Caltex sells bitumen business

Refiner selling off non-core assets

Mike King

Mike King is a Fool.com.au Investment Analyst and Writer. He caught the investing bug more than a decade ago, at a time when the U.S. had invaded Iraq and fear reigned in the markets. His initial success as the markets took off encouraged his passion and thirst for knowledge. With 13 years behind him at one of Australia's largest domestic banks, Mike's passion for stocks led him to join a boutique funds management firm, where he stayed for four years. A seven-year stint in equity research at one of the largest investment banks in the world followed that, giving Mike a thirst to pursue his passion further. Mike holds a Diploma in Applied Finance and Investment and a Graduate Certificate in Financial Planning. His passion is to help retail investors invest better, and that passion was one of his primary reasons for joining The Motley Fool Australia in late 2011. Mike has written thousands of articles since joining, including for Fairfax Media, Yahoo!7, Ninemsn and has also appeared on ABC's The Business. You can see all of Mikes' holdings here

Published October 15, 2013 11:32 am AEDT

Oil importer and refiner, Caltex Australia (ASX: CTX) has agreed to sell its Sydney-based import bitumen business to Puma Energy, a subsidiary of commodity trading firm Trafigura Beheer.

Caltex managing director Julian Segal said in an announcement today, "Caltex's strategy is to remain Australia's leading transport fuels player. As bitumen is a by-product of refining, while we had an operating base oil refinery at Kurnell (Sydney), having the bitumen business made sense. Going forward, however, bitumen is no longer deemed to be a core business." He added, "The decision to invest is consistent with our strategy and it makes operational and financial sense."

Caltex says the deal is confidential, and hasn't released the terms of the sale including the price.

Puma Energy is Australia's largest independent petrol retailer, after purchasing Ausfuel for $625 million and appears to be interested in United Petroleum. United operates a chain of petrol stations across Australia, as well as fuel import terminals in several states and could sell for as much as $1 billion. United also sells bulk fuel products to other customers.

Currently Woolworths (ASX:WOW) and Wesfarmers (ASX:WES) owned Coles control around 50% of the petrol market with Caltex holding 17%. BP, 7-Eleven and the independents share the leftovers.

It seems Trafigura is positioning Puma Energy to be a major player in Australia's petroleum marketing, distribution and sales, and building a portfolio of substantial petroleum assets. It may be a good move, with Australia forced to import the majority of its petroleum. Around 85% of input to refineries is sourced from imports according to the Bureau of Resources and Energy Economics (BREE).

The purchase of Caltex's bitumen business also gives Puma exposure to the road construction industry and would benefit from an increase in Australia's infrastructure spending, which appears to be on the cards.

Foolish takeaway

Caltex is moving out of the refining business to focus on its marketing and distribution of petroleum products. The sale of its bitumen business appears to be a win-win situation for both Caltex and Puma Energy.

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Motley Fool writer/analyst Mike King owns shares in Woolworths.

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