Caltex flags return to profit on better margins
The fuel marketer and refiner forecast an operating profit of $145 million to $165 million, beating consensus estimates.
The forecast is on a replacement cost basis, which excludes the effect of changes in the world oil price.
Traders liked the result although Caltex initially fell, with its shares closing 27¢ higher at $19.20.
The improved forecast has been driven by better refining margins. The company also forecast a record result in its marketing segment, including record volumes and earnings before interest and tax (EBIT) of $730 million to $740 million.
However, following EBIT growth in fuel marketing of 28 per cent in 2010 and 21 per cent last year, this year's expected rise of about 5 per cent is more modest.
Caltex sells a third of Australia's transport fuel and is the country's largest convenience retailer.
The marketing business will be the most important segment, with refining to be halved when the Kurnell refinery in Sydney closes in late 2014.
There is uncertainty around marketing because it has been affected by tough economic conditions of late, one analyst said.
"Heading into 2013 it does appear that it will be a tough economic year and that is a concern," he said. "Going down to 5 per cent suggests some of the growth decelerating, which is a bit of a concern particularly given this is going to be their business going forward when they close down Kurnell."
Caltex has forecast a jump in EBIT to $100 million in its refining and supply business.
Frequently Asked Questions about this Article…
Caltex Australia has forecast a return to full-year profit in 2012, with an operating profit of $145 million to $165 million on a replacement cost basis. For investors, this signals the company expects improved results after prior losses, driven by better refining margins and strong marketing performance.
In Caltex's announcement, 'replacement cost basis' means the operating profit forecast excludes the effect of changes in the world oil price, isolating underlying business performance from volatile commodity price swings.
Yes. The improved forecast has been driven by better refining margins, and Caltex also expects a record result in its marketing segment with strong volumes, which together have boosted the company's earnings outlook.
Traders reacted positively overall: although Caltex shares initially fell, they finished the day 27 cents higher at $19.20 after the company released its upgraded forecast.
Caltex forecast a record marketing result with marketing EBIT of $730 million to $740 million. However, marketing EBIT growth is expected to slow to about 5% this year after rising 28% in 2010 and 21% last year.
Very important. Caltex sells about a third of Australia's transport fuel and is the country's largest convenience retailer. The company expects the marketing business to be its most important segment, especially since refining volumes will be roughly halved when the Kurnell refinery in Sydney closes in late 2014.
Analysts pointed to uncertainty in the marketing business because it has been affected by tough economic conditions. One analyst warned that a potentially weak economic year in 2013 and the slowdown in marketing growth are concerns, particularly given the business's future central role after refinery closures.
Caltex forecast a jump in EBIT for its refining and supply business to $100 million, reflecting the benefit of stronger refining margins on that part of the company.
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