Caltex Share Price Up 4%, but Franchises to Go

Caltex Australia Ltd [ASX:CTX] shares were up 4% to $36.47 at the time of writing. The company boosted its net profit 1% to $619 million.

More importantly, Caltex’s replacement cost operating profit (RCOP), which takes into account crude oil price fluctuations, rose 18.5% from the previous year to $621 million.

The firm also lifted revenue by 19% to $21.4 million, due to better global oil crude prices and a jump in refinery margins.

The recently acquired Lytton Refinery led the way with earnings up 50% to $308 million, despite a drop in sales to less than 2016 production figures.

Caltex declared a second-half dividend of 61 cents, bringing the full-year dividend  to $1.21 a share.

What caused the profit result?

Offsetting the profit result was the announcement that Caltex Australia will outlay $120 million to buy out its franchisees over the next three years.

The firm expects all of its service stations to be company owned by 2020. Presently, the company operates 314 service stations, while franchisees operate 433.

Allegations that workers were being underpaid in franchise outlets led Caltex to conduct a two-year review of its franchise operations. The company subsequently arranged a $20 million assistance fund for underpaid franchise employees in May 2017.

Caltex stated that franchising had been an important part of expanding their retail business, and that they were aware of the decision’s impact on franchisees, stating:

Caltex appreciates that this is a significant decision and it will affect many of our franchisees. Caltex will work with our franchisees to manage the impact of this change, including by offering franchisees transition support and offering employment to all franchisee employees.’

What’s next for Caltex?

Recently, Caltex rolled out 26 new ‘The Foodary’ pilot stores that provide healthy fast food options and barista-made coffee, along with services such as parcel pick-up and dry cleaning.

Whether this revamp of the traditional service station convenience store will take off remains to be seen. Caltex Australia’s executive general manager, commercial, Bruce Rosengarten is confident in the potential of the new look, stating:

First impressions count, and the first thing you’ll notice about The Foodary is that it doesn’t look or feel like a traditional petrol station…Everything from the modern interior design, layout, services and real food on offer will excite and surprise.

Caltex is not the only firm cashing in on the resurgence in the resource sector. Market & Money’s Jason Stevenson thinks that Aussie mining stocks are back. Read his free report on ‘The Top 10 Mining Stocks in Australia for 2018’ today.


Ryan Clarkson-Ledward,
For Markets & Money

Ryan Clarkson-Ledward is a junior analyst for Markets & Money. Ryan has degrees in both communication and international business. His priority is bringing you the latest price updates on stocks through ASX updates, as well as supporting Sam Volkering with background research. As part of the team at Markets & Money his aim is to provide unbiased and relevant news for readers. Ryan’s work with Sam is designed to provide research that complements Sam’s analysis for small-cap and technology stocks. Together, their objective is to break through all the jargon and give you the hard facts to inform your investment decision-making. Ryan writes for:

Leave a Reply

Your email address will not be published. Required fields are marked *

Markets & Money