Caltex good turn around story, page-25

Strengthening Aussie good for Caltex http://www.theage.com.au/business/2001/02/24/FFXKEMUCJJC.html
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Halved profits put the heat on Caltex
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By NICK O'MALLEYSYDNEYSaturday 24 February 2001
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Caltex Australia's net profit and final dividend have more than halved despite improved refining margins.
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The petrol refiner and service station group reported a net profit of $36.1 million for the year to December, down from $86.3 million a year earlier, although refining margins improved from $US1.69 ($A3.23) to $US3.05.
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Caltex will pay a final dividend of six cents fully franked on March 21, down from 14 cents the previous year.
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In a year that managing director Tony Blevins described as difficult and disappointing, profits were battered by high crude-oil and freight costs, lost production at the company's two refineries and a weak Australian dollar. Freight costs rose from 88 US cents a barrel in 1999 to $US1.73.
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Mr Blevins said the company aimed to bolster profits in the year ahead by developing its non-fuel operations including the retail store network and lubricant business.
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He said Caltex would focus on "revenue streams not impacted by OPEC".
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Australian Equities Research analyst Simon Oaten said the shift to retailing had been part of Caltex's strategy for several years.
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"Refining is probably the harshest business there is from an operational point of view, and they are subject to so many elements outside their control ... they can get much higher margins selling things like snack foods," he said. Caltex owns 91 retail outlets and franchises about 250. It is testing a "stand-alone" retail chain of stores without petrol pumps.
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Mr Blevins would not rule out raising fuel prices to counter freight prices. "If this premium from freight continues we'll have to push it into the marketplace. I know it's not a popular thing right now, with petrol prices being so topical."
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But he said job cuts were not on the cards. "We don't have a head-count reduction target," he said.
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Caltex production was hit by a power cut that affected its Brisbane refinery for six weeks, and the discovery of structural damage in an exhaust chimney in its Sydney refinery that is still being replaced. Despite this, operating costs fell from 4.6 cents a litre to 4.5 cents.
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Mr Blevins said the board had yet to decide how to commit the $250 million needed to upgrade its refineries for the production of cleaner fuel by 2006, as mandated by the Federal Government.
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Despite Caltex's planned push into retailing, Mr Blevins said: "I plan to be in the refining business and the petrol business for a long, long time yet."
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Mr Oaten said he was surprised by how far Caltex's profits had fallen. "I was looking for a result about $9 million more than that," he said.
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In the wake of the results, Caltex's share price fell 15 cents to close at $2.11.
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