 900 • Corporate $105m - $110m 795 813 800 733 709 700 658 672 600 500 406 400 308
Slide 12: Financial Highlights
Financial Highlights 12 Continued Supply & Marketing growth despite impact of retail operating model transition. Reliable Lytton operating performance enables capture of higher refiner margins • Supply & Marketing EBIT up $24 million (+3.4%) to $733 million (including $43 million $m Caltex RCOP NPAT
Slide 13: Cash Flow generation performance
Financial Highlights 13 Cash Flow generation performance 1,200 2017 EBITDA Return to normalised Higher priced commodities M&A: Includes Gull NZ payments following and normal variability within ($329m) and Milemaker 900 $1.164 billion 292 814 lower 2016 cash tax complex supply chain ($95m) instalment
Slide 14: Agenda
14 Agenda Values Moment Full Year 2017: Key Highlights Financial Highlights Supply & Marketing Highlights Lytton Refinery Highlights Financial Discipline Strategy Update Result Take-Aways & Short Term Priorities Q&A Appendices
Slide 15: Supply & Marketing Highlights - Key Drivers
Supply & Marketing Highlights - Key Drivers 15 Earnings growth driven by premium product focus and supply chain optimisation benefits 2016 v 2017 RCOP EBIT 1000 Transport fuels margin driven by: Higher depreciation following growth Includes asset portfolio write-downs 1) Retail and B2B product mix a
Slide 16: Supply & Marketing Highlights: Diesel and Jet Sales
Supply & Marketing Highlights 16 Overall domestic Diesel volumes up 7% to 7.7 BL with improved product mix, Jet volumes up 6% BL Caltex Australian Diesel and Jet Sales • Total diesel volumes up 7.3% (520 ML) to 7.7BL 12.0 • Retail diesel +4.9% to 3.3 BL with premium Vortex (retail) 11.0 diesel up 15
Slide 17: Supply & Marketing Highlights: Domestic Petrol Sales
Supply & Marketing Highlights 17 Domestic Petrol Sales – Favourable premium mix shift continues – though premium and total petrol volumes down • Total petrol volumes fell 2.8% to 5.7 billion litres, BL Caltex Australian Petrol Sales driven by continuing trend of falling base grade volumes down 3.5%
Slide 18: Supply & Marketing Highlights: Non Fuel Income (NFI)
Supply & Marketing Highlights: Non Fuel Income (NFI) 18 Non-Fuel income down due to impact of significant site transition (~175 franchise sites) $m Caltex Non Fuel Income Non Fuel income continues to reflect the current franchise model 300 Significantly more sites transitioned than planned in 278 28
Slide 19: Agenda
19 Agenda Values Moment Full Year 2017: Key Highlights Financial Highlights Supply & Marketing Highlights Lytton Refinery Highlights Financial Discipline Strategy Update Result Take-Aways & Short Term Priorities Q&A Appendices
Slide 20: Lytton Refinery Highlights
Lytton Refinery Highlights 20 Strong operational performance leverages higher refiner margins 2016 vs 2017 RCOP EBIT 400 External Drivers Controllable Drivers 350 141 17 CRM up US$2.58/bbl to US$12.87/bbl. 12 17 4 8 308 Incorporates controllable elements 300 including yield mgmt., crude premiums (op
Slide 21: Lytton Refinery Highlights: Caltex Refiner Margin
Lytton Refinery Highlights 21 Tighter supply (refinery maintenance, weather) and solid demand push SWAM margins higher US$/bbl Cpl Caltex Refiner Margin 30 16 28 Build-up (US$bbl) 13.85 26 14 FY17 FY16 24 22 12 Singapore WAM* 12.82 10.94 20 10.55 18 8.71 Product freight 3.51 3.32 8.70 10 16 7.22 0.2
Slide 22: Lytton Refinery Highlights: Refiner Margin 2007-2017
Lytton Refinery Highlights 22 Tighter supply (refinery maintenance, weather) and solid demand push SWAM margins higher • Comparable Singapore Weighted Average 2007-2017 Caltex Refiner Margin (US$/bbl) Margin (SWAM) (US$12.82/bbl versus US$10.29/bbl) year on year, despite volatility 5 year average US
Slide 23: Lytton Refinery Highlights: Operational Performance
Lytton Refinery Highlights 23 Strong controllable operational performance continues High Value Transport Fuels Production Volumes, Production Utilisation (%) and Availability (%) BL % • Strong controllable operating 3.5 98 100 performance, underpinned by: 97 97 97 97 97 97 97 96 • Mechanical Availab
Slide 24: Lytton Refinery Highlights: Balanced Product Slate
Lytton Refinery Highlights 24 Balanced product slate petrols (47%) and middle distillates (diesel, jet 49%) provides flexibility LYTTON 2013 2014 2015 2016 2017 Diesel 39% 38% 39% 39% 38% Premium Petrols 12% 13% 12% 14% 12% Jet 10% 12% 12% 11% 11% 61% 63% 63% 64% 62% Unleaded Petrol 35% 33% 32% 33%
Slide 25: Agenda
25 Agenda Values Moment Full Year 2017: Key Highlights Financial Highlights Supply & Marketing Highlights Lytton Refinery Highlights Financial Discipline Strategy Update Result Take-Aways & Short Term Priorities Q&A Appendices
Slide 26: Financial Discipline - Capital Management
Financial Discipline - Capital Management 26 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 d
Slide 27: Financial Discipline - Balance Sheet
Financial Discipline - Balance Sheet 27 Higher period end debt position reflects Gull NZ and Milemaker acquisitions (SeaOil investment completion expected end 1Q 2018) % $m Period end debt and gearing* $m Caltex net debt levels** 900 40 2250 800 35 2050 814 700 740 742 730 1850 30 693 600 639 1650 2
Slide 28: Financial Discipline - Capital Expenditure
Financial Discipline - Capital Expenditure 28 Capital directed to reinvest and grow, whilst ensuring a safe, efficient business FY2017 total capex of $809m (guidance $800m - $880m) $M Caltex Capital Expenditure • Stay-in-business of $232 million; • Growth (excl. M&A) of $150 million, primarily retai
Slide 29: Financial Discipline - Capital Expenditure
Financial Discipline - Capital Expenditure 29 Indicative Capital Expenditure*, subject to change (includes T&I**) $ millions 2014 2015 2016 2017 2018 Forecast* Lytton - Stay in business (includes T&I)** 58 94 35 41 50-70 - Growth 56 39 8 11 0 114 133 43 52 50-70 Marketing and Supply - Stay in busine
Slide 30: Financial Discipline: Depreciation & Amortisation
Financial Discipline 30 Depreciation & Amortisation 2018 $ millions 2014** 2015 2016 2017 Forecast* Lytton 34 48 56 60 60-70 Supply and Marketing 99 139 148 164 170-190 Corporate 33 6 6 6 5-10 166 193 209 229 235-270 Kurnell Refinery 37 0 0 0 0 Total 203 193 209 229 235-270 * Indicative forecasts on
Slide 31: Financial Discipline - Dividend
Financial Discipline - Dividend 31 Final dividend of 61 cents per share (2016: 52cps) fully franked; pay-out ratio 50.8% Caltex dividend history* Cents per share Payout Ratio** 140 60% 117 121 120 50% 102 100 61 40% 80 70 70 52 60 30% 40 60 45 34 25 30 50 20% 40 28 60 23 17 47 50 10% 20 25 30 17 17
Slide 32: Agenda
32 Agenda Values Moment Full Year 2017: Key Highlights Financial Highlights Supply & Marketing Highlights Lytton Refinery Highlights Financial Discipline Strategy Update Result Take-Aways & Short Term Priorities Q&A Appendices
Slide 33: Strategy Update: Asset Optimisation Review
Strategy Update 33 Any outcomes from the asset optimisation review will be driven by the delivery of sustainable value for shareholders (as measured by Total Shareholder Returns) ASSET OPTIMISATION REVIEW BACKGROUND • Caltex acknowledges that there are different perspectives of how long term shareho
Slide 34: Strategy Update: Asset Optimisation Review
Strategy Update 34 Asset Optimisation Review Financial Implications (short and long term) Impact on financial accounts (imminent change in accounting standards, AASB 16 Leases), capital structure and credit rating Uses of capital proceeds, optimal cost of capital and cost of alternative financ
Slide 35: Two businesses and cultures emerging
Strategy Update 35 Two businesses and cultures emerging, both with significant growth options
Slide 36: Proposed sale of Woolworths fuel business to BP
Strategy Update 36 Proposed sale of Woolworths fuel business to BP • Woolworths announced on 28th December 2016 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
Slide 37: Retail operating model update
Strategy Update 37 Retail operating model update • Caltex today announced the outcome of the 2 year review into its retail operating model to determine which model will best deliver our retail growth objectives • The review determined that controlling our core business is the best way to achieve our
Slide 38: Convenience Retail: The Foodary moving to roll-out phase
Strategy Update 38 Convenience Retail: The Foodary moving to roll-out phase • As at 31 December 2017, 23 Foodary sites rolled out across different geographies: regional and metropolitan (27 sites as at 27 February 2018) • Overall performance is encouraging (recognising some volatility from site to s
Slide 39: Convenience Retail: The Foodary moving to roll-out phase
Strategy Update 39 Convenience Retail: The Foodary moving to roll-out phase Progress to Date
Slide 40: Fuels & Infrastructure: Targeting growing regional markets
Strategy Update 40 Fuels & Infrastructure: Targeting growing, deregulated regional markets • Targeting growing, de-regulated, import capable regional markets where Caltex can leverage its regional trading & shipping, and other downstream capabilities • Following Gull NZ acquisition (announced end 20
Slide 41: Agenda
41 Agenda Values Moment Full Year 2017: Key Highlights Financial Highlights Supply & Marketing Highlights Lytton Refinery Highlights Financial Discipline Strategy Update Result Take-Aways & Short Term Priorities Q&A Appendices
Slide 42: Result Take-Aways & Short Term Priorities
RESULT TAKE-AWAYS & SHORT TERM PRIORITIES 42 RESULT TAKE-AWAYS • RCOP NPAT $621 million, 18% above prior year; Final dividend 61.0 cps declared (FY 2017: 121.0 cps) fully franked (50.8% payout; guidance 40% - 60%) • Supply & Marketing underlying EBIT up 5% (~2% excluding impact of acquisitions) Do
Slide 43: Short-term priorities
Key Highlights 43 Short-term priorities (Next 12 months) • Complete company structure review and implement recommendations, including optimising assets (e.g. retail service stations; terminals & infrastructure), where appropriate • Operate and optimise the business as two separate, but interconnecte
Slide 44: Q&A
44 Q&A.
Slide 45: Agenda
45 Agenda Values Moment Full Year 2017: Key Highlights Financial Highlights Supply & Marketing Highlights Lytton Refinery Highlights Financial Discipline Strategy Update Result Take-Aways & Short Term Priorities Q&A Appendices
Slide 46: Appendix: Our Purpose and Values
46 Appendix: Our Purpose and Values
Slide 47: Appendix: Our People - Caltex Leadership Team
Appendix: Our People 47 Caltex Leadership Team (CLT) Name Role Joined Experience Caltex Julian Segal Chief Executive Officer 2009 Former CEO Incitec Pivot; Orica Limited; James Hardie (CEO) Simon Hepworth Chief Financial Officer 1996 20 years Industry Finance Leadership (CFO) Richard Pearson EGM, Co
Slide 48: Appendix: Our People - Convenience Retail Leadership Team
Appendix: Our People 48 Convenience Retail Leadership Team Name Role Joined Caltex Experience Richard Pearson EGM, Convenience Retail 2017 Retail specialist: Coles (Coles Express, Merchandising, Supply Chain, Marketing & Strategy), Procter & Gamble, United Biscuits, ASDA, Royal Bank of Scotland CFO,
Slide 49: Appendix: Our People - Fuels & Infrastructure Leadership Team
Appendix: Our People 49 Fuels & Infrastructure Leadership Team Name Role Joined Experience Caltex Louise Warner EGM, Fuels & Infrastructure 1999 Founder Ampol Singapore Trading & Shipping; Chevron UK Trading secondment; previously technical, supply & project roles CFO, Fuels & Infrastructure 2006 He
Slide 50: Appendix: Our History - Caltex's Strategic Journey
Appendix: Our History - Caltex’s Strategic Journey continues 50 A focused multi-year transformation strategy, to deliver top quartile total shareholder returns 15 Corporate structure review 14 Asset optimisation review 13 Retail operating model 12 Regional Fuels Growth (Gull, SeaOil) 11 Quantum Leap
Slide 51: Appendix: 2017 Strategic Achievements
Appendix: 2017 Strategic Achievements 51 Fuels & Infrastructure • Newport terminal Phase 1 completed on time, on budget (approx. $70m) Optimise • Continuous Lytton improvement to lower breakeven costs, by increasing High Value Production, optimising the T&I cycle and improving efficiency infrastruct
Slide 52: Appendix: 2017 Strategic Achievements
Appendix: 2017 Strategic Achievements 52 Retail (Petrol & Convenience) • Fuel pricing transformation through new pricing capabilities, strategies and tools • Use of behavioural economics to drive consumer fuel buying behaviour (“Good”, “Better”, “Best” fuels) Enhance the fuel retail customer • Launc
Slide 53: Appendix: Our Assets - Retail Infrastructure
Appendix: Our Assets - Retail Infrastructure 53 Caltex Retail Service Station Network Ownership Structures • Australia: Caltex supplies 1,983 card accepting sites, including: • Caltex owned (476) or leased (386) 862 (2016: 857) • Dealer owned 602 (2016: 581) • Woolworths supplied 519 (2016: 524) • R
Slide 54: Appendix: Our Assets - Retail Infrastructure
Appendix: Our Assets - Retail Infrastructure 54 2017: Active Real Estate Management • In 2017, Caltex outlaid (Net) capital of around $50 million on its real estate network, comprising land purchases ($62m net); less Sale & Lease-back ($12m) RETAIL SITE PURCHASES • Land Purchases $63.27 million (7 s
Slide 55: Appendix: Our Assets - Infrastructure (excluding Retail)
Appendix: Our Assets - Infrastructure (excluding Retail) 55 Caltex (Non-Retail) Infrastructure Network* Darwin (Vopak) 1 Caltex Refinery Terminals operated by Cairns 11 Caltex Broome (BP hosted) Joint or industry terminal Townsville 7 (Viva JT) 6 Terminal hosting arrangement Port Hedland Mackay Majo
Slide 56: Appendix: Our Assets - Terminal Infrastructure
Appendix: Our Assets - Terminal Infrastructure 56 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 ** 730 Pelican Point, Adelaide 95 95 6% Banksmeadow
Slide 57: Appendix: The Market - Australian Fuels Demand Growth
Appendix: The Market - Australian Fuels Demand Growth 57 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 Australian Transport Fuels Market Growth • Ongoing improvements in vehicle fuel CAGR (% p.a.)
Slide 58: Appendix: The Market: Regional Supply and Demand
Appendix: The Market: Regional Supply and Demand 58 Regional product demand growth projected to exceed refining capacity additions, next five years K bbl/d Asia Pacific Product Demand Growth vs CDU • Asian product demand growth is forecast to Capacity Additions continue at 2-3% p.a. over 2018-22. Th
Slide 59: Appendix: The Market - Asia Pacific, Middle East product balances
Appendix: The Market - Asia Pacific, Middle East product balances 59 Regional Gasoline deficit forecast to continue to grow, offset by surplus middle distillates (diesel and jet) kb/d Asia Pacific and Middle East Product Balances • The Middle East has added complex refining capacity over the past 5
Slide 60: Appendix: Market Disruption – Electric vehicle sales
Appendix: Market Disruption – Australian, global electric vehicle sales 60 Electric vehicle sales currently represent only 0.1% of total Australian new vehicle sales Australian EV sales volumes and market share 0.4% • Uptake of electric vehicles (EVs) in Australia continues to lag other major market
Slide 61: Appendix: The Market - Petrol & Convenience Retail
Appendix: The Market - Petrol & Convenience Retail 61 GDP plus growth market, trending towards fresh food and beverage; and service offer • Addressable Market: A$ 8.3 billion • Market growth 4.5% (2016); last 5 years: 3% to 5%; Growth varies by state (e.g. -0.3% NT to +5.5% NSW / South Australia)
Slide 62: Appendix: Franchisee underpayment of employees update
Appendix: Franchisee underpayment of employees update 62 In 2016, Caltex identified instances where franchisees were underpaying their employees and engaging in visa and other fraudulent conduct. This conduct is unacceptable to Caltex and we have committed to removing the practice from our network A
Slide 63: AUD vs USD
Appendix: Commodities 63 AUD-USD Exchange Rate 0.90 AUD vs USD 0.85 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
Slide 64: Commodity Exposure - Oil Prices
Appendix: Commodities 64 Commodity Exposure - Oil Prices USD/bbl Dated Brent Prices $80 $70 $60 $50 $40 $30 $20 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2015 2016 2017 Source = Reuters
Slide 65: Product Prices - Regional Traded Petrol
Appendix: Commodities 65 Product Prices - Regional Traded Petrol USD/bbl Unleaded (Platts 92Ron) $100 $90 $80 $70 $60 $50 $40 $30 $20 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2015 2016 2017 Source = Reuters
Slide 66: Product Prices - Regional Diesel
Appendix: Commodities 66 Product Prices - Regional Diesel USD/bbl $100 Diesel (Platts 10 ppm) $90 $80 $70 $60 $50 $40 $30 $20 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2015 2016 2017 Source = Reuters
Slide 67: Appendix: Finance - Balance Sheet
Appendix: Finance - Balance Sheet 67 Funding Sources & Debt Maturity Profile • Incorporates Gull NZ acquisition: A$325m (completed 3 July 2017), Redemption of A$550m subordinated notes (hybrid) - replaced with existing bank facilities (Effective: 15 Sept. 2017; estimated savings $15m-$20m p.a.); and
Slide 68: Appendix: SeaOil Accounting Treatment
Appendix: Finance - Balance Sheet 68 SeaOil Accounting Treatment* 1. On Acquisition (subject to regulatory approval): DR. Investment in Associates $115m CR. Cash $115m 2. On delivery of earnings at period end: DR. Investment in Associates $12m CR. NPAT $12m 3. On receipt of any cash dividend: DR. Ca
Slide 69: Appendix: Summary Financial Information
Appendix 69 Summary Financial Information* 2017 2016 2015 2014 2013 Dividends Dividends ($/share) 1.21 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) 21,398 17,9
Slide 70: Important Notice
IMPORTANT NOTICE 70 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 Austr
Slide 71: 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.
Slide 72: Thank You
CALTEX Thank You