Caltex Australia ups dividend despite dip in revenue and soaring debt

Caltex has booked a result broadly in line with analyst expectations, as it warned of a challenging market.

Caltex Galleria in Morley.

Fuel seller and oil refiner Caltex Australia has increased its dividend despite a slide in interim revenue and a solid increase in company debt.

Caltex (CTX) today booked a profit of $318 million for the six months through June, up 15 per cent on a historical cost basis. On a replacement cost basis, which excludes significant items and external factors such as oil price movements, profit was up 1 per cent to $254m.

Revenue over the six month period were down 13 per cent to $8.5bn. Meanwhile, the company’s net debt ballooned to $693m, compared with $432m at the end of last year. The increase in debt follows the $270m off-market buyback completed in April this year.

Caltex will pay a fully-franked, 50c interim dividend, an increase over the prior interim payout of 47c per share.

Citi analyst Dale Koenders said the results and the dividends were largely in line with expectations, although Citi had expected a 60c dividend.

“There is very little in the outlook commentary to get excited about — Caltex stated that it remains a challenging market for both volumes and margins,” he said.

Shares in the Sydney-based company were down 45c, or 1.3 per cent at $33.80 at 10.44am (AEST).

The challenging market included downbeat demand for diesel, not only from miners but from farmers, indicating a tough economic climate and aggressive price competition. Chief financial officer Simon Hepworth said a major mining contract had taken longer to ramp up than expected.

Chief executive Julian Segal said the company would temporarily slow its retail growth strategy as it looked to incorporate findings from a retail review.

“The Australian convenience market is undeveloped” compared to some overseas,” Mr Segal said.

He said pilot sites of a new model, incorporating barista coffee, “grab’n’go” food and quick service restaurants would be rolled out over the next 12 to 18 months at a cost of less than $30m.

Mr Segal said he would still eye acquisitive growth, but did not address speculation it may look to buy Woolworths’ service station business.

He stressed the company’s short to medium focus would remain on its core business, despite the prominence given to its new retail strategy, titled “freedom of convenience”.

Following last year’s 50 per cent stake sale by US oil giant Chevron, whose exit made the ASX-listed Caltex a wholly Australian company, Caltex Australia is considering a change to its name to reflect its position as the nation’s only Australian-controlled fuel refiner.

Caltex Australia operates the Lytton oil refinery in Brisbane that makes transport fuels, a wholesale marketing business that imports and supplies fuel and a retail petrol station network that accounts for about 5 per cent of revenue. The company announced plans to shut down its Kurnell refinery in Sydney in 2012, converting it into an import terminal as part of an increased focus on fuel distribution and marketing.

Since Caltex announced the closure in July 2012, its share price has more than doubled, from around $14 to yesterday’s close of $34.24, giving it a market value of $8.9 billion.