Caltex Australia got the thumbs up from the market yesterday for its long-awaited plan to spin off some of its convenience store retail sites into a separate company.
The shares jumped 6.8% to $29.79 after it confirmed long-held plans for the spin-off which will involve a 49% interest in 250 of the company’s core Convenience Retail freehold sites around the country.
In fact, the shares were up more than 10% at $30.62 at one stage early in the session on the news of the spin-off which overshadowed what was a weak trading update.
“The proposed IPO is expected to realise significant value for Caltex shareholders, while allowing Caltex to maintain operational control of the company’s core Convenience Retail network,” the company said in a filing to the ASX.
“It is anticipated that the property trust will receive rental payments from Caltex of approximately $80 million to $100 million in the first year.”
If approved, Caltex said the transaction is expected to occur in the first half of next year.
Separately, the company releases a trading update to the market yesterday indicating that the first half EBIT at its Convenience Retail (CR) division is likely to be higher than the same period a year earlier.
“EBIT is expected to be in the range of $190 ‐ 210 million, representing an increase of $20 – 40 million over the first half of 2019, driven by an improvement in fuel margin,” the company said.
“Our refocus on retail fuel has led to market share gains through 2019, with continued growth in premium fuel market share. Total CR fuels sales volumes are expected to be around 4.8 billion litres in 2019.”
But the company revealed a weak full-year forecast, with Caltex expecting earnings before interest and tax to hit between $190 million and $210 million, a drop of up to 38% on 2018’s $307 million.
The company said, however, the outlook reflected a better second-half performance (the December six months).
“Despite the softer conditions from ongoing Australian economic weakness, Caltex has continued to outperform our competitors in the retail fuel market by leveraging our fuel supply chain expertise and our high-quality retail network,” CEO Julian Segal said in a statement.
