Ampol Limited · ASX:ALD
Ampol — H1 2018 Earnings Presentation
50 slides from Ampol's earnings presentation, Aug 28, 2018
Slide 1: 2018 Half Year Results Announcement
2018 Half Year Results Announcement Caltex Australia Limited ACN 004 201 307
Slide 2: Agenda
2 Agenda Values Moment Key Highlights: Half Year 2018 Results Strategy Update Financial Highlights Fuels & Infrastructure Highlights Convenience Retail Highlights Asset Optimisation Review Capital Management Discipline Financial Guidance Short-term Priorities Appendices
Slide 3: Values Moment
Values Moment 3 Health and safety are core to our values and the safety of our people is paramount Convenience Retail Fuels & Infrastructure Process Safety Total Recordable Injury Frequency Personal safety injury performance Process Safety performance Rate (TRIFR) has increased during a contin
Slide 4: Key Highlights
Key Highlights 4 Half Year 2018 Results Summary Consolidated Group Result RCOP NPAT $296 million, an increase on 1H 2017 ($294 million). RCOP NPAT $296 million up 1% Extended and expanded long term partnership with Woolworths to include the co-creation of a market-leading convenience offering as
Slide 5: Strategy Update
Strategy Update 5 Separate businesses and cultures emerging, both with significant growth options
Slide 6: Strategy Update – Primed for growth
Strategy Update – Primed for growth 6 Retail and F&I both have significant growth options, underpinned by core competencies and enabled by market leading networks Creating Successful Transformation Primed for Growth the Platform 2011-2016 2017-2018 2018 and beyond • Delivery of top quartile TSR Quan
Slide 7: Financial Highlights
Financial Highlights 7 Half Year Ending 30 June 1H 2018 1H 2017 % Change HISTORIC COST EBIT ($m) 568 408 39 NPAT ($m) 383 265 45 EPS (cps) 147 101 45 REPLACEMENT COST EBIT* ($m) 443 454 (2) NPAT ($m) 296 294 1 EPS (cps) 113 113 1 Dividend (cps) 57 60 (5) Net Debt ($m) 1,041 730 43 Gearing (%) 24% 20
Slide 8: Financial Highlights
Financial Highlights 8 Modest earnings growth given strong underlying performance from Fuels & Infrastructure and acquisitions, more than offsetting lower CRM and Convenience Retail shop contribution 1H 2018 RCOP NPAT represents 5 year CAGR of $m 11% on an annualised basis since 2013. Caltex RCOP
Slide 9: Financial Highlights
Financial Highlights 9 Fuels & Infrastructure delivers strong growth despite lower CRM, but Group EBIT down slightly due to short-term impacts of Convenience Retail transition costs and growth related costs HY 2017 v HY 2018 HCOP EBIT 1000 Store transitions, Increased M&A 900 and crude and and proje
Slide 10: Financial Highlights
Financial Highlights 10 Operating Cash Flow remains strong, with some investment in working capital to fund regional growth 1,500 1H 2018 EBITDA Timing of out of Tax paid on Primarily $563 million region cargoes, HCOP basis, Seaoil increased Ampol with annual acquisition 1,200 activity, and payments
Slide 11: Financial Discipline - Balance Sheet
Financial Discipline - Balance Sheet 11 Higher debt levels reflect Seaoil investment and some investment in working capital to fund regional growth % Caltex net debt levels** $m Period end debt and gearing* $m 1200 45 3000 Increased debt capacity to facilitate 1,041 greater Ampol 40 activity 1000 25
Slide 12: Financial Discipline - Dividend
Financial Discipline - Dividend 12 Interim dividend of 57 cents per share (2017: 60cps) fully franked; pay-out ratio 50.3% Caltex dividend history* Cents per share Payout Ratio 140 60% 120 50% 100 61 40% 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 0% Interim Divide
Slide 13: Fuels & Infrastructure Highlights - Result
Fuels & Infrastructure Highlights - Result 13 Strong underlying operational performance, with International growth strategy offsetting soft CRM 1H 2018 1H 2017 Change (%) Total Fuels Sales Volumes (BL) 10.2 9.1 12 Australian Domestic Volumes (BL) 8.4 8.1 3 International Volumes (BL) 1.8 0.9 87 Lytto
Slide 14: Fuels & Infrastructure Highlights – Key Drivers
Fuels & Infrastructure Highlights – Key Drivers 14 Strong underlying operational performance generating earnings growth, with acquisitions offsetting weaker CRM HY 2017 v HY 2018 F&I RCOP EBIT 500 CRM down US$2.30/bbl to Benefits from Higher D&A from 450 US$10.06/bbl, given growing regional acquisit
Slide 15: Fuels & Infrastructure Highlights - Volumes
Fuels & Infrastructure Highlights - Volumes 15 Overall volumes up 12% to 10.2 BL with strong growth in Wholesale (B2B diesel and jet) and International (Gull & Ampol regional supply growth) BL Fuels & Infrastructure Sales Total F&I volume up 12% to 10.2BL in 1H 2018. 11 Domestic sales up 3.5% to
Slide 16: Fuels & Infrastructure Highlights - Lytton Key Drivers
Fuels & Infrastructure Highlights - Lytton Key Drivers 16 Weaker result driven by regional margins, despite continued solid operational performance 250 HY 2017 v HY 2018 Lytton RCOP EBIT External Drivers Controllable Drivers 3.16BL sales from production in 1H 2018, up 138ML (4.6%) Continued good cos
Slide 17: Lytton Refinery Highlights
Fuels & Infrastructure 17 Lytton Refinery Highlights Lytton continuing its track record of cost competitive and reliable performance, with near record production in 1H 2018 Continued focus on optimisation and cashflow generation from Lytton. Sales averaged >6% above nameplate capacity (~108Kbopd
Slide 18: Fuels & Infrastructure - Lytton Refinery Highlights
Fuels & Infrastructure - Lytton Refinery Highlights 18 1H 2018 saw softer refining margins on regional margin weakness, lower yield and lower quality premium, but “Structural” portion of margin limits downside. Unlagged Caltex Refining Margin of 2012-2018 Caltex Refiner Margin (US$/bbl) US$10.06/b
Slide 19: International - a platform for growth
Fuels & Infrastructure 19 International - a platform for growth International Expanding role of Ampol Singapore on regional supply to Caltex investments and third parties. Seaoil strategic partnership commenced in March 2018. Ampol Singapore is now sourcing fuel on behalf of Seaoil. Target r
Slide 20: Convenience Retail Highlights - Result
Convenience Retail Highlights - Result 20 Retail EBIT down on 1H 2017 due to impact of rising crude prices on retail fuel margin and impact of ongoing transition of franchise sites 1H 2018 1H 2017^ Change (% ) Period end COCO sites (#)^^ 414 233 78 Period end CORO sites (#) 376 555 (32) Total Sales
Slide 21: Convenience Retail Highlights - Key Drivers
Convenience Retail Highlights - Key Drivers 21 Transition to company operations is progressing in line with plan, but it has had an impact on earnings HY 2017 v HY 2018 Convenience Retail RCOP EBIT 300 Timing impact of Milemaker & NTI Increase in lease Includes profit/loss rising crude gains, partia
Slide 22: Convenience Retail Highlights – Fuel Volumes
Convenience Retail Highlights – Fuel Volumes 22 Domestic Retail Fuel Sales – Favourable premium mix continues – though premium and total petrol volumes down Overall Retail fuel income flat with rising crude price BL Convenience Retail Fuel Sales* impact on volume and margin, offsetting new site 3.
Slide 23: Convenience Retail Highlights – Shop Performance
Convenience Retail Highlights – Shop Performance 23 Momentum building with improved shop offer, investment in enablers to underpin future growth Core shop offer developing momentum with customers Customers responding positively to improvements in store – headline sales and transaction growth in 1H
Slide 24: Convenience Retail Highlights – Woolworths Partnership
Convenience Retail Highlights – Woolworths Partnership 24 Strategic partnership with Woolworths to strengthen and accelerate Convenience Retail Strategy, underpinning the delivery of top end of $120-150m EBIT uplift range over 5-6 years. Larger sites Caltex Convenience retail network Smaller sites T
Slide 25: Transition to Company Operations
Convenience Retail Highlights – Transition to Company 25 Operations Good progress on execution of transition of network to company operations, with optimisation to come Transition to company operations progressing well 57 sites transitioned since February 2018 as part of the decision to transition
Slide 26: Asset Optimisation
Asset Optimisation 26 Thorough Review Process Now Concluded Maximise sustainable long-term shareholder value by ensuring optimal asset Objective ownership and management models • Review led by Corporate Strategy team, supported by independent advisors. • Separate processes for Infrastructure and Con
Slide 27: Asset Optimisation — Infrastructure
Asset Optimisation — Infrastructure 27 Various ownership options considered, including partial sale with take-or-pay contract or a capacity charge. Also evaluated variety of structural options and tariff charges, which were confidentially tested with sophisticated investors. Operational Financia
Slide 28: Asset Optimisation — Convenience Retail Real Estate
Asset Optimisation — Convenience Retail Real Estate 28 Various ownership options considered, including public REIT, unlisted investment and private individual sale and leasebacks. Various models for property management and development were also considered. Tested with sophisticated investors a
Slide 29: Asset Optimisation – Convenience Retail Real Estate
Asset Optimisation – Convenience Retail Real Estate 29 Caltex to pursue a partnership with a sophisticated Retail real estate investor as the centrepiece of its newly instituted real estate principles, including a sale of a meaningful portfolio of sites Next Steps Internal process underway Manage
Slide 30: Capital Management Discipline
Capital Management Discipline 30 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 deliver top
Slide 31: Financial Guidance
Financial Guidance 31 Indicative Capital Expenditure*, subject to change (includes T&I**) Prior 2018 New 2018 $ millions 2017 1H 2018 Forecast Forecast* Lytton - Stay in business (includes T&I)** 41 11 50-70 40-50 - Growth 11 4 0 10-20 52 15 50-70 50-70 Fuels and Infrastructure (excl Lytton) - Stay
Slide 32: Financial Guidance
Financial Guidance 32 Depreciation & Amortisation Prior 2018 New 2018 $ millions 2017 1H 2018 Forecast* Forecast* Convenience Retail 85 44 90-100 Fuels and Infrastructure 138 73 130-150 Corporate 6 3 5-10 5-10 Total 229 120 235-270 225-260 Increased D&A in 2018 vs 2017 a function of: 1. M&A acquisit
Slide 33: Financial Guidance
Financial Guidance 33 Preliminary impact of new lease accounting standard Caltex has long reported its lease adjusted gearing ratio in its financial disclosures. The Group is well advanced for full implementation of AASB16 on 1 January 2019. Estimated to bring ~$1.0 bn discounted lease liability
Slide 34: Short-term Priorities
Short-term Priorities 34 Retail Continue developing Caltex’s retail capability with implementation of key enablers (people, systems, supply chain, loyalty, customer offer). Continue transition of franchised network to company operated retail network (to be largely completed by end 2020), with fo
Slide 35: Appendix
35 Appendix
Slide 36: Reconciliation to underlying (RCOP) profit metric
Financial Highlights 36 Reconciliation to underlying (RCOP) profit metric 1H 2018 1H 2017 Half Year Ending June (After Tax) (After Tax) HCOP NPAT 383 265 Add: Inventory loss/(gain) (87) 31 Add: Significant items (gain) 0 (2) RCOP NPAT 296 294 Pricing lags on product sales, previously included in rep
Slide 37: Significant Items
Financial Highlights 37 Significant Items 1H 2018 1H 2017 Half Year Ending June $M $M Sale of fuel oil business 0 19 Franchisee Employee Assistance Fund 0 (20) Total Significant Items (Before Tax) 0 (1) Tax 0 3 Total Significant Items (After Tax) 0 2
Slide 38: Strategy Update – Commercial Separation
Strategy Update – Commercial Separation 38 Creating the platform to deliver optionality and growth across both business units Key Drivers for Commercial Separation Optimisation of group value and long term value creation remains Caltex’s primary objective. Both businesses have unique set of core
Slide 39: Fuels & Infrastructure Highlights – By product
Fuels & Infrastructure Highlights – By product 39 Overall volumes up 12% to 10.2BL with growth in all underlying products BL Total petrol volumes up 7.4% vs 1H Fuels & Infrastructure Sales 2017, with International sales growth 11 (Gull & Ampol optimisation) more than offsetting volume declines in
Slide 40: Lytton Refinery Highlights
Lytton Refinery Highlights 40 Lower regional margins, higher yield losses and reduced quality premiums see CRM return back towards 10yr average margins US$/bbl Cpl Caltex Refiner Margin * 16 16 Build-up (US$/bbl) 13.68 1H 2018 1H 2017 14 14 Singapore WAM 11.51 12.73 12 10.67 12 Product freight 3.78
Slide 41: Lytton Refinery Highlights
Lytton Refinery Highlights 41 Strong controllable operational performance continues High Value Transport Fuels Production Volumes, Production Utilisation (%) and Availability (%) BL % Strong controllable operating performance, underpinned by: 3.5 100 97 97 97 97 98 97 97 97 96 97 - Mechanical Avai
Slide 42: Lytton Refinery Highlights
Lytton Refinery Highlights 42 Balanced product slate petrols (46%) and middle distillates (diesel, jet; 50%) provides flexibility LYTTON 2013 2014 2015 2016 2017 1H 2018 Diesel 39% 38% 39% 39% 38% 39% Premium Petrols 12% 13% 12% 14% 12% 14% Jet 10% 12% 12% 11% 11% 11% 61% 63% 63% 64% 62% 64% Unleade
Slide 43: Appendix: Our Assets - Retail Infrastructure
Appendix: Our Assets - Retail Infrastructure 43 Caltex Retail Service Station Network Dealer Owned Leased Total Owned Company operated (Calstore) 200 162 0 362 Company operated (Diesel Stop) 21 31 0 52 Company Operated (Depot Fronts) 5 0 0 5 Franchised 200 176 0 376 Other* 49 19 600 668 WOW 0 0 535
Slide 44: Appendix: Our Assets - Infrastructure (excluding Retail)
Appendix: Our Assets - Infrastructure (excluding Retail) 44 Caltex (Non-Retail) Infrastructure Network 1 Caltex Refinery 13 Caltex owned & operated terminal 7 Joint Terminal or Terminal Services Darwin Agreement 5 Terminal hosting arrangement Cairns 9 Airport jet fuel supply Broome 1 Lubricant manuf
Slide 45: Convenience Retail Update
Convenience Retail Update 45 Audit of Franchisee underpayment of employees Caltex implemented a comprehensive audit program, to audit Caltex franchise sites (using independent auditors). As at 20/08/2018, we have completed audits/or commenced audits of more than 60% of our franchise network (363
Slide 46: Appendix: Finance - Balance Sheet
Appendix: Finance - Balance Sheet 46 Funding Sources & Debt Maturity Profile Incorporates Seaoil acquisition: A$114m (20% shareholding acquired March 2018), the issuance of $300m medium term notes and a $320m upsize of bank facilities. Current Sources of Funding Debt Maturity Profile A$m Source Me
Slide 47: Appendix: Historical Segment Results
Appendix: Historical Segment Results 47 1H 2017 2017 Fuels & Infrastructure Total External Revenue ($m) 5,592 11,893 F&I (excl Lytton) EBITDA ($m) 174 417 Lytton CRM ($m) 311 648 Lytton opex and other costs ($m) (134) (261) Lytton EBITDA ($m) 177 388 F&I EBITDA ($m) 350 805 F&I D&A ($m) (64) (138) F
Slide 48: Appendix: Summary Financial Information
Appendix 48 Summary Financial Information* 1H 2018 2017 2016 2015 2014 2013 Dividends Dividends ($/share) 0.57 1.21 1.02 1.17 0.70 0.34 Dividend payout ratio - RCOP basis (excl. significant items)* 50% 51% 51% 50% 38% 28% Dividend franking percentage 100% 100% 100% 100% 100% 100% Other data Total re
Slide 49: IMPORTANT NOTICE
IMPORTANT NOTICE 49 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 6 months period ended 30 June 2018; and a high level overview of aspects of the operations of the Caltex Austr
Slide 50: Thank You
CALTEX Thank You