Caltex Australia Limited (ASX: CTX) released its full year 2017 financial results today. Here are the highlights:
- Revenue was up 19% to $21.3 billion
- Replacement cost operating profit was up 18% to $621 million which was slightly higher than the 2017 profit guidance of $600 million to $620 million
- The Lytton refinery was once again a strong profit contributor with an FY 17 EBIT of $308 million which was up 50% compared to the prior year
- As of 1 January 2018, Caltex commenced its new structure which split its operations into two separate businesses. One which focuses on refining, fuel infrastructure and business to business supply. The other focuses on retail petrol and convenience stores
- A final fully franked dividend of 61 cents was announced which takes the full FY 17 dividend to $1.21, a yield of 3.3% on the current share price.
The Caltex share price was up 4% in early trade this morning.
Caltex also announced that as a result of a review of the convenience retail business, it will end its retail franchises by mid 2020 and move those sites into the company's operations.
The rationale for this makes sense as Caltex wants to provide a more consistent customer experience and simplify its supply arrangements.
It also assists the company in tackling conduct risks highlighted from previous Fairfax media investigations into its operations such as the allegations of underpaying service station workers and threatening them with deportation.
The franchise business model is under serious public review in Australia with Retail Food Group Limited (ASX: RFG) being another franchise business that saw media investigations into its operations leading to a 60% share crash at the end of last year. I think Caltex has taken the right steps to manage this risk.
Caltex has also stated that it was conducting an asset optimisation review and so perhaps there could be future announcements relating to the sale of non-core assets.
Overall, while it was a good result announced by Caltex it's not my preferred blue chip stock.
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