Caltex Australia’s Stocks Tumbled On ASX Despite Increasing The Dividend Payout Ratio

  • Oct 30, 2018 AEDT
  • Team Kalkine
Caltex Australia’s Stocks Tumbled On ASX Despite Increasing The Dividend Payout Ratio

Caltex Australia Limited (ASX: CTX) made changes in its dividend policy by increasing the dividend payout ratio to 50 – 70% of the full year Replacement Cost of Sales Operating Profit after tax (excluding significant items) subject to taking into account Caltex’s earnings for the period, future capital requirements and other relevant factors, such as the outlook for the business. Earlier, the targeted dividend payout ratio was 40% to 60%. The intention of the company is to return excess capital to shareholders in the most efficient manner, where excess capital is defined by the company’s capital management framework. Following the release of this news, the share price of the company decreased by 1.58 percent as on 30 October 2018.

In the investor presentation, the company reported an increase in the Convenience Retail incidents as Convenience Retail transformation leads to greater focus on the operations of 240 new company-operated stores, and now nearly 2,900 new store employees in 2018 alone. 

In the first half of FY 2018, the fuel sales volumes of the company reached $10.2 billion and the refined production reached $3.2 billion. The operating cash flow of the company was $140 million in H1 FY2018. The net debt of the company is 1.0 billion with a gearing ratio of 24 percent.  The Convenience Retail business of the company delivered an EBIT of $161 million which is marginally above the 1H 2018 profit guidance of between $150 million and $160 million. Convenience Retail business of the company witnessed a decrease of 14% in the EBIT as compared to the same period last year due to the increase in the crude and product prices. The Fuels & Infrastructure business of the company delivered an EBIT of $314 million in 1H 2018 which is below the guidance range of $315 to $335 million, given a weaker than anticipated CRM in June.

In the changing market, the F&I business of the company has transitioned successfully from a refiner to create a strong platform for both domestic and international growth. The company is having a Competitive Advantage of integration with retail, infrastructure, and relationship due to which the company is able to defend itself from the new entrants of the market. The earnings of CY 2019 are expected an increase on CY 2019. It is expected that the continued growth in F&I (Fuel and infrastructure) business will offset the Woolworths fuel supply contract reprice. The 2019 total capital expenditure is expected to be around $350 million which is a reduction of around 30% in 2018. In FY 2019, the Convenience Retail business is planning to deliver sustainable profits by optimizing value and volume and it is also planning to implement the first phase of Woolworth's partnership. For FY 2019, the F&I business of the company is planning to run business safely, reliably and competitively to generate cash.

In the last six months, the share price of the company decreased by 10.25 percent as on 29 October 2018. CTX shares traded at $27.400 with a market capitalization of circa $7.26 billion as on 30 October 2018 (AEST 4:00 PM).


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