Petrol refiner and retailer, Caltex Australia (CTX) has gone all conservative as it faces a greater call on hits financial strength to boost expansion plans after reporting what was a solid profit for 2016.
It earned a net profit of $610 million in 2016, up from $522 million a year earlier on revenue that fell 10% to $17.9 billion from almost $20 billion in 2015.
On a replacement cost basis, which is the company’s preferred measure, the net profit fell to $524 million from $628 million.
The company yesterday cut the final dividend to 52 cents a share from 70 cents a share, giving an annual payout of 102 cents a share, down from 117 cents in 2015. The interim was raised to 50 cents a share from 47 cents in 2015.
The lowered dividend is in addition to the $270 million buyback conducted in early 2016.
The lower dividend is in light of spending on recent acquisitions, with two deals worth a cumulative $420 million yet to be paid for as they await approvals in Australia and NZ.
Sales volumes of transport fuels were flat at 16 billion litres, but that obscured a 3% rise in sales of higher-margin premium fuels, which continue to offset the long-term decline in petrol sales, especially ethanol enhanced non leaded fuel. Overall petrol sales fell 3% over the year.
A lower refiner margin dropped the contribution from the company’s only Australian refinery at Lytton in Brisbane, which fell to $205 million, pretax, from $406 million in 2015.
Caltex has been the subject of intense scrutiny in recent months, first over the disclosure of the underpayment of some employees of franchised petrol station employees and then BP’s move to buy the Woolworths service station network – a move that could see Caltex lose an estimated 3.5 billion litres of volume from its sales which it suppliers to Woolies outlets at the moment.
The BP purchase is subject to review by the competition watchdog, the Australian Competition and Consumer Commission which has indicated will take much of this year to complete.
The ACCC could require BP to sell some outlets, which could open the door for Caltex to buy some of the outlets and preserve some of the volume that would have been lost.
Additionally, Caltex is buying the Gull service station network in NZ and a small retail service station chain in Victoria for a total of $420 million.
The shares rose 1.6% to $30.13 yesterday.
