Caltex Australia Limited ACN HALF YEAR REPORT 2002

Transcription

1 Caltex Australia Limited ACN HALF YEAR REPORT 2002

2 Dear Shareholder, Caltex Australia reported a major turnaround to a net profit after tax of $130.4 million (including a significant item of -$7.5 million), or 48.3 cents a share, for the first half of 2002 from a net profit after tax of $1.2 million (including a significant item of +$15.5 million), or 0.5 cents a share, for the first half of This turnaround was due not only to higher refiner margins and rising crude oil prices, which had resulted in gains on inventory purchased, but also to improved refinery reliability and robust sales. The Board remains very conscious of its stated objective of paying consistent dividends. However, the company s current financial priority is debt reduction, and taking this into account the Board has determined that no interim dividend will be paid. In focusing on reducing debt levels and improving gearing, the company is working to position itself to better withstand the impact of external factors beyond its control and return to profit and cash flow levels which will support payment of a consistent dividend and investment in clean fuels. Net debt has been reduced to $1,036 million (52% gearing) at 30 June 2002 compared with $1,264 million (61% gearing) at 31 December The company is on track to meet its debt reduction target of $950 million for the end of The company was also successful in raising US$200 million in the international capital market in July The placement was well received by US investors resulting in the transaction being significantly oversubscribed. These funds, of varying maturities between five and ten years, will be used to retire facilities expiring in November The profit included an inventory gain of $105.9 million for the half year to 30 June Excluding this key external factor, the company s earnings before interest and tax (on a replacement cost of sales basis, excluding significant items) was $129.3 million for the half-year up from $36.2 million in the first half of 2001, reflecting continued strong improvement in the underlying performance of the business. There have been significant improvements in the reliability and safety performance of both the Kurnell and Lytton refineries in the first half of 2002 compared with a year ago. This enabled the business to benefit from improved regional refiner margins (the difference between the price of crude oil and the price of refined petroleum products), which averaged US$2.70 a barrel for the first half of 2002, up from US$1.45 a barrel for the same period last year.

3 The price of regional benchmark Tapis crude oil averaged US$22.80 a barrel for the first half of Prices rose steadily from US$19.50 a barrel in January, peaking at US$25.32 in May and ending the half year at US$24.01, creating gains on inventory from the gap between what the company paid at the time of crude purchase and the price of refined products sold in the market place. 3 Operational excellence and plant reliability continue to be key focus areas for the company and significant improvements in these areas have been achieved. A major independent review of operating and management practices at both refineries undertaken in early 2001 by a team of international and local experts led to 148 recommendations. Currently actions on over 60% of these recommendations have been completed or are in progress. The remaining items are currently being engineered and/or planned with the bulk of the items scheduled for completion prior to the end of At the Lytton refinery in Brisbane, there has been an improvement in power supply reliability, with a commitment from local suppliers Energex and Powerlink to upgrade the electricity network that services the refinery. The company has taken steps towards cleaner fuels production in line with federal government regulation. Further progress was made on technical and economic feasibility studies at both the Kurnell and Lytton refineries into options to meet the standards for benzene in petrol and sulfur in diesel required by The first six months of 2002 saw a continued strong performance across all marketing channels. Caltex petrol sales volumes were higher than the same period last year, in line with Australian market growth, while diesel sales grew by 9%, well ahead of the national average. Caltex s share of the total transport fuels market share grew by 1% to 28.2%. Commercial and industrial diesel sales volumes were 11% higher, boosted by strong demand from the mining and industrial sectors. Jet fuel sales were 5.7% lower than a year ago, but are recovering in the aftermath of the loss of Ansett and the global aviation slump following September 11, due to increased sales to both domestic and international carriers. Performance has also been improved in the highly competitive lubricants sector, with profits up by 6% on the comparative period last year. Sales growth has been assisted by promotion of the key Caltex brands Havoline and Delo through successful motorsport sponsorship and targeted advertising. Earnings from convenience store and related activities continued to grow. The Star Mart convenience stores experienced average sales increases of 6.3%, while the smaller Star Shops average sales grew 14.9% in the first half of 2002 compared with the same period the previous year.

4 4 Caltex s national All Stars quality assurance program has contributed to enhanced site performance in areas such as customer service, promotional compliance, merchandising, brand and site presentation. The Caltex retail offer has also grown with the upgrading and expansion of the car wash network and new services such as phone card rechargers. Market research has enabled effective targeting of key audience segments in advertising and promotions at national and site level. Brand awareness continues to grow, with sound results from a seven-week TV advertising campaign, the Easter road safety Driver Reviver program and Star Day fundraising activities for the Starlight Children s Foundation. The outlook for the second half of 2002 will be largely governed by refiner margins and crude oil prices. A fall in petrol demand led to a significant weakening of regional margins in July and August Caltex s current financial priority remains debt reduction. Good progress was made in the first six months of 2002 as improved earnings and prudent cash management enabled the debt to be reduced by $229 million. Meeting the company s debt reduction goal will reduce gearing to less than 50% by 31 December This will place the company in a much stronger position to withstand volatile external factors such as refiner margins, crude oil prices and freight rates and to meet the estimated $250 million funding requirements for the refineries conversion for cleaner fuels production. The remainder of the year will see a strong focus on plant reliability and the debt reduction program. The company has taken a number of measures to improve cash flow including targeted cuts in capital and operating budgets, divestment of non-core assets and strategies for enhancing revenue. We thank you for your continued support. DICK WARBURTON Chairman JEET BINDRA Managing Director and CEO 30 August 2002

5 Board of Directors 5 The board of directors of Caltex Australia Limited comprises: RFE (Dick) Warburton Chairman, Non-executive director EB (Elizabeth) Bryan* Non-executive director KT (Ken) Watson Non-executive director JS (Jeet) Bindra Managing Director & Chief Executive Officer LG (Leo) Lonergan # Non-executive director MK (Michael) Wirth # Non-executive director * Elizabeth Bryan was appointed as a director with effect from 18 July 2002 to fill a casual vacancy on the board following the retirement of Malcolm Irving at the end of the Annual General Meeting held on 2 May # JS (Steve) de Bruyn was appointed as an alternate director for Leo Lonergan and Michael Wirth with effect from 21 February Introducing Jeet Bindra Managing Director & Chief Executive Officer Jeet was appointed Managing Director & Chief Executive Officer of Caltex Australia with effect from the close of the Annual General Meeting held on 2 May In his previous role as President of the ChevronTexaco Pipeline Company in Houston, Texas, Jeet was responsible for ChevronTexaco s worldwide oil and gas upstream and downstream pipeline and natural gas processing operations. Since joining Chevron in the USA around 25 years ago, Jeet has held a number of senior roles in refinery operations, refinery engineering, strategic planning, capital projects, international upstream and engineering technology. Jeet holds a Chemical Engineering degree from the Indian Institute of Technology, Kanpur, India, a Masters degree in Chemical Engineering from the University of Washington, Seattle, Washington in the USA, and an MBA from St Mary s College, California.

6 6 Statement of Financial Performance for the half year ended 30 June 2002 Consolidated Thousands of dollars Gross sales revenue 4,130,443 4,142,060 Product duties and taxes (1,662,662) (1,608,475) Net sales revenue 2,467,781 2,533,585 Other revenue from ordinary activities 95,653 95,071 Revenues from ordinary activities 2,563,434 2,628,656 Changes in inventories of finished goods and work in progress (2,701) 99,339 Raw materials and consumables used (1,718,213) (2,234,387) Employee expenses (95,265) (84,884) Depreciation and amortisation expenses (62,351) (62,909) Borrowing costs (38,390) (48,735) Other expenses (458,021) (312,063) Share of net profits/(losses) of associates and joint ventures accounted for using the equity method 1,378 (1,474) Profit/(Loss) from ordinary activities before income tax expense 189,871 (16,457) Income tax (expense)/benefit relating to ordinary activities (59,100) 18,186 Net profit 130,771 1,729 Net profit attributable to outside equity interests (382) (489) Net profit attributable to members of the parent entity 130,389 1,240 Basic earnings per share (cents per share) Diluted earnings per share (cents per share) The financial information and discussion and analysis set out in the Half Year Report 2002 should be read in conjunction with the Full Financial Report 2001.

7 Discussion and Analysis of the Statement of Financial Performance 7 The consolidated entity s net profit attributable to members of the parent entity for the half-year was $130.4 million, up $129.2 million from the $1.2 million profit recorded in the first half of The increased earnings were due to higher refiner margins, improved refinery reliability and rising crude prices that resulted in inventory gains. The price of regional benchmark Tapis crude rose steadily from US$18.64 per barrel in December 2001 to US$24.01 per barrel in June 2002, which generated a $105.9 million pre-tax inventory gain (first half 2001: pre-tax inventory loss of $20.3 million). There was one significant item recorded in the first half being the provision for a potential $7.5 million liability for deferred purchase consideration payable to Pioneer Petroleum Australia Pty Ltd. Net debt has been reduced to $1,036 million at 30 June 2002 compared with $1,284 million for the corresponding period last year leading to a fall in borrowing costs. Earnings per share increased to 48.3 cents per share from 0.5 cents per share in the first half-year of The return on equity (net profit or loss attributable to members of the parent entity on parent entity interest in total equity) jumped from 0.1% in the first half of 2001 to 13.8% in the first half of The financial information and discussion and analysis set out in the Half Year Report 2002 should be read in conjunction with the Full Financial Report 2001.

8 8 Statement of Financial Position as at 30 June 2002 Consolidated Thousands of dollars Current assets Cash assets 36,581 44,837 Receivables 588, ,911 Inventories 513, ,763 Tax assets - 16,146 Other 39,592 29,683 Total current assets 1,178,169 1,444,340 Non-current assets Receivables 24,662 23,648 Investments accounted for using the equity method 13,108 9,276 Property, plant and equipment 1,630,219 1,632,524 Intangibles 1, ,744 Other Total non-current assets 1,669,326 1,818,207 Total assets 2,847,495 3,262,547 Current liabilities Payables 570, ,022 Interest bearing liabilities 61, ,174 Tax liability 56,955 - Provisions 36,143 30,146 Total current liabilities 725,479 1,044,342 Non-current liabilities Interest bearing liabilities 1,010,638 1,036,050 Deferred tax liabilities 125, ,048 Provisions 33,591 26,244 Total non-current liabilities 1,170,035 1,207,342 Total liabilities 1,895,514 2,251,684 Net assets 951,981 1,010,863 Equity Contributed equity 543, ,415 Reserves - 319,865 Retained profits 400, ,561 Parent entity interest 943,821 1,000,841 Outside equity interest 8,160 10,022 Total equity 951,981 1,010,863 The financial information and discussion and analysis set out in the Half Year Report 2002 should be read in conjunction with the Full Financial Report 2001.

9 Discussion and Analysis of the Statement of Financial Position 9 Since 31 December 2001: The consolidated entity s net assets increased by $130.8 million over the first half to $952.0 million at 30 June The consolidated entity s total assets increased by 3.7% during the half-year to $2,847.5 million due to movements in three specific asset groups: an increase in cash at bank of $36.6 million, due to strong first half operating cash flows; an increase in receivables consistent with higher crude prices and volumes in June 2002 compared to December 2001; and slightly higher inventories reflecting the higher crude prices, partially offset by lower inventory holdings. The increase in payables of $104 million reflects the increase in crude prices, offset by the strengthening of the Australian dollar against the US dollar. Net debt has been reduced to $1,036 million at 30 June 2002, a decrease of $229 million from 31 December As a result, the consolidated entity s gearing (net debt, to net debt plus equity) was 52.1%, down from 60.6% at the end of the prior year. The company is on track to meet its debt reduction target of $950 million by the end of Net tangible asset backing per share (net assets attributable to members of the parent entity less intangibles, on number of shares on issue) increased from $3.01 to $3.49. The financial information and discussion and analysis set out in the Half Year Report 2002 should be read in conjunction with the Full Financial Report 2001.

10 10 Statement of Cash Flows for the half year ended 30 June 2002 Consolidated Thousands of dollars Cash flows from operating activities Receipts from customers 4,752,486 5,615,298 Payments to suppliers, employees and governments (4,438,090) (5,597,426) Dividends received Interest received Interest and other borrowing costs paid (42,843) (38,273) Income taxes (paid) (1,162) (1,777) Net operating cash flows 270,596 (21,460) Cash flows from investing activities Purchases of property, plant and equipment (29,958) (31,794) Maintenance and shutdown expenditure capitalised (14,131) (8,072) Proceeds from sale of property, plant and equipment 3,372 19,008 Proceeds from sale of intangibles - 17,000 Proceeds from sale of investments - (1,678) Purchases of operating licences and goodwill (1,358) - Loan repayment from associated companies Net investing cash flows (41,575) (5,536) Cash flows from financing activities Proceeds from borrowings 2,206,000 2,895,000 Repayments of borrowings (2,390,000) (2,848,442) Repayment of finance lease principal (216) (236) Dividends paid - (16,200) Net financing cash flows (184,216) 30,122 Net increase in cash held 44,805 3,126 Cash at the beginning of the financial period (8,224) 41,711 Cash at the end of the financial period 36,581 44,837 The financial information and discussion and analysis set out in the Half Year Report 2002 should be read in conjunction with the Full Financial Report 2001.

11 Discussion and Analysis of the Statement of Cash Flows 11 The company generated strong net operating cash flows over the first half of 2002, in line with its robust earnings performance. The increased earnings and cash flow were due to higher refiner margins, improved refinery reliability and rising crude prices. Also contributing to this outcome was lower working capital levels. Interest and other borrowing costs paid increased in the current half year due to the timing of coupon payments. Capital expenditure for the first half was on par with the level of 2001, again being focused on retail service station network development, yield and risk improvements at the refineries, and information technology and environmental projects. A further $14.1 million was outlaid on planned maintenance and shutdown expenditure at the company s three refineries. Divestment proceeds from the sale of property, plant and equipment was lower over the first half of 2002, although the company s debt reduction program anticipates higher inflows in the second half. Net debt fell over the first half of 2002 as strong operating earnings were channelled towards the repayment of debt. The company is on track to meet its debt reduction target of $950 million by the end of The financial information and discussion and analysis set out in the Half Year Report 2002 should be read in conjunction with the Full Financial Report 2001.

12 Caltex Australia REGISTERED OFFICE Caltex Australia Limited Level 12, MLC Centre Martin Place Sydney NSW 2000 Mail GPO Box 3916 Sydney NSW 2001 WEB SITE COMPANY SECRETARY Helen Conway Company Secretary & General Counsel John Willey Assistant Company Secretary INVESTOR RELATIONS Stewart Cummins Financial Controller & Investor Relations Manager FINANCIAL CALENDAR* 2002 results and dividend announced 28 February 2003 Record date - dividend entitlement 19 March 2003 Final dividend payable 3 April 2003 Notice of Annual General Meeting and Annual Review mailed 17 March 2003 Annual General Meeting 17 April 2003 * These dates are subject to change SHARE REGISTER Computershare Investor Services Pty Limited GPO Box 7045 Sydney NSW 1115 Telephone (within Australia) Telephone (outside Australia) AUDITOR KPMG