Caltex flags return to profit on better margins

CALTEX AUSTRALIA has pleased the market by forecasting a return to full-year profit in 2012 but a slowdown in its marketing business has raised concerns.

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.