Ampol Limited · ASX:ALD
Ampol — Investor Day (October 2018)
132 slides from Ampol's investor day presentation, Oct 30, 2018
Slide 1: Revised Payout Ratio and Investor Day Presentations
ASX Release 30 October 2018 REVISED PAYOUT RATIO AND INVESTOR DAY PRESENTATIONS As part of the Caltex Australia Limited investor days to be held on 30 October 2018 and 31 October 2018, Caltex provides the following business updates. Dividend policy Caltex Australia wishes to advise of a change to it
Slide 2: Caltex Investor Day
Caltex Investor Day 30 October 2018 30 October 2018
Slide 3: Caltex brands
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Slide 4: Welcome and Introduction
3 Welcome and Introduction Julian Segal MD and CEO
Slide 5: Safety of our people and customers is our top priority
4 Safety of our people and customers is our top priority Caltex’s lengthy history of safety and reliability underpins our commitment to our customers and employees Fuels and Infrastructure Personal Safety Process Safety 10 12 8 10 8 6 6 4 4 2 2 0 0 2015 2016 2017 2018 H1 20181H 2015 2016 2017 2018 H
Slide 6: Welcome and Introduction; Group financial guidance and outlook
5 Welcome and Group financial Introduction guidance and outlook Julian Segal Simon Hepworth MD and CEO CFO Fuels & Asset Convenience Infrastructure optimisation Retail Louise Warner Alan Stuart-Grant Richard Pearson EGM Fuels & EGM Strategy EGM Convenience Infrastructure Retail
Slide 7: We are proud of the transformation we have already achieved
6 We are proud of the transformation we have already achieved and will continue to evolve successfully In fuels, we have secured our position as the market leader in Australia and become an emerging player in the Asian region, as well as commencing our journey on convenience retail FIVE YEARS AGO TO
Slide 8: Caltex is the leading Australian transport fuel company
7 Caltex is the leading Australian transport fuel company, which has successfully embarked on its regional expansion, and is progressing well with its convenience retail growth strategy Our strategy is to build and monetise capability and scale across the fuels and convenience value chain, to maximi
Slide 9: We are strong across the entire value chain
8 We are strong across the entire value chain Our strategies across the business are focused on delivering integrated value and growth across the chain Developed Record Advantaged Retained scale KEY Creation of new formats production national and customer SUCCESSES Ampol and volumes position relatio
Slide 10: Our strong network of assets provides a platform for growth
Our strong network of assets provides a platform for growth 9 We control a hard to replicate, privileged network of retail and distribution assets Large, well located retail real estate network Advantaged regional infrastructure National presence We control the entire supply chain
Slide 11: Our capabilities are providing valuable new growth options
10 Our capabilities are providing valuable new growth options INTERNATIONAL ▪ Ampol enabled material supply chain efficiency and is now handling over 3 billion litres of international volumes ▪ International assets seeing mid teens profit growth rates CONVENIENCE RETAIL STORES ▪ Natural adjacency fo
Slide 12: Commercial separation enables the relevant cultures and systems
11 Commercial separation enables the relevant cultures and systems required to deliver our strategy Caltex Australia 66% of EBIT 34% of EBIT Fuels and Infrastructure Convenience Retail ✓ Full supply chain view ✓ Foster retail culture ✓ Improved efficiency ✓ Apply retail specific KPIs ✓ Continued foc
Slide 13: Business units are positioned to create value for shareholders
12 Business units are positioned to create value for shareholders Fuels & Convenience Corporate Infrastructure Retail Transformed Business Primed for Growth Effective Capital Management ▪ Predictable earnings ▪ Stable earnings base ▪ Increased payout ratio ▪ Cash generative ▪ Expanded capability ▪ I
Slide 14: Increased dividend payout
13 Increased dividend payout With transformation well advanced, Caltex now has the capacity to sustainably pay higher dividends, whilst retaining sufficient capital headroom to support growth aspirations in both Fuels & Infrastructure and Convenience Retail The transformation of Caltex has created a
Slide 15: In summary, we offer a clear investment proposition
14 In summary, we offer a clear investment proposition Defensive and reliable cash flow from Execute on TSR Catalysts Core Business Invest in Growth Realise Franking ✓ Transport fuels focused Engines Credits ✓ Strong competitive advantages Where excess ▪ International ✓ Cash generative business capi
Slide 16: Caltex's 2019 Deliverables
15 Caltex’s 2019 Deliverables Continued growth in F&I Progress Convenience Retail earnings Strategy ▪ Deliver Seaoil and Gull ▪ Deliver sustainable fuels profits investment cases by optimising value & volume ▪ Grow volumes at market ▪ Leverage Woolworths rates partnership ▪ Grow international earnin
Slide 17: Group financial guidance and outlook
16 Group financial guidance and outlook Simon Hepworth CFO
Slide 18: Caltex 1H18 by the numbers
17 Caltex 1H18 by the numbers – substantive and well positioned Operating Financial Shareholder Balance sheet performance performance value Fuel sales volumes RCOP NPAT Net Debt* 1H dividend 10.2 BL $296m $1.0bn 57 cps Refining production Operating cash flow Gearing HCOP EPS 3.2 BL $140m 24% 147 cps
Slide 19: Our strategy is delivering earnings growth, and underpinning shareholder returns
18 Our strategy is delivering earnings growth, and underpinning shareholder returns EBIT (ex refining) has achieved ~10% CAGR for last 4 years. Growth has become steady and reliable STEADY AND GROWING PROFITABILITY* ENHANCED ABILITY TO PAY DIVIDENDS 1200 Operating Cash Flow and Dividends Per Share (
Slide 20: Capital allocation framework
19 Caltex’s capital allocation framework defines capital priorities to support top quartile TSR objective ✓ Target Adj. Net Debt / EBITDA range 1.5x - 2.0x 1 Capital Structure ✓ Where Adj. Net Debt > 2.0x EBITDA, debt reduction plans become a focus 2 Maintenance Capex ✓ Safety and reliability of sup
Slide 21: Strong focus on capital discipline
20 Strong focus on capital discipline to deliver strong returns to shareholders Top Quartile TSR is the Overarching Objective 2. 1. Optimal 4. Financial Disciplined 3. Capital Capital Risk Capital Efficiency Structure Management Allocation
Slide 22: Caltex has a record of effective capital allocation
21 Caltex has a record of effective capital allocation >20% ROCE on capital allocated 16% ROCE 12%(1) ROCE 7%(2) ROCE ROCE<WACC to growth EPS Accretive EPS Accretive EPS Neutral EPS Dilutive initiatives Caltex Opportunity not Ownership 3 years+ 16 months 6 months 18 months pursued in 2016 Rationale
Slide 23: Robust Financial Risk Management
22 Robust Financial Risk Management Caltex’s enhanced risk management platform supports growth in Fuels & Infrastructure KEY RISK TOOLS INTERNATIONAL ROBUST SUPPLY CHAIN CALTEX VALUE CHAIN SOURCING AND REFINING DISTRIBUTION WHOLESALE RETAIL MANAGEMENT SUPPLY STRONG CUSTOMER BASE IS SUBJECT TO HAVING
Slide 24: Committed Liquidity Headroom
23 Caltex’s transformation enabled an overhaul of funding platform; materially improving terms, conditions and pricing Committed ✓ Final legacy debt issue to be repaid Facilities Committed Liquidity Liquidity Buffer 2,000 Nov 2018 ($150m AMTN @ 7.25% Headroom Headroom 1,500 Buffer coupon) Peak 1,000
Slide 25: Updated financial guidance
24 Updated financial guidance 2018 GUIDANCE 2019 GUIDANCE ▪ 3Q Retail fuel volumes and margins impacted by high ▪ CY19 Earnings anticipated to be an increase on CY18. crude price and low AUD, as well as targeted competitor Continued growth in F&I business to offset Woolworths fuel actions. Negative
Slide 26: Q&A
25 Q&A
Slide 27: Fuels & Infrastructure
26 Fuels & Infrastructure Louise Warner EGM Fuels & Infrastructure
Slide 28: What does F&I do?
27 What does F&I do?
Slide 29: Our scale and capability across the whole supply chain differentiates us
28 Our scale and capability across the whole supply chain in Australia differentiates us Australian International Refining Distribution Wholesale Retail Wholesale Sourcing Market Share(1) 34% Most sites leased to Outsourced to Vitol Coles 22% 20% Sold to 7 Eleven 17% Trafigura shareholding n/a n/a S
Slide 30: F&I runs as an integrated business to drive value
29 F&I runs as an integrated business to drive value F&I comprises four interconnected operational “hubs” which form an overall supply and marketing system Third Party Wholesalers Crude & Feedstocks (Australia) MANUFACTURING Finished Products F&I’s B2B CUSTOMERS Lytton Refinery RELATIONSHIPS TRADING
Slide 31: Interaction of the system's hubs
30 HUB 1 CUSTOMER DEMAND *Caltex and WOW Retail demand is especially valuable as volume certainty is supported by strong network The interaction of the system’s HUB 3 TRADING & HUB 2 hubs make the SHIPPING Ampol Singapore Crude Supply MANUFACTURING Lytton Refinery value more Crude Oil, Feedstocks, G
Slide 32: Our network is being expanded internationally to enable growth
31 Our network is being expanded internationally to enable growth Our international supply chain and retail capability has opened up new growth options ▪ Investments in high growth businesses in New Gull NZ and Seaoil Zealand and the Philippines ▪ Added >1.7 billion litres1 of scale with scope to gr
Slide 33: F&I has transitioned from a refiner to a strong growth platform
32 In a changed market F&I has transitioned successfully from a refiner to create a strong platform for both domestic and international growth Strategic focus Enabled by a range of competitive advantages ✓ International Product Sourcing Grow Trading ▪ Ampol Singapore established in 2013 Biggest impo
Slide 34: Q&A
33 Q&A
Slide 35: Kurnell wharf
34 Kurnell wharf Kurnell is uniquely positioned in Caltex’s Gasoline export tankage leading supply network Jet export tankage Blend tanks Diesel and Jet import tanks
Slide 36: Fuel & Infrastructure Operations
35 Fuel & Infrastructure Operations Louise Warner
Slide 37: The Caltex F&I Presentation Team
36 The Caltex F&I Presentation Team Louise Warner EGM Fuels & Infrastructure Brad Phillips Derek Styles Brent Merrick David Bodger Chris Richmond GM B2B Sales GM Manufacturing GM Trading & Shipping GM Gull New Zealand GM Strategy
Slide 38: Understanding our system across the Hubs
37 Understanding our system across the Hubs HUB 1 AUSTRALIAN HUB 2 CUSTOMER MANUFACTURING DEMAND Lytton Refinery Source of scale Lubricants B2B & Retail supply Manufacturing HUB 3 HUB 4 TRADING & INTERNATIONAL SHIPPING Crude Oil Product shipping Support for domestic & international sales Internation
Slide 39: Hub 1: Australian Customer Demand
38 Hub 1: Australian Customer Demand The heart of our business is the scale enabled through our strong demand base in Australia. The Australian economy is heavily dependant on transport fuels (i.e. mining, shipping, transport, agriculture, industrial), and will be for a while yet. What does it do? H
Slide 40: Defending and growing Australian B2B volumes
39 How we succeed in defending and growing Australian B2B volumes Australia is an attractive market for new entrants but we have steadfastly defended our market position due to the inherent strength of our assets and breadth of offer Key Competitive Advantages INTEGRATION WITH RETAIL INFRASTRUCTURE
Slide 41: B2B market less prone to disruption from alternate transport
40 Longer term the B2B market is much less prone to disruption from emerging alternate transport solutions ▪ Large amount of F&I’s scale is derived from commercial diesel and aviation sales ▪ Both of these segments are expected to see robust growth over the medium term CALTEX VOLUME SPLIT (H1 2018)
Slide 42: Leveraging the integrated supply chain creates value
41 Leveraging the integrated supply chain creates value for shareholders EXAMPLE: Caltex’s ~50% market share at Sydney Airport is enabled by combining trading expertise with advantaged infrastructure and customer relationships 4 1 Airfield Sales Ampol Sources Jet Fuel ▪ Caltex B2B sales team have lo
Slide 43: Hub 2: Manufacturing's role in the integrated supply chain
42 Hub 2: Manufacturing's role in the integrated supply chain Lytton refinery is one of the best performing small refineries in Asia, it represents a major centre of technical expertise critical to deliver core earnings today, and continued optimisation will support the integrated value chain What d
Slide 44: How does Lytton work
43 How does Lytton work Simplified process flow for Lytton – DHTU and FCC feed imported via Ampol is used to materially boost production FEEDSTOCKS IN DISTILLATION PROCESSING Other, 1% LPG, 2% LPG Premium Gasoline, 13% Naphtha Processing DISTILLATION Isomerisation CRUDE Gasoline Unit CRUDE Gasoline,
Slide 45: Lytton's operating performance has been exceptional
44 Lytton’s operating performance has been exceptional A refocus on reliable and efficient operations and high value products plus optimisation with Ampol has improved production and reduced historic volatility and turned Lytton into a high returning business CALTEX REFINER MARGIN(1) HIGH VALUE PROD
Slide 46: Lytton's performance compares favourably to regional benchmarks
45 Lytton’s performance compares favourably to some regional benchmarks Margin success is influenced by product mix, configuration and utilisation FY17 TOTAL PRODUCTION (ML) WHITE BARREL PRODUCTION REFINER MARGIN* (US$/bbl) 6,300 6,500 99% 13.02 6,200 10.20 94% 8.02 90% Lytton Geelong Marsden Point
Slide 47: How the Lytton turnaround has been achieved (1)
46 How the Lytton turnaround has been achieved (1) Improved processes and maintenance FEEDSTOCKS IN DISTILLATION PROCESSING ▪ Rebuild of systems and capability in LPG Naphtha inspection and Splitter DISTILLATION Isomerisation asset integrity CRUDE Gasoline Unit CRUDE ▪ Periodic T&I to smooth cash fl
Slide 48: How the Lytton turnaround has been achieved (2)
47 How the Lytton turnaround has been achieved (2) Additional yield and lower unit costs through capacity creep and other upgrades FEEDSTOCKS IN DISTILLATION PROCESSING ▪ Low cost investments in DHTU and LPG Naphtha FCC capacity Splitter DISTILLATION Isomerisation increased CRUDE Gasoline Unit CRUDE
Slide 49: How the Lytton turnaround has been achieved (3)
48 How the Lytton turnaround has been achieved (3) The benefits of sourcing from Ampol FEEDSTOCKS IN DISTILLATION PROCESSING LPG Naphtha ▪ Independent Splitter DISTILLATION Isomerisation purchasing has CRUDE Gasoline Unit CRUDE improved crude choices and prices LPG Reformer ▪ Led sourcing of Gasolin
Slide 50: IMO2020 impacts on Lytton
49 IMO2020 is expected to have both positive and negative impacts on Lytton IMO2020 refers to an international ban on high sulfur fuel (HSFO) oil by marine vessels which will trigger changes by shipowners to either their equipment or fuel choice Shipowners Install No impact Fuel Oil Scrubbers Use Al
Slide 51: Update on full Euro V fuels transition
50 Update on full Euro V fuels transition There are no imminent plans for a shift to low sulfur gasoline Current Situation What is Expected ▪ Australia is Euro V compliant for diesel, not ▪ Industry position is a 2027 adoption gasoline ▪ No impact on trading margins, already buying ▪ Changes will re
Slide 52: Hub 3: Trading and Shipping
51 Hub 3: Trading and Shipping offers opportunity to improve margins and value Known as Ampol Singapore the trading and shipping business was established in 2013 What does it do? How Does it Create Value? ▪ Sources crude and finished product to meet Uses relationships and market ACCESS LOWER COST OF
Slide 53: For many Asian refiners Australia is an attractive outlet
52 For many Asian refiners Australia is an attractive outlet Our scale in a key Asian markets allows Ampol to capture value by sourcing product directly Why is Australia Attractive? Key Export Markets Capacity additions will see both these shorts reduce materially by 2022 ✓ Excess refining capacity
Slide 54: Ampol competitive advantages owing to integration with Caltex
53 Ampol enjoys numerous competitive advantages owing to integration with Caltex Caltex’s Trading and Shipping expertise and advantage has been built from scratch Ability to diversify supply sources, claim discounts, vary freight terms and retain talent Scale Position Australian logistics are challe
Slide 55: Ampol is now positioned as a major growth engine
54 Ampol is now positioned as a major growth engine for Caltex Ampol has evolved quickly after being scaled up in 2015 and is now a valuable platform capability for the group 2015 NOW FUTURE Simple Toolbox Established Capability Growth Engine Blending Improved pricing STORAGE GLOBAL MARKET SOURCING
Slide 56: Dynamically managing crude purchases for Lytton
55 EXAMPLE: Dynamically managing crude purchases for Lytton Ampol’s insights and risk management capabilities can drive material supply chain value 1 OPTION 3 Ampol uses market insights to Product is stored in Singapore to buy African crude at an attractive capture freight benefits, cargo timing pri
Slide 57: Hub 4: International operations
56 Hub 4: International operations enable further system expansion and growth The international operations have been developed in collaboration with Ampol What does it do? How Does it Create Value? ▪ Ownership of interests in overseas fuel Investments provide EPS ATTRACTIVE FINANCIAL marketing and d
Slide 58: Gull New Zealand was Caltex's first international acquisition
57 Gull New Zealand was Caltex’s first international acquisition Transaction completed in July 2017 ▪ 87 Gull branded retail sites across North Island ▪ Owner of New Zealand’s only scale import terminal located at Mount Manganui (91ML capacity) ▪ Prominent discounter brand with strong customer engag
Slide 59: What makes Gull successful
58 What makes Gull successful Despite being smaller, Gull retains a number of key advantages The “Gull Effect” was coined by the 70% of market’s supply is via the NZ AA in 2013. Fuel prices are single NZ refinery. Small scale known to become more imports are competitive with this competitive when Gu
Slide 60: Gull has progressed well under Caltex ownership
59 Gull has progressed well under Caltex ownership The anticipated benefits of bringing Caltex and Gull together are already being realised in the first year of ownership Original Investment Case Progress to Date ✓ Strong growth profile from a low base On Acquisition FY18 Forecast of sites Fuel Volu
Slide 61: Extension of the System into Asia is a natural step
60 Extension of the System into Asia is a natural step Global fuels demand growth is driven by emerging markets which are more attractive due to economic growth levels and wealth effects from growing vehicle ownership levels 2.7% 2.5% These trends are evident in the majors’ investment CAGR in Fuels
Slide 62: The Philippines is an attractive market
61 The Philippines is an attractive market in multiple ways A key factor with the Seaoil investment was the attractive market backdrop Deregulated Market Fast Growing Market ✓ Freely competitive market Industry and National Growth Rates ✓ Open to foreign investment 11.4% 10.3% ✓ No government owned
Slide 63: Seaoil provided an alternative model for growth
62 Seaoil provided an alternative model for growth In March 2018, Caltex completed the acquisition of a 20% equity interest in Seaoil for A$115m SEAOIL retail and terminal network footprint 316 10 Volumes Seaoil terminal branded retail strategically located 1.4 Seaoil branded retail sites by region
Slide 64: Our approach to further international investments
63 Our approach to further international investments Further investments will remain highly targeted 1 Market or asset is capable of growing faster than Australian fuels market EVALUATION CRITERIA 2 Unregulated market structure which does not hinder businesses reaching full potential 3 Country risk
Slide 65: Generating additional growth engines through adjacencies
64 Generating additional growth engines through adjacencies Core capabilities provide platform for growth (regionally or with relevance into adjacencies), with willingness to partner to grow. Trading & Complex B2B Infrastructure Manufacturing Shipping supply chains relationships
Slide 66: Fuels & Infrastructure wrap
65 Fuels & Infrastructure wrap Louise Warner
Slide 67: F&I is a strong, efficient, defensive business
66 F&I is a strong, efficient, defensive business with good growth prospects Strong competitive Efficient execution Growth advantages ▪ Creation of an independent ▪ Attractive outlook for trading ▪ Scale trading business and shipping ▪ Full supply chain view ▪ Record refinery production ▪ Expansion
Slide 68: F&I Key Focus Areas
67 F&I Key Focus Areas Protect & Grow Safe Grow Trading & Growth via Operations Supply Shipping International Base Operations Delivering a reliable and growing earnings profile to support TSR objectives
Slide 69: F&I's 2019 Deliverables
68 F&I’s 2019 Deliverables Continue to run business Grow Australian wholesale safely, reliably and fuels at or above market competitively to generate growth rates cash Deliver investment case Grow international earnings from Gull and Seaoil • Increase international • Add 5-10 Gull NTIs volumes above
Slide 70: Glossary of industry terms
69 Glossary of industry terms DHTU Diesel Hydro Treating Unit, used by a refinery to remove sulfur from high sulfur diesel to make higher quality diesel products such as Australian grade diesel (10ppm sulfur) FCCU Fluidised Catalytic Converter Unit, used by a refinery to convert lower value crude re
Slide 71: Asset optimisation
70 Asset optimisation Alan Stuart-Grant EGM Strategy
Slide 72: Thorough asset optimisation review
71 Thorough asset optimisation review focused on maximising shareholder value Objective: Thorough examination of Caltex’s portfolio of assets to determine optimal ownership structure Considered various transaction/ownership Operating impact alternatives 01 ▪ Current operations, flexibility 01 ▪ Asse
Slide 73: Infrastructure assessment
72 Infrastructure assessment Asset perimeter included all terminal facilities and pipelines (incl. and excl. Lytton storage and JVs) Structures evaluated Key assumptions ▪ 2 primary sale and leaseback cases considered ▪ 20 year lease term 1– Full take-or-pay tariff ▪ Weighted average tariff range of
Slide 74: Infrastructure assessment (cont.)
73 Infrastructure assessment (cont.) 3 sophisticated investors approached for feedback and alternative structures were encouraged. Required IRR range of 8-13% Illustrative financial & value impact based on 100% sale Key takeaways Take-or-pay Infrastructure is key strategic asset – control and 01 fle
Slide 75: Real estate assessment
74 Real estate assessment Various ownership and portfolio options considered Structures evaluated Key assumptions Portfolio summary ▪ Considered options for Convenience Defined broadly – 1 Public REIT Retail owned Representative portfolio Portfolio –1 The whole portfolio – 2 Unlisted/private capital
Slide 76: Real estate assessment (cont.)
75 Real estate assessment (cont.) Tested the market via real estate investors, REIT managers, SWFs – formal sale process now well-progressed Illustrative financial & value impact based on 100% sale Key takeaways Estimated value ~$2b (EV/EBITDA in the high Caltex real estate portfolio appears underva
Slide 77: Why a property partnership makes sense for Convenience Retail assets
76 Why a property partnership makes sense for Convenience Retail assets ▪ Intention to bring together best in Illustrative value-add opportunities class development capability with Caltex’s large and well located site network - a new strategic lever ▪ Portfolio of sites to be sold & leased 3 back ha
Slide 78: Important Notice
77 IMPORTANT NOTICE This presentation for Caltex Australia Limited is designed to provide a high level overview of aspects of the operations of the Caltex Australia Group, including comments about Caltex's expectations of the outlook for 2H 2018 and future years, as at 30th October 2018. This presen
Slide 79: Thank You
CALTEX Thank You
Slide 80: Caltex Investor Day
Caltex Investor Day 31 October 2018 30 October 2018
Slide 81: Welcome and Introduction
2 Welcome and Introduction Richard Pearson Executive General Manager Retail
Slide 82: Introducing The Team
3 Introducing The Team Richard Pearson Prasad Kholkute Helen Moore Karen Bozic Miles Drury EGM Convenience Retail GM Retail Fuels GM Convenience GM Retail Operations CFO Retail Development Viv Da Ros Has Fakira CIO Head of Digital
Slide 83: Caltex Retail is primed for growth
4 Caltex Retail is primed for growth Caltex Convenience Retail is underpinned by a stable and profitable fuels business with Strong Base exceptional network strength Growth Changing customer expectations offer a significant opportunity for Caltex to grow Opportunity Well We are making good progress
Slide 84: Strong Base: a stable and profitable fuels business
5 Strong Base: a stable and profitable fuels business with exceptional network strength 4 $823m 2017 Fuels and shop margin ~1,770 Branded sites NT 179 QLD Company operated sites WA 483 today (798 controlled sites) 114 StarCard customers with SA ~70,000 ~900K StarCard users NSW 57 262 10 ~3 million T
Slide 85: Our network strength is a significant advantage
6 Our network strength is a significant advantage in realising the convenience opportunity Transitioning to company operation enables consistent execution of our offer and accelerated roll out of our strategy We have the largest controlled P&C network We are also on course to capture 100% of site pr
Slide 86: Growth Opportunity in convenience business
7 Growth Opportunity: High potential opportunity for Caltex to grow our convenience business Online aggregator Australian P&C market today: Cafes & QSR $0.3B ▪ Broader opportunity extends beyond just Coffee Shops ~$20B ~$8B P&C convenience segment ▪ Convenience is competitive, but is also growing ▪
Slide 87: Well Progressed: many building blocks are in place
8 Well Progressed: many of the building blocks are in place, execution is key Format Capability Site Commercial Woolworths Development Build Control Separation Partnership
Slide 88: $120m-$150m Financial Uplift
$120m-$150m Financial Uplift: clear plan to deliver with disciplined capital 9 approach To be delivered from ▪ New sites and formats increase sales, margin and fuel volume ▪ QSR increases customer traffic, sales and margin ▪ Woolworths partnership increases sales, fuel volume, margin, reduces supply
Slide 89: Woolworths Partnership
10 Woolworths Partnership: Prioritising to strengthen and accelerate retail strategy Overview 2019 Milestone ▪ Offer to leverage the knowledge and expertise of both Woolworths ▪ Co-creation process underway and Caltex ▪ Initial sites targeted to open in 1H Convenience ▪ Target of 250 sites over 5 ye
Slide 90: Retail Fuel Leadership
11 Retail Fuel Leadership Prasad Kholkute GM Retail Fuels
Slide 91: Australian retail fuel market is large, profitable and stable
12 Australian retail fuel market is large, profitable and stable through the cycle Australian Retail market volumes expected to remain relatively flat in near term CAGR CAGR Caltex’s strengths (2015-18) (2018-23) ▪ The fuels business provides the 28.1 majority of earnings today, with 27.2 27.7 27.8
Slide 92: Challenging point in the cycle
13 Currently a challenging point in the cycle owing to combination of factors Adverse Macro conditions… …lead to record board prices… …which has impacted demand Board Prices 1H Retail Fuels Volume Change vs. Brent Crude Oil Prices (USD/bbl) past year 160 2017 90 2018 80 150 70 60 Petrol 140 50 40 13
Slide 93: Fuel outlook for light vehicles
14 While the fuel outlook for light vehicles remains relatively flat in the near term, longer term outlook may face declining demand Medium Term Fuels Outlook Australia – Light Vehicle Fuels (BL) Key Drivers Growing fleet of light vehicles in Australia 30 ~(10%) Ongoing improvements in fuel efficien
Slide 94: Network strength to benefit from longer term mobility trends
15 Network strength will allow Caltex to benefit from longer term mobility trends Caltex has always adopted a proactive approach to alternate fuels, as it aims to remains the leader in Australian transport fuels, whatever they happen to be. ▪ 2015 - Installed Australia's first CNG refuelling site at
Slide 95: Caltex has unique levers to maintain market leading position
16 Caltex has unique levers to maintain market leading position Loyalty, Integrated Redemption Pricing Format StarCard FuelPay Supply chain and Capability Innovation Partnerships
Slide 96: Developing market leading Convenience Retail formats
17 Developing market leading Convenience Retail formats Helen Moore GM Convenience Development
Slide 97: Convenience sector opportunity driven by favourable consumer trends
18 Convenience sector opportunity driven by favourable consumer trends CONSUMER TRENDS - FAVOURABLE Largest Category Shifts for P&C 12 months to Aug-18 ▪ Craving convenience: consumers shop more frequently, with smaller baskets ▪ ‘On the Go’ fresh and ready to eat: rise in fresh products, take-away
Slide 98: Leverage existing transactions to drive incremental earnings
19 Opportunity: leverage existing transactions to drive incremental earnings Our significant existing customer base provides a direct opportunity for material earnings growth Existing network transaction composition 1% increase in fuel to shop + fuel Opportunity 1: conversion 2017 - 2018 Over 3m Inc
Slide 99: Our format strategy is customer needs led
20 Our format strategy is customer needs led Diverse customer bases… …with changing needs… ..are being addressed by Caltex’s formats Male Workday Motorist Tradie Road Warriors Female Workday Motorists Millennial Non-Driver Non-Millennial Non-Drivers Boost
Slide 100: Formats designed to extend across our varied network
21 Formats have been designed to extend across our varied network ? Brand Metro The Foodary Starmart Other Top Up Shop Barista Coffee Customer Food for Now Self-Serve Coffee Food for Now Food for Later Food for Now Proposition Convenience Barista Coffee Convenience QSR QSR Indicative shop sales upli
Slide 101: Metro is our priority retail concept
22 Metro is our priority market-leading retail concept A little bit of good everyday, just got easier SPEED FRESH RANGE VALUE INDICATIVE ✓ Top-up shop ✓ Strong network ✓ Food for now ✓ Fuel offer ✓ Food for later ✓ Convenience offer ✓ Brand recognition ✓ The Foodary learnings ✓ Value promise ✓ QSR
Slide 102: Stores will look very different to achieve the Metro offer
23 Stores will look very different to achieve the Metro offer and desired uplifts INDICATIVE INDICATIVE What you can expect to see: A typical Metro Caltex site: ✓ Range density ✓ Population density ✓ More chilled space ✓ Strong traffic flows ✓ Less storage / office space ✓ Larger trading floor area
Slide 103: Partnership involves a period of co-creation
24 Partnership involves a period of co-creation, Caltex to retain operational control Key Elements of Partnership Planned Timeline Co-Creation FY18 – ▪ Range development 1H19 Co-creation ▪ Format development ▪ Brand execution ▪ Site selection ▪ Logistics solution 1H19 Pilot 4 sites Caltex retains op
Slide 104: The Foodary will remain integral to our format strategy
25 The Foodary will remain integral to our format strategy
Slide 105: The Foodary is a significant step forward
26 The Foodary is a significant step forward in transforming our retail business 51 sites
Slide 106: Results to date confirm the opportunity
Results to date confirm the opportunity, greater consistency will be achieved 27 in the future Strong customer feedback Outperforming on fuel Significant sales uplifts 72 90 4.7* +5% Top Quartile 96% NPS Coffee Boost vs. Network VOC Satisfaction >National Average 38% • Average upgrade site performan
Slide 107: Making The Foodary ready for further roll-out
28 Making The Foodary ready for further roll-out Getting the format right for Selecting best suited sites each site Following selection of Metro sites, we will prioritise ✓ QSR ✓ Bigger sales / fuel base ✓ Coffee / fresh first ✓ High traffic ✓ New fresh equipment ✓ Less competition / amenity ✓ “Cafe
Slide 108: QSR is integral to successful retail formats
29 QSR is integral to successful retail formats Drives Traffic Strong Profit Margin Incremental Sales Strong ROCs CALTEX GYG IN-HOUSE ADRESSING DIFFERENT OPERATED OPERATED HOT KITCHENS DEMANDS New Partners
Slide 109: Future format plans shifting to execution
30 Future format plans shifting to execution Co-create Pilot Scale Continue Consolidate Reset Roll-out Agree Trial Build QSR Scale Boost GYG others own
Slide 110: Convenience Retail operational capabilities
31 Convenience Retail operational capabilities Karen Bozic GM Retail Operations
Slide 111: Reshaping & enabling our Convenience Retail offer
32 Caltex is progressing in reshaping & enabling our Convenience Retail offer Now 2023 Redefine our offer with clear points of difference Control our network* Build a customer focused retail culture Develop our team and optimise labour Accelerate supply chain capability *2020 objective
Slide 112: Redefine our offer with clear points of difference
33 Redefine our offer with clear points of difference - drive customer perception, sales and profitability Reset the Core Offer Clear Points of Difference Leading Fresh Food Offer Caltex Fresh sales 4% growth YoY in Meal Deal sales more than growth YoY transactions double YoY 34%
Slide 113: Control our network
34 Control our network – at least 96% of sites company operated by 2020 Company operation is a key enabler of our Retail Strategy 87% of sites have agreed transition dates End 2020 >96% Caltex owned # total sites (projected) # total sites (projected) 1 156 100% = 793 810 798 798 4% 133 48 4% 114 39%
Slide 114: Building a customer-focused retail culture
35 Building a customer-focused retail culture Net Promoter Score & Voice of Customer: Driving customer advocacy and satisfaction to drive sales Live April 694 Stores 2018 > 5,000 VOC across Surveys entire network completed every week 70 Current Net 83% Promoter Overall Score 1,700 customer High 5’s
Slide 115: Engage and Develop Our Team
36 Engage and Develop Our Team Building retail capability and connecting with our team to win Number of Caltex Retail employees ▪ Strengthen cross-functional planning 6,000+ Listen to and Engage ▪ Revisit store communication 4,000+ our team ▪ First Convenience Retail end to end conference 800+ 2017
Slide 116: Optimise labour management
37 Optimise labour management Significant opportunity exists to optimise labour management 2018 2019 - 2020 2021 ▪ Develop team capability ▪ Leverage technology ▪ Upgrade workforce tool (Kronos) investment ▪ Develop labour standards ▪ Further simplify across Initiatives ▪ Re-engineer rosters value c
Slide 117: Accelerate supply chain capability
38 Accelerate supply chain capability ▪ Caltex has built a dry goods supply chain for majority of stores, and is expanding temperature controlled capability ▪ Multi-temperature supply now live in SA and Vic. ▪ Woolworths partnership is an opportunity to accelerate supply chain capability ▪ Win:win -
Slide 118: The building blocks of growth
39 The building blocks of growth Richard Pearson Executive General Manager Retail
Slide 119: $120m-$150m Financial Uplift: clear plan to deliver
40 $120m-$150m Financial Uplift: clear plan to deliver with capital disciplined approach Three core drivers of growth Clear KPIs established ▪ Control our existing sites 1 Network development ▪ New site investment ▪ Clear pathway and metrics for success established ▪ Tracking and reporting on progre
Slide 120: The way in which Caltex makes money from Retail is changing
41 The way in which Caltex makes money from Retail is changing Franchise Company Op (COCO) 6 key business drivers (CORO) Volume x Margin - Fuel Commission Volume x Margin ▪ Fuel volume Shop Sales $ ▪ Fuel margin Sales x Royalty % GM% contribution Network margin Franchise Fees Labour ▪ Shop sales * O
Slide 121: Drivers of future financial performance
42 Drivers of future financial performance ▪ Network growth, format innovation and loyalty offer offset market Fuel volume <1% CAGR decline More impacted by market ▪ Focus on premiumisation, but historic trend of margin expansion factors Fuel margin ~1% CAGR flattens ▪ Significant growth driven by n
Slide 122: Convenience Retail Wrap
43 Convenience Retail Wrap Richard Pearson Executive General Manager Retail
Slide 123: Convenience Retail Key Messages
44 Convenience Retail Key Messages Caltex Retail is primed for growth Growth Well $120-$150m Woolworths Strong Base Opportunity Progressed Uplift Partnership
Slide 124: Convenience Retail 2019 Deliverables
45 Convenience Retail 2019 Deliverables Foodary consolidation and Deliver sustainable profits revisit in 1H19 prior to by optimising value & recommending further roll volume out in 2H19 Implementation of the first Continue to progress phases of the Woolworths transition to company partnership operat
Slide 125: Digital and Technology Strategy
46 Digital and Technology Strategy Viv Da Ros CIO
Slide 126: IT Strategic Focus
47 Digital & Technology innovation essential for Caltex strategy execution Caltex Strategy/Business Model Transform New technologies and customer IT Strategic Focus innovation Grow Establish core suite of systems Run Remediate and strengthen foundations 2017 2018 2019 onwards
Slide 127: Enabling technologies at Caltex
48 Enabling technologies at Caltex RUN GROW & TRANSFORM Application Monitoring & Alerts Application Redundancy & Fail Over CLOUD ERP PLATFORM End User Experience SAP / & TECH STARCARD BLUEPRINT Regulatory Compliance Service Excellence (Operation Efficiency) CYBER INTEGRATION BIG / APIs SECURITY Appl
Slide 128: Innovation at Caltex
49 Innovation at Caltex – Think Customer Experience, Drive Operational Efficiency DIGITAL TRANSFORMATION FuelPay Fuel Delivery Drivers’ App Caltex Team App Express Lane Trial Mobile Scan Innovation & Refinery Automation Self Checkout Emerging Initiatives Tablet Apps
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Slide 130: Q&A
51 Q&A
Slide 131: Important Notice
52 IMPORTANT NOTICE This presentation for Caltex Australia Limited is designed to provide a high level overview of aspects of the operations of the Caltex Australia Group, including comments about Caltex's expectations of the outlook for 2H 2018 and future years, as at 30th October 2018. This presen
Slide 132: Thank You
CALTEX Thank You