Ampol Limited · ASX:ALD
Ampol — Caltex Australia — FY2015 Earnings Presentation
63 slides from Ampol's earnings presentation, Feb 23, 2016
Slide 1: 2015 Full Year Results Announcement
2015 Full Year Results Announcement Caltex Australia Limited ACN 004 201 307
Slide 2: Agenda
AGENDA Safety Full Year 2015: 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 Moment
OPERATIONAL EXCELLENCE MOMENT 3
Slide 4: Operational Excellence (OE) Moment
Operational Excellence (OE) Moment • No Tier 1 or 2 Process Safety Events. 4 • Caltex recorded a total of 14 medically treated injuries (MTI); and 5 Lost Time 3.5 Injuries (LTI) in 2015. 3.04 • LTIFR in line with record low levels 3 2.83 Per million hours worked (despite increase in TTIFR which was
Slide 5: Full Year 2015: Key Highlights
AGENDA Safety Full Year 2015: Key Highlights Strategy Update Financial Highlights Supply & Marketing Highlights Lytton Refinery Highlights Financial Discipline Result Summary & Outlook Q&A Appendices 5
Slide 6: Key Highlights
Key Highlights Full Year 2015 Results Summary Consolidated Group Result RCOP NPAT $628 million, 27% above prior year RCOP NPAT $628 million Significant item of $29 million (after tax) from sale of surplus property Final dividend 70.0 cps declared (2014: 50.0 cps) fully franked (50% payout) B
Slide 7: Strategy Update
AGENDA Safety Full Year 2015: Key Highlights Strategy Update Financial Highlights Supply & Marketing Highlights Lytton Refinery Highlights Financial Discipline Result Summary & Outlook Q&A Appendices 7
Slide 8: Strategy Update
Strategy Update A focused multi-year transformation strategy…to deliver top quartile total shareholder returns (TSR) 12 Refresh Vision & Strategy 11 Capital Management 10 Growth 10 9 9 Value Chain Optimisation 8 Tabula Rasa 7 Ampol Singapore 6 Invest in Distribution Infrastructure 5 Kurnell conversi
Slide 9: Strategy Update
Strategy Update Extend Invest in capabilities and businesses that leverage our existing consumer and mobility assets Enhance Capabilities and Competitiveness Efficiency & CALTEX | With you all the way customer offering Create new customer solutions in the convenience marketplace One Caltex n = ie) =
Slide 10: Key Highlights: Priorities
Key Highlights Priorities Short Term • Continue to defend and grow core transport fuels business including (Next 12 months) growth in premium fuels • Prioritise the optimisation of the entire value chain from product sourcing to customer via: - Continue to build Ampol product sourcing & shipping cap
Slide 11: Financial Highlights
AGENDA Safety Full Year 2015: Key Highlights Strategy Update Financial Highlights Supply & Marketing Highlights Lytton Refinery Highlights Financial Discipline Result Summary & Outlook Q&A Appendices 11
Slide 12: Financial Highlights
Financial Highlights Full Year Ending 31 December FY2015 FY2014 % Change HISTORIC COST EBIT ($m) 815 139 487 NPAT ($m) 522 20 >100 EPS (cps) 193 7 >100 REPLACEMENT COST EBIT ($m) 977 795 23 NPAT ($m) 628 493 27 EPS (cps) 233 183 27 Dividend (cps) 117 70 67 Debt ($m) 432 639 (32) Gearing (%) 13 20 (3
Slide 13: Reconciliation to underlying (RCOP) profit metric
Financial Highlights Reconciliation to underlying (RCOP) profit metric FY 2015 $m FY 2014 $m (After Tax) (After Tax) HCOP NPAT 522 20 Add: Inventory loss/(gain) 135 361 Add: Significant items (gain) (29) 112 RCOP NPAT 628 493 13
Slide 14: Significant Items
Financial Highlights Significant Items Year Ending December FY 2015 FY 2014* $M $M Cash Benefits / (Costs) Sale of surplus land 32 Redundancies (53) Asset Rationalisation (31) Early repayment of USPP tranche** (16) Contract cancellation (12) Other costs and fees (25) Non-Cash Benefits/ (Costs) Asset
Slide 15: Historic Cost Profit impacted by fall in crude and product prices
Financial Highlights Historic Cost Profit impacted by fall in crude and product prices Incl. $10m increased investment in $ million FY 2014 v FY 2015 HCOP EBIT IT, growth, business development 1200 188 21 32 194 977 1000 140 795 14 815 800 516 600 After After $19m $23m T&I non-cash related 400 asset
Slide 16: Integrated Supply and Marketing result resilient
Financial Highlights Integrated Supply and Marketing result resilient in challenging B2B market; Strong operational performance allows Lytton to capture strong refiner margins • Lytton profitability up $188 million to $406 million. Strong operational performance allows $m Caltex RCOP NPAT* Lytton to
Slide 17: 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 August 2014. 977 1,000 900 The net FX loss of $26m in FY15 (FY2014: net FX loss $26m) was net of hedging gains of $23m (FY 201
Slide 18: Supply & Marketing Highlights
AGENDA Safety Full Year 2015: Key Highlights Strategy Update Financial Highlights Supply & Marketing Highlights Lytton Refinery Highlights Financial Discipline Result Summary & Outlook Q&A Appendices 18
Slide 19: Reporting framework change reflecting integrated supply chain
Supply & Marketing Highlights Reporting framework change reflecting integrated supply chain business model Kurnell Refinery Integrated Supply Chain FY14 FY15 Lytton Refinery Corporate 2014 2015 • Marketing & Distribution 812 2014 2015 FY14 FY15 • Supply Costs (99) Refining (69) - • FX impact / Price
Slide 20: Supply & Marketing Highlights - Key Drivers
Supply & Marketing Highlights - Key Drivers Premium product focus, improved supply chain, good cost control drive earnings growth 2015 v 2014 RCOP EBIT Good cost control (Tabula Rasa focus), incl. removal of one product ship (~$18m) 750 Import terminal ($65m costs, Includes (non-cash) including $26m
Slide 21: Gross Contribution
Supply & Marketing Highlights Gross Contribution $m Supply and Marketing Gross Contribution • Integrated returns ensure 1400 resilient earnings growth 1200 • Improved margins due to 184 product mix, channel sales 185 65 and improved supply chain 1000 175 184 95 efficiency (Tabula Rasa, Ampol Singapo
Slide 22: Diesel, Jet Fuel Sales - Volumes down
Supply & Marketing Highlights Diesel, Jet Fuel Sales - Volumes down, despite strong Vortex retail sales growth • Total diesel volumes fell 5.4% to 7.2BL, off record 2014 base, but new contract volumes won for 2016 BL Caltex Diesel, Jet Sales • Commercial (B2B) diesel sales volumes impacted by: 10.0
Slide 23: Petrol Sales - Premium petrols volumes up
Supply & Marketing Highlights Petrol Sales - Premium petrols volumes up; Total Market and volumes down • Premium petrol sales up 4.0%, including BL Caltex Petrol Sales Vortex 98 volumes up 9.5%. 7.0 Premium now represents 31% of total Consumer petrol sales 6.0 1.11 0.98 0.89 0.75 0.62 Higher sal
Slide 24: Non Fuel Income (NFI)
Supply & Marketing Highlights Non Fuel Income (NFI) - Network development enables transport fuels and convenience growth $m Caltex Non Fuel Income • Non fuel income contribution (net) broadly flat at $184 million 300 • Non fuel income is an enabler for 291 250 281 Transport Fuels volume growth, 261
Slide 25: Retail capabilities and other developments, supports strategy
Supply & Marketing Highlights Retail capabilities and other developments, supports strategy Infrastructure • Retail network development accelerates New to Industry / New to Caltex retail outlets (23 completed) Retail site Knock Down rebuilds (11) and major upgrades (7) (including 21CC Retail fit
Slide 26: Retail Capabilities and Other Developments, supports strategy
Supply & Marketing Highlights Retail Capabilities and Other Developments, supports strategy Retail • Major Retailer of the Year Award, Australian Association of Convenience Stores (AACS) (2014 - 2015) • Convenience store sales grow to $1.2 billion per annum (approx. 3 million customers each week)
Slide 27: Lytton Refinery Highlights
AGENDA Safety Full Year 2015: Key Highlights Strategy Update Financial Highlights Supply & Marketing Highlights Lytton Refinery Highlights Financial Discipline Result Summary & Outlook Q&A Appendices 27
Slide 28: Strong operational performance enables Lytton to take advantage of margins
Lytton Refinery Highlights Strong operational performance enables Lytton to take advantage of strong refiner margins, despite lower production due to major T&I 2014 vs 2015 RCOP EBIT 600 External Drivers Controllable Drivers 500 163 37 23 4 2 13 8 406 400 98 300 10 3 218 One-off T&I related Higher c
Slide 29: Caltex Refiner Margin driven by lower yield loss
Lytton Refinery Highlights Caltex Refiner Margin (CRM) driven by lower yield loss, lower crude premium and higher market margins 30 16 28 14.03 Caltex Refiner Margin 26 14 Build-up (US$bbl) 24 FY15 FY14 22 12 20 Singapore WAM * 14.95 13.12 18 8.70 10 Product freight 4.51 4.95 16 7.22 0.22 14 Quality
Slide 30: Caltex Refiner Margin 2007-2015
Lytton Refinery Highlights Caltex Refiner Margin (CRM) driven by lower yield loss, higher market prices and lower crude premium costs 2007-2015 Caltex Refiner Margin*1 (US$/bbl) 25 • Higher CRM driven by lower yield loss, crude premium and net freight costs 20 • Comparable Singapore Weighted Average
Slide 31: Operational performance metrics adversely impacted by T&I
Lytton Refinery Highlights Operational performance metrics adversely impacted due to Turnaround & Inspection (T&I) Refinery Production, Utilisation (%) and Availability (%) BL % 3.50 100 • Turnaround & Inspection 96 97 97 97 97 (T&I) impacted Lytton operational performance: 3.00 93 3.1 3.0 2.8 1. Me
Slide 32: High quality product slate
Lytton Refinery Highlights High quality product slate, balanced between petrol and middle distillates LYTTON 2015 2014 2013 2012 2011 2010 Diesel 39% 38% 39% 40% 38% 39% Premium Petrols 12% 13% 12% 13% 12% 10% Jet 12% 12% 10% 10% 9% 7% 63% 63% 61% 63% 59% 56% Unleaded Petrol 32% 33% 35% 34% 37% 41%
Slide 33: Financial Discipline
AGENDA Safety Full Year 2015: Key Highlights Strategy Update Financial Highlights Supply & Marketing Highlights Lytton Refinery Highlights Financial Discipline Result Summary & Outlook Q&A Appendices 33
Slide 34: Financial Discipline - Balance Sheet
Financial Discipline - Balance Sheet Average daily borrowings lower on higher earnings, disciplined capex spend and lower working capital levels % $m Period end debt and gearing* $m Caltex net debt levels** 800 40 2500 700 740 742 35 2000 600 639 30 617 500 544 25 1500 400 432 20 1000 300 15 200 10
Slide 35: Financial Discipline - 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 1. Refreshed FX Hedging strategy completed - Hedging of net USD exposure increased to 80% (from 50%), effective 1 August 2014 - Use of vanilla foreign exchange option introduces the ability to participate in AUD strength 2. Early repaymen
Slide 37: Financial Discipline - Capital Expenditure
Financial Discipline - Capital Expenditure Capital directed to reinvest and grow, whilst ensuring a safe, efficient business $m Caltex Capital Expenditure 600 FY 2015 total capex spend of $454m (previous guidance $430m - $485m) 568 Includes: 500 503 • Stay-in-business of $241 million 454 (versus $21
Slide 38: Indicative Capital Expenditure
Financial Discipline - Capital Expenditure Indicative Capital Expenditure, subject to change (includes T&I**) $ millions 2013 2014 2015 2016 Forecast* Lytton - Stay in business (includes T&I) 93 58 94 30 - 45 - Growth 13 56 39 5 - 10 106 114 133 35 - 55 Supply and Marketing - Stay in business 116 10
Slide 39: Financial Discipline - Dividend
Financial Discipline - Dividend Final dividend of 70 cents per share (2014: 50cps); full year dividend 117 cps, up 67% Caltex dividend history^ Cents per share Payout Ratio^^ 140 60% 117 120 50% 100 60 70 45 40% 80 70 34 40 30% 60 30 50 20% 40 25 28 23 17 47 10% 20 25 30 17 17 17 20 0 0% 2009 2010 2
Slide 40: $270 million Off-Market Buy-Back
Financial Discipline $270 million Off-Market Buy-Back • Significant change in share register composition following Chevron’s exit. Domestic shareholders now represent a majority (previous minority) • All capital return options considered (e.g. special dividend, on-market, off-market buy-backs) • Off
Slide 41: Details of the Buy-Back and Benefits to Shareholders
Financial Discipline Details of the Buy-Back and Benefits to Shareholders • Size: ~$270 million; Price: Discount of 10% to 14% to the Market Price* • Composition: • Capital component of $2.01/share; • Fully franked dividend makes up rest of share purchase price • Good utilisation of current surplus
Slide 42: Illustrative Buy-Back Example
Financial Discipline Illustrative Buy-Back Example (for Australian Super Fund Investors) Key Assumptions Comments Assumed Market Price $ 36.00 Assumed Buy-Back Price $ 30.96 Assumed Market Price less maximum tender discount of 14.0% Capital component $ 2.01 As per ATO Draft class ruling Original sha
Slide 43: Proposed Off-Market Buy-Back Timetable
Financial Discipline Proposed Off-Market Buy-Back Timetable February 2016 Announcement of Caltex’s results and of Buy-Back Tuesday, 23 February Last day that Shares can be acquired to be eligible for Buy-Back franking entitlements Thursday, 25 February Buy-Back ex-entitlement date: the date that Sha
Slide 44: Agenda
Safety Full Year 2015: 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 result of $628 million, 27% above prior year • Significant item of $29 million (after tax) from sale of surplus property • Supply & Marketing delivers positive EBIT growth (excl. $3m unfavourable externalities) • Ampol Singapore underpins a more
Slide 46: Q&A
Q&A 46
Slide 47: Appendices
AGENDA Safety Full Year 2015: Key Highlights Strategy Update Financial Highlights Marketing Highlights Supply Chain Highlights Financial Discipline Result Summary & Outlook Appendices 47
Slide 48: Appendix: Regional Supply Capacity
Appendix: Regional Supply Capacity Utilisation rates forecast to remain relatively high, following net 2015 capacity reductions Asia Pacific Refining Capacity Additions and Utilisation • Following the net reduction in regional Net Additions Crude Unit Utilisation refining capacity in 2015, net addit
Slide 49: Appendix: Australian Fuels Demand Growth
Appendix: Australian Fuels Demand Growth Continued demand growth forecast for diesel and jet fuel (though at declining rates) Australian Transport Fuels Market Growth • Regular unleaded petrol volumes are 6% projected to continue to decline 4.3% steadily, reflecting improvements in 4% 3.0% 3.3% 2.7%
Slide 50: Appendix: Regional Supply and Demand
Appendix: Regional Supply and Demand Regional product demand growth projected to exceed refining capacity additions (next four years) • Product demand growth in the kb/d Asia Pacific Product Demand Growth vs CDU Capacity Additions Asian region is forecast to remain 2,000 robust (CY 2016-19), support
Slide 51: Appendix: Middle East product balances
Appendix: Middle East product balances Middle East region is forecast to have growing surpluses of transport fuels kb/d Middle East Product Net Exports • The Middle East region is adding 800 refining capacity over the next 700 three (3) years that is designed to maximise petrol and middle 600 distil
Slide 52: Appendix: Depreciation & Amortisation
Appendix: Depreciation & Amortisation Depreciation & Amortisation* $ millions 2013 2014** 2015 2016 Forecast* Lytton 24 34 48 50 - 60 Supply and Marketing 91 99 139 150 - 160 Corporate 8 33 6 5 - 10 123 166 193 205 - 230 Kurnell Refinery 42 37 0 0 Total 166 203 193 205 - 230 * Indicative forecasts o
Slide 53: Appendix: Reporting Framework Change
Appendix: Reporting Framework Change Reconciling 2014 to 2015 segment reporting 2014 Segmentation Basis FY 2014 2015 Segmentation Basis FY 2014 Marketing 812 Lytton 218 Supply Chain* 64 Supply and Marketing* 658 Corporate (81) Corporate (81) RCOP EBIT 795 RCOP EBIT 795 Supply Chain* consisted of: Ly
Slide 54: Integrated Supply & Marketing earnings up
Appendix Integrated Supply & Marketing earnings up, despite competitive business to business sector 2015 EBIT Comment / Source Reported EBIT 672 ASX Results Release Adjustments: Add-back: Externalities 3 FX -$26m; Price timing lags +$23m Add-back: Non-Cash asset write-offs 19 IT / Card systems; and
Slide 55: Appendix: Productivity
Appendix: Productivity Company-wide efficiency and organisation structure review “Tabula Rasa” - Benefits Tabula Rasa 2016 Expected Recurring Savings $M Comments Head count reduction (net 250-300 FTEs, previously approx. 350FTEs) 40 - 45 Previously $40m - $50m Head count down Cost savings per headco
Slide 56: Appendix: Balance Sheet
Appendix: Balance Sheet Flexible Balance Sheet Supports growth, capital management and a competitive dividend Diverse funding sources in excess of funding requirements Current sources of funding Debt maturity profile A$m Source Australian and Asian A$ notes* 150 150 institutional Bank facilities 600
Slide 57: Kurnell Closure Cash-flow versus provision
Appendix Kurnell Closure Cash-flow versus provision – tracking to plan Indicative Item Description Timing amount Closure costs Includes redundancy, $(430)m* Majority of redundancies took place 4Q 2014, decommissioning and $13 million remaining at 31 December 2015 remediation Decommissioning comp
Slide 58: AUD-USD Exchange Rate
Appendix AUD-USD Exchange Rate 1.10 AUD vs USD 1.05 1.00 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 2015 2014 2013 Source = HSRA Reuters 58
Slide 59: 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 2015 2014 2013 Source = Reuters 59
Slide 60: 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 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2015 2014 2013 Source = Reuters 60
Slide 61: Product Prices - Regional Diesel
Appendix Product Prices - Regional Diesel USD/bbl Diesel (Platts 10 ppm) $140 $130 $120 $110 $100 $90 $80 $70 $60 $50 $40 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2015 2014 2013 Source = Reuters 61
Slide 62: Summary Financial Information
Appendix Summary Financial Information 2015 2014 2013 2012 2011 2010 Dividends Dividends ($/share) 1.17 0.20 0.34 0.40 0.45 0.60 Dividend payout ratio - RCOP basis (excl. significant items) 50% 38% 28% 24% 46% 51% Dividend franking percentage 100% 100% 100% 100% 100% 100% Other data Total revenue ($
Slide 63: 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