A rebound in refining margins has fuelled a 21 per cent jump in benchmark profit for the first half at Caltex Australia,. (Photo above) Caltex CEO Julian Segal
The fuels retailer, which is struggling to replace a $150 million earnings gap arising from the looming loss of a major supply contract with Woolworths, also announced a revamp of its operational structure that will make further cost savings and could point to a spin-off or demerger down the track.
The reorganisation - dubbed Quantum Leap - will initially involve the loss of about 120 jobs as Caltex reorganises its business into two division, fuels and infrastructure, and petrol and convenience retailing, chief executive Julian Segal told investors on a conference call.
Caltex had previously estimated the expected hit to its earnings before interest and tax from the loss of the 3.5 billion litres-a-year Woolworths contract at between $100 million and $140 million but has increased that estimate, chief financial officer Simon Hepworth said.
Mr Segal said two acquisitions this year - of the Victorian fuels retailer Milemaker and of Gull New Zealand - would provide $55 million-$60 million of earnings. The Quantum Leap program would initially yield another $60 million, he added.
Caltex is also replacing some of its more expensive debt, expected to save a further $15 million-$20 million.
In all, the moves so far envisage some $130 million-$140 million of gains to raw earnings, almost replacing the expected hit from the Woolworths contract loss, which results from the sale of the supermarket owner's petrol stations to Caltex's rival BP.
"We see this as a short-term setback," Mr Segal said, noting Caltex was "already well progressed" on mitigating the impact.
The gain in benchmark profit for the June half to $307 million came within Caltex's guidance in June for profit of between $290 million and $310 million although was slightly ahead of some analyst estimates.
Raw earnings from the refining business, which has shrunk to a sole refinery in Brisbane, surged 62 per cent to $149 million thanks to a recovery in refining margins in the price-setting Singapore market.
Headline earnings from supply and marketing, now the bulk of Caltex's business, climbed 8 per cent to $377 million.
Net income, which takes into account the impact of oil prices on the value of stockpiles and is less closely watched by the market, slid 17 per cent to $265 million. The figure was also within Caltex's June guidance of $250 million-$270 million.
Caltex is looking at further opportunities to grow and is thought to be looking at some of the Woolworths service stations that may need to be sold for BP to get approval for the $1.8 billion transaction from the competition watchdog.
At the same time, Caltex is looking to potential asset sales as part of the operational restructure.
"Nothing is off the table," Mr Segal said. "We are not married in an ideological way to any asset," he added when quizzed whether Caltex may sell its remaining refinery. Sales for the June half climbed 20 per cent to $10.16 billion.
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