Just a day later to the release of investor’s day presentation Caltex Australia has today provided the clarification as to what they expect from the negative impact of ~$20 million in their 3Q Retail earnings.
In the yesterday’s presentation, Caltex stated that the high crude price and low Australian dollar has pushed the 3Q Retail fuel volumes and margins down. Further in today’s statement to Australian Securities Exchange, the company has provided a statistical front to the negative impact as it confirmed the 2018 earnings guidance for convenience retail.
Caltex said that $20 million negative impact in Convenience Retail earnings is anticipated to result into the lower earnings for full year 2018 which is estimated to be within the range of $275 - 295 million EBIT for convenience retail in 2018.
Moreover, the unplanned outage of reformer, a processing unit, at Lytton has reportedly impacted the gasoline and diesel production, which has downturned the EBIT by $15-20 million.
Coming to the half year results release, the company has posted a considerable improvement in the underlying earnings before interest and tax (EBIT) for fuel and infrastructure business which has increased to $322 million in 1H18 from $304 million in 1H17. But on the negative side Caltex’s Convenience retail segment has reported a $26 million decline in EBIT of $161 million in 1H18. This reflects a downtrend in retail sales volumes, rising crude prices and the ongoing transition of franchise stores to company stores.
In Fuel & Infrastructure business the company has reported significant rise of 12% in volumes to 10.2BL for the half year ended 30 June 2018. But, the highlight of the results was the change in company’s dividend policy. This year Caltex has increased its dividend payout ratio to 50-70%, a leap from previous 40-60% payout. This has brought 2018 first half year dividend to 57 cents per share, fully franked.
In support to the improved dividend payout policy, the management said that with transformation well advanced, Caltex now has the capacity to sustainably pay higher dividends, whilst retaining sufficient capital headroom to support growth aspirations in both Fuels & Infrastructure and Convenience Retail.
Looking into 2019, the company expects higher earnings on CY18 underpinned by continuous growth in Fuel and Infrastructure business. Total 2019 capital expenditure is expected to be around $350 million, a reduction of ~30% on 2018. Subsequently, the company plans to return the available excess capital to shareholders for which they intend to take an off-market buyback in 2019. Dividend payout is expected to remain consistent to 50-70% while full year Lytton 2019 production is aimed to the target range of 6.0 – 6.1BL.
Despite releasing the lower guidance for 2018 convenience retail, Caltex’s share price has edged up by 2.92% to trade at $28.200 on 31 October 2018 (2:55 PM AEST). Currently, the stock is trading at a PE of 9.690 x with market capitalization of $7.15 billion. The stock of Caltex Australia Limited (ASX: CTX) has witnessed a performance change of -19.36% over the past one year.
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