Ampol Limited · ASX:ALD
Ampol — Caltex Australia — FY2018 Earnings Presentation
46 slides from Ampol's earnings presentation, Feb 26, 2019
Slide 1: 2018 Full Year Results
2018 Full Year Results 26 February 2019 Caltex Australia Limited ACN 004 201 307 26 February 2019
Slide 2: Introduction and overview
2 Introduction and overview Julian Segal MD and CEO
Slide 3: The safety of our people and customers is our priority
3 The safety of our people and customers is our priority Fuels & Infrastructure safety performance continues to improve, with more vigilance as Convenience Retail grows Fuels and Infrastructure Personal Safety Process Safety 10 12 8 10 6 8 6 4 4 2 2 0 0 2015 2016 2017 2018 2015 2016 2017 2018 Days A
Slide 4: Significant progress on the key strategic deliverables over the last three years
4 Significant progress on the key strategic deliverables over the last three years What were our objectives What have we achieved* Australian Wholesale vols ↑ 4% in 2018 and Leverage integrated supply chain scale and efficiency Australian (excl Lytton) EBITDA ↑ 5% Secured Woolworths volumes for 15 y
Slide 5: 2018 was a critical year in delivering strategy
5 2018 was a critical year in delivering strategy Fuels & Convenience Corporate Infrastructure Retail Delivering Growth Primed for Growth Effective Capital Management ▪ F&I ex-Lytton EBIT +21% (Lytton EBIT - ▪ Convenience Retail EBIT down 8% (or $26m), ▪ Clarity over site transition, Retail capex, 5
Slide 6: 2019 – Continue growth in F&I, ongoing execution to deliver long-term sustainable growth
2019 – Continue growth in F&I, ongoing execution to deliver long-term 6 sustainable growth in Convenience Retail Fuels & Convenience Corporate Infrastructure Retail Continue Growth Continuing the journey Maintain capital discipline ▪ Large & resilient cash flows in Australian towards growth ▪ Mainta
Slide 7: The Caltex investment proposition, a focus on shareholder returns
7 The Caltex investment proposition, a focus on shareholder returns Large and resilient cash flow from Core Disciplined Capital allocation Business framework ✓ Transport fuels focused ✓ Maintain strong capital structure ✓ Strong competitive advantages ✓ Distribute excess capital where available ✓ Pr
Slide 8: Group financial result
8 Group financial result Simon Hepworth CFO
Slide 9: 2018 Key Highlights
9 2018 Key Highlights Strong underlying business result impacted by lower refining margins, and transition to Company operations Solid underlying Good progress on strategy Delivering shareholder returns business result F&I (ex Lytton) EBIT Total fuel sales volumes EBIT ROCE +21% +7% -5% $409m YoY 20
Slide 10: Over the last 3 years, Caltex has allocated over $2.2bn of capital
10 Over the last 3 years, Caltex has allocated over $2.2bn3 of capital to inorganic growth and shareholder returns, while maintaining EBIT ROCE of around 20% Over $1.6 billion3 has been returned to shareholders since 2016 including the 2019 Buy-back 1800 1600 1400 7-22% ROCE2 1200 A$m 1000 800 16% R
Slide 11: 2018 strong underlying business result impacted by lower refining margins
11 2018 strong underlying business result impacted by lower refining margins Normalising refining margins to 2017 levels, RCOP NPAT would have grown ~2% YoY 2017 v 2018 HCOP EBIT 1000 24 6 959 23 35 929 128 95 20 2 3 10 826 17 20 829 800 20 10 763 600 A$m Transition/timing Controllables impacts 400
Slide 12: Disciplined approach to capital to support growth and shareholder returns
12 Disciplined approach to capital to support growth and shareholder returns Operating Cash Flow remains strong, with investment in Seaoil and working capital to support business growth 1,200 Decommissioning of EBITDA $1.1bn refinery plant. Future 900 spend relates to environmental 600 remediation.
Slide 13: Financial Discipline – Balance Sheet
13 Financial Discipline – Balance Sheet Higher debt levels reflect Seaoil investment and investment in working capital to support business growth $m Period end net debt and gearing* % 1200 40 1,041 35 1000 955 Caltex’s target capital structure is Adj. 30 814 net debt / EBITDA 1.5-2.0x 800 740 742 73
Slide 14: Focus on capital efficiency and disciplined capital allocation maintained
14 Focus on capital efficiency and disciplined capital allocation maintained Caltex announces ~$260 million Off-market Buy-back. Capital Allocation Priority Order Where we are Off-market Buy-back Maintain strong capital structure to support ▪ ~$260 million Off-market Buy-back, ~1.6x adj. net debt /
Slide 15: Commentary on 2019 earnings outlook
15 Commentary on 2019 earnings outlook Fuels & Convenience Corporate Infrastructure Retail ▪ Continue to generate strong cashflows ▪ EBIT anticipated to be flat YoY* ▪ Maintaining capital discipline; 2019 capex $320-385 million, Corporate costs ~$55m ▪ Australian Wholesale and International to ▪ Key
Slide 16: Fuels & Infrastructure
16 Fuels & Infrastructure Louise Warner EGM Fuels & Infrastructure
Slide 17: 2018 strong underlying performance
17 FY 2018 FY 2017 Change (%) Total Fuels Sales Volumes (BL) 20.4 19.1 7 Australian Volumes (BL) 16.9 16.6 2 International Volumes (BL) 3.5 2.5 39 Lytton CRM Sales from Production (BL) 6.0 6.1 (1) Lytton Total Production (BL) 6.2 6.2 - 2018 strong Australian F&I (ex Lytton) EBITDA (A$m)* 435 415 5 u
Slide 18: Fuels & Infrastructure Highlights – Key Drivers of Result
18 Fuels & Infrastructure Highlights – Key Drivers of Result Solid International and Australian growth despite WOW reprice. Lower Lytton result driven by regional refining margins and impacts from Lytton operating issues 2017 v 2018 F&I RCOP EBIT 1000 Predominantly regional margin 900 weakness, Octo
Slide 19: Fuels & Infrastructure Highlights – Lytton Result
19 Fuels & Infrastructure Highlights – Lytton Result Lower result driven by regional refining margins and Lytton operational impacts. Focus in 2019 is on more reliable operations and responding to the expected range of refining market conditions. 2017 v 2018 Lytton RCOP EBIT 500 450 External Drivers
Slide 20: Continued success in growing and diversifying Australian volumes and earnings
20 Continued success in growing and diversifying Australian volumes and earnings Strength in supply chain supporting earnings across Australian Wholesale and Convenience Retail fuels BL Fuels & Infrastructure Volumes A$m Australian F&I (ex Lytton)* EBITDA 22 500 Achievements +7% 20 +8% 450 +5% +5% +
Slide 21: Fuels & Infrastructure is a proven platform for international growth
21 Fuels & Infrastructure is a proven platform for international growth International Fuels EBITDA is up 172% in 2018 YoY, highlighting the success of recent acquisitions and other regional growth BL International Volumes A$m International* EBITDA 4.0 80 +172% +39% Achievements 3.5 70 35 cargoes sou
Slide 22: Refining margins are at historical lows
22 Refining margins are at historical lows Refining margins have historically been above current levels 98% of the time. 2018 saw softer Caltex refining margins with lower regional margins, lower yield and minor reductions to Australian market quality premiums. Ability to optimise supply through Amp
Slide 23: F&I’s 2019 focus – operational excellence and continued international growth
23 F&I’s 2019 focus – operational excellence and continued international growth Lytton ▪ Continue to run business safely, reliably and competitively Australia F&I (ex Lytton) ▪ Improve controllables ▪ Grow Australian wholesale fuels at or above market growth rates* ▪ Restore FCCU operations to full
Slide 24: Convenience Retail
24 Convenience Retail Richard Pearson EGM Retail
Slide 25: 2018 saw key steps taken in shaping Retail offer and delivering enablers
25 2018 saw key steps taken in shaping Retail offer and delivering enablers Entering 2019 with positive momentum Site Capability Format Woolworths Fuel ▪ Headline shop Control Build Development Partnership sales growth of 2.5% in 2H18 ▪ Labour improved 55 The Foodary Loyalty and through year with Go
Slide 26: Solid result given focus on shaping offer
FY 2018 FY 2017(1) Change (%26) Period end COCO sites (#) (2) 516 316 63 Period end CORO sites (#) 277 482 (43) Total Sales volumes (BL) 4.87 5.10 (4) Premium Fuel Sales (%) 48.0% 47.2% 1 Total Fuel Revenue ($m) (3) 4,376 3,771 16 Network Shop Revenue ($m) (4) 1,089 1,070 2 Solid result Total Shop R
Slide 27: Convenience Retail Highlights – Key Drivers
27 Convenience Retail Highlights – Key Drivers 2017 v 2018 Convenience Retail RCOP EBIT 600 500 Fuel earnings Largely transition Includes annual Movement between up slightly. impacts. increases and full $3m net gain in Investment in site year of Milemaker. 2018 and $11m net network/systems 400 cost
Slide 28: Drivers of future shop financial performance
28 Drivers of future shop financial performance 2017* 2018* 2019 Target 5-6yr Target 100% Company Network Control 40% 65% 80% operated Cumulative 23 55 65-70 ~500 Foodary/Metro stores Shop sales growth 0.6% 1.7% ~4% 5-7% CAGR Shop gross margin (1.0)% (0.3)% ~1% +5% pre QSR expansion Labour/sales mar
Slide 29: 2019 is a key year of driving enablers for Retail earnings growth
29 2019 is a key year of driving enablers for Retail earnings growth Deliver benefits of ▪ Continue to progress integrated fuel supply chain transition to Company by leveraging: operation ▪ StarCard ▪ Improve safety ▪ Loyalty and redemption performance ▪ FuelPay ▪ Format innovation ▪ Optimise The Fo
Slide 30: Closing Remarks
30 Closing Remarks Julian Segal CEO
Slide 31: Q&A
31 Q&A
Slide 32: Appendix
32 Appendix Financial Highlights........................................... 33 Financial Discipline – Dividend......................... 34 Financial Discipline – Balance Sheet................. 35 Fuels Highlights – by product........................... 36 Lytton Refinery Highlights..................
Slide 33: Financial Highlights
33 Financial Highlights Reconciliation to underlying (RCOP) profit metric Significant Items FY 2018 FY 2017 FY 2018 FY 2017 Year Ending December (After Tax) (After Tax) $M $M HCOP NPAT 560 619 Sale of interest in Kitchen Food Co (27) Sale of fuel oil business 19 Add: Inventory loss/(gain) (14) 4 Fra
Slide 34: Financial Discipline – Dividend
34 Financial Discipline – Dividend Final dividend of 61 cents per share (2017 : 61cps) fully franked; final dividend pay-out ratio 60.5% Caltex dividend history* Cents per share Payout Ratio 140 60% 120 50% 100 61 40% 61 80 70 52 30% 60 30 50 20% 40 28 60 57 23 17 47 50 10% 20 25 30 17 17 17 20 0 0
Slide 35: Financial Discipline – Balance Sheet
35 Financial Discipline – Balance Sheet Funding Sources and Debt Maturity Profile at 31 December 2018 ▪ Successful execution of Caltex's first debt capital markets issuance since 2012 ▪ 7 year $300m medium term notes (fixed @ 4% p.a.) Current Sources of Funding Debt Maturity Profile (A$m) A$m Source
Slide 36: Fuels Highlights – by product
36 Fuels Highlights – by product BL BL Fuels & Infrastructure Volumes Convenience Retail Fuel Volumes 22 5.5 0.1 0.1 20 1.5 5.0 0.1 0.1 18 1.8 4.5 0.8 1.5 3.0 1.2 1.3 1.4 16 4.0 1.4 2.9 2.4 2.7 14 3.5 0.9 0.9 0.9 12 3.0 0.9 9.6 10 7.4 8.3 2.5 7.4 1.0 1.0 1.0 8 2.0 0.9 0.3 0.2 6 1.5 0.2 0.2 4 1.0 6.2
Slide 37: Lytton Refinery Highlights
Strong controllable operational performance continues 37 Lytton Refinery Highlights High Value Transport Fuels Production Volumes, Production Utilisation (%) and Availability (%) BL % ▪ History of strong controllable A return to historical margins, higher yield losses and reduced 3.5 100 operating p
Slide 38: Financial Guidance
38 Financial Guidance Indicative Capital Expenditure*, subject to change (includes T&I**) Depreciation and Amortisation $ millions 2017 2018 2019 Forecast* $ millions 2017 2018 2019 Forecast* Lytton 85 97 105-115 Convenience Retail Stay in business (includes T&I)** 41 38 65-75 Fuels and Infrastructu
Slide 39: Our Assets – Retail Infrastructure
39 Our Assets – Retail Infrastructure Caltex Australian Retail Service Station Network Dealer Owned Leased Total Owned Company operated (Calstore)^ 247 212 0 459 Company operated (Diesel Stop) 24 31 0 55 Company operated (Depot Fronts) 12 4 0 16 Franchised 152 125 6 283 Other* 43 13 596 652 WOW 0 0
Slide 40: Control our network – at least 99% of sites Company operated by 2020
40 Control our network – at least 99% of sites Company operated by 2020 Company operation is a key enabler of our Retail Strategy 99% of sites have agreed transition dates End 2020 >99% Caltex operated # total sites (projected) # total sites (projected) 1 4% 1% 19% 35% 61% 182 80% 136 99% 126 81% 65
Slide 41: Segmental Reconciliation
41 Segmental Reconciliation 2018 Consolidated P&L Inventory gain/(loss) Consolidated P&L F&I CR Corporate (RCOP basis) and significant items (HCOP basis) External Revenue 16,764 4,967 21,731 21,731 EBITDA 721 404 (44) 1,082 3 1,085 D&A (151) (97) (8) (255) (255) EBIT 570 307 (51) 826 829 2017 Consol
Slide 42: AASB16 updated guidance
42 AASB16 updated guidance Caltex anticipates the adoption of AASB16 will result in an unfavourable non-cash impact to NPAT in 2019 of approximately $20 million, which is slightly below guidance provided on 18 December 2018. This impact is anticipated to be the result of the following, all else equa
Slide 43: Illustrative Buy-back Example
43 Illustrative Buy-back Example (for Australian Super Fund Investors) Key Assum ptions Com m ents Assumed Market Price* $ 28.00 OMBB Price $ 24.08 Assumed Market Price less maximum tender discount of 14.0% Assumed Capital Component $ 2.01 Subject to ATO class ruling Original share purchase price (c
Slide 44: Proposed Off-market Buy-back Timetable
44 Proposed Off-market Buy-back Timetable Feb-19 • Announcement of Buy-back Tuesday, 26 February • Last day that Shares can be acquired on the ASX to be eligible to participate in the Buy-back and to qualify for franking Thursday, 28 February credit entitlements in respect of the Buy-back considerat
Slide 45: IMPORTANT NOTICE
45 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 2018; and ▪ a high level overview of aspects of the operations of the Caltex A
Slide 46: Thank You
CALTEX Thank You