Caltex Australia has joined the buyback club, announcing yesterday plans to buy back $260 million of its shares.
(That will help use up franking credits ahead of the 2019 federal election and a possible Labor win, although that was not mentioned yesterday).
Already we have had special dividends and buybacks from the likes of Brambles, Wesfarmers, Woolworths potentially, and CSR to name a few.
The announcement came with the full year results from Caltex which also revealed a lower total dividend and an update on plans to return more than 400 franchised stores to company ownership by next year.
Caltex said its full-year profit beat its annual profit guidance $560 million, down 10% from $619 million in 2017, but just above its guidance range of $530 million to $550 million.
Caltex says it will pay a fully franked final dividend of 61 cents a share for the second half of 2018, on top of the 57 cents a share interim, making a total for the year of $1.18 a share. That is down from $1.21 a share in 2017 (60 cents and 61 cents a share).
Regardless of the dividend cut the shares jumped more than 4% on the buyback news to $28.90.
The company said the fully franked off-market share buyback, at a price to be determined by a tender process, was expected to be completed in the second quarter of this year.
Caltex says it spent about $20 million in 2018 bringing 182 franchised petrol stations back into the company under its previously announced plan to leave the franchise industry after it was sprung in a staff underpayments scandal. It had 516 Caltex-controlled service stations at December 31.
Caltex said the transition of franchise stores hit convenience retail earnings before interest and tax (EBIT), which fell 8% to $307 million. Fuel & infrastructure’s EBIT of $570 million were affected by outages in the third quarter at Queensland’s Lytton refinery and a lower refining margin but was in line with guidance.
Caltex said the Lytton oil refinery in Brisbane had EBIT of $161 million which was down compared to 2017 due to lower refiner margins and a $20 million impact of a previously announced refinery outage.
CEO Julian Segal said in yesterday’s statement: “Since closing the Kurnell refinery in 2014, Caltex has transitioned the business to one that generates more reliable cash flows. This focus on capital efficiency supported an Off-market Buy-back in 2016, the increase in the dividend payout ratio to 50-70%, the acquisition of two international beachheads for growth, and supports today’s announced ~$260 million Off-market Buy-back.”
“Since 2016 Caltex has allocated over $2.2 billion to inorganic growth opportunities and returns to shareholders. Including the Buy-back announced today, Caltex has returned over $1.6 billion in capital to shareholders, while maintaining a return on capital employed of around 20%,” the CEO said.
Chairman Steven Gregg said in yesterday’s statement: “While attractive growth opportunities exist in the portfolio, Caltex believes the Buy-back will benefit all of our shareholders, given it is expected to improve Caltex’s earnings per share and return on equity”. Caltex also has sufficient franking credits to ensure that dividend component of the buy-back price is fully franked.”
