The Caltex Australia Limited (ASX: CTX) share price is fairly flat today as the fuel business reported full-year results in line with guidance.
Caltex shares were trading at $34.22 at the time of writing, down 0.73% from yesterday's close.
Caltex's FY19 results
The company reported replacement cost of sales operating profit (RCOP) earnings before interest and tax (EBIT) of $607 million for 2019, down from $826 million the previous year. Results were impacted by lower Lytton earnings, subdued market conditions in refining and retail fuel, and the repricing of the EG wholesale fuel supply contract.
Caltex advised that although market conditions stabilised in the second half, they are yet to recover as the Australian economy remains weak.
The company responded to tough operating conditions with a focus on capital discipline and reducing costs, while also progressing growth strategies. Corporate costs were reduced to $44 million from $51 million the previous year.
RCOP net profit after tax (NPAT) of $344 million was reported, down from $588 million in 2018 but above the midpoint of the guidance range provided in December.
A fully franked final dividend of 51 cents per share was declared for the second half, which represents a payout of 61% of second-half RCOP NPAT.
Divisional performance
Despite a tough industry backdrop, the Fuel & Infrastructure business delivered a resilient result, with RCOP EBIT of $450 million down from $570 million the previous year. Growth in international volume and EBIT was recorded in the second half.
CEO and managing director Julian Segal said, "in Fuels & Infrastructure we maintained our position as the leading player in Australian transport fuels and delivered strong volume and earnings growth in our international business."
Retail fuel margins strengthened in the second half reflecting a modest industry recovery, with market share and premium fuel share gains. Convenience Retail RCOP EBIT was $201 million, down from $307 million in 2018. Caltex continues to progress initiatives from its retail network review. A property initial public offering (IPO) is targeted for mid-2020 which will release significant capital.
"In Convenience Retail, we have continued to transition our stores to company operation, outperformed the industry in fuel margin per site, and launched our first Caltex Woolworths Metro stores," Segal said.
Balance sheet
Interest bearing liabilities net of cash at 31 December was $1,746 million, including $868 million of net borrowings and $878 million of lease liabilities. Closing net borrowings of $868 million were down from $955 million net borrowings at 31 December 2018.
Management commentary
Commenting on the company's FY19 results, CEO Segal said:
"2019 was a disappointing financial result, impacted by lower regional refining and retail sales margins, softer economic conditions, and unplanned outages caused by a third-party power disruption at our Lytton refinery."
"Despite this, the underlying performance of our business has been resilient and we have continued to build on the solid foundations we have in place for future growth," he added.
Outlook
Caltex is currently considering proposals to acquire the business, with bidders conducting due diligence.
Alimentation Couche-Tard has provided an indicative proposal to acquire Caltex shares at $35.25 less any dividends paid.
A proposal has also been received from EG Group Limited to acquire all Caltex shares which the board is considering.
Both proposals are subject to various conditions and there is no certainty that either will proceed.
