The Caltex Australia Limited (ASX: CTX) share price has been thumped today, down 14% at the time of writing.
About Caltex
Caltex is the well known oil refiner and fuel marketer. The multi-billion dollar company operates in the petroleum industry by buying, refining and distributing fuel products throughout Australia. It’s been in the business for more than 100 years.
Caltex’s Announcement
In today’s announcement, Caltex said it expects their first-half profit to be less than half of what it was a year ago amid a slowdown in the country’s economy.
Caltex’s most closely watched profit measure, the ‘replacement cost operating profit’ or RCOP, is now expected to be between $120 million and $140 million, down from the $296 million posted in the previous corresponding period.
Caltex chief executive Julian Segal said, “the industry continues to experience difficult macro-economic conditions, arising from the slowing Australian economy, low refining margins and high crude prices combined with a low FX rate.”
Earnings before interest and tax (EBIT) at the Lytton refinery in Brisbane will be between zero and $10 million, down from the $105 million posted in 1H18. It was negatively impacted to the tune of $40 million from the repriced EG Group, or Woolworths Group Ltd (ASX: WOW), fuel supply contract.
What Now?
Low refining margins have been a problem for the sector for 18 months, with fellow ASX listed fuel business Viva Energy Group Ltd (ASX: VEA) also struggling to make a decent profit out of refining.
In what may be cold comfort for shareholders, CEO Julian Segal said Caltex had, “delivered a fair underlying performance in a very challenging market“.
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Disclosure: At the time of writing David does not hold a financial interest in any of the companies mentioned.
