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Caltex recorded a solid financial performance with higher earnings in 2007 despite a worsening external environment. There was record production by the refineries and a stronger contribution by the marketing business.
Caltex’s full year profit after tax increased to $444 million on a replacement cost of sales operating profit (RCOP)1 basis for the year ended 31 December 2007, up from $430 million in 2006.
Dividend
The Board declared a final dividend of $89.1 million or 33 cents per share fully franked. This makes the total year dividend of 80 cents per share fully franked after 47 cents per share paid in September 2007 (2006 total dividends: 80 cents per share).
The company is facing increasing cash demands as a result of rising capital costs and higher working capital requirements due to the significant rise in the cost of crude oil. The level of dividend has been set taking into consideration future cash flow requirements and the need to maintain a prudent debt level in an environment of likely continuing lower refiner margins.
Delivering results
The sound operational performance and good cost control in 2007 helped offset the negative impact of a 17% drop in the Caltex refiner margin (CRM)2 in Australian cents per litre terms compared with 2006. The CRM averaged A7.0 cents per litre (US$9.26 a barrel) in 2007, compared with A8.44 cents per litre (US$10.13 a barrel) in 2006. This margin excludes operating costs.
The company managed to keep its unit operating expenses in line with inflation despite strong cost pressures for materials and skilled labour.
The refineries achieved record production of all products of 12.1 billion litres (2006: 11.9 billion litres), including 10.9 billion litres of high value transport fuels (petrol, diesel and jet fuel). New throughput records were set during the year with average utilisation for the refineries increasing to 84% (2006: 78%) although production was slightly lower than anticipated due to unscheduled unit shutdowns for essential repair and maintenance work at both the Kurnell (Sydney) and Lytton (Brisbane) refineries in November and December.
The marketing business also performed well and maintained its market leadership in fuel sales and convenience store retailing. Caltex had record transport fuel sales of 13.8 billion litres in 2007 (2006: 13.4 billion litres). The highest growth was in diesel sales with Caltex diesel volumes up by over 11% which was well above market growth. There was also higher non-fuel income with a strong increase in convenience store sales and revenue from the card business.
Petrol prices
Australian petrol prices remain low relative to those in many other developed economies. We have the fourth lowest prices for petrol before tax in the OECD.
On a litre of petrol, Caltex’s profit after tax averaged around 1.5 cents a litre in 2007 compared with the Australian Government’s tax at the bowser of approximately 50 cents a litre3.
During the year, Caltex made substantial contributions to the Australian Competition and Consumer Commission’s 2007 inquiry into unleaded petrol prices in Australia. Caltex welcomed the ACCC report issued in December which found no reason to regulate petrol pricing and no evidence of price fixing or collusion in the industry.
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| 1 | The replacement cost of sales operating profit (RCOP) excludes the impact of the fall or rise in oil prices in Australian dollar terms (a key external factor) and presents a clearer picture of the company’s underlying business performance. It is calculated by restating the cost of sales using the replacement cost of goods sold rather than the historical cost, including the effect of contract based revenue lags. |
| 2 | The Caltex Refiner Margin (CRM) represents the difference between the cost of importing a standard Caltex basket of products to Eastern Australia and the cost of importing the crude oil required to make that product basket. The CRM calculation represents: average Singapore refiner margin + product quality premium + crude discount/(premium) + product freight - crude freight - yield loss. |
| 3 | This calculation is based on a bowser price of around $1.35 a litre (excise 38.14 cpl + GST 12.27 cpl). |