Caltex Australia Limited (ASX: CTX) could be a big mover today after reporting a big cut to its dividend and profit in 1H19. Here’s what you need to know.
About Caltex
Caltex is a 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.
The Numbers
Caltex reported revenue growth of 1% to $10,309 million in the period ended 30th June 2019. Net profit after tax (NPAT) was reported as $155 million, representing a decline of 59% from 1H18. According to Bell Potter, the consensus analyst estimate was $181 million.
In terms of sales volumes, Convenience Retail fell from 2.46 billion litres (BL) in 1H18 to 2.42 BL in 1H19. Australia Wholesale volumes also declined from 5.96 BL to 5.69 BL, while International volumes suffered the largest percentage decline of 16.3% from 1.78 BL to 1.49 BL.
On a historical cost basis, basic earnings per share (EPS) fell from 146.7 cents per share to 60.6 cps.
Dividends
Caltex declared a fully franked interim dividend of 32 cps, representing a 59% payout ratio. This is down around 43.8% from the FY18 interim dividend of 57 cps.
Management Commentary
Caltex CEO and Managing Director Julian Segal described the result as disappointing and outlined some of the reasons results were down.
“Economic weakness, soft retail fuel margins, lower refining margins and outages have impacted our performance,” he said.
“We are responding to the tough conditions through a focus on capital discipline and by sustainably reducing our cost base.”
Outlook
In response to the difficult operating environment, Caltex has put in place a cost-out program which will deliver a $100 million per annum reduction in operating costs by the end of 2020.
Caltex also lowered its FY19 capex guidance from a range of $320 million – $385 million to around $300 million.
Despite the cost cuts, I won’t be buying Caltex shares today. This commodity-based business is too unpredictable, and I think there are better growth options, like the companies mentioned in the free report below.
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Disclosure: At the time of writing, Max does not own shares in any of the companies mentioned.
