Caltex Yet to Fully Recover From 7.86% Share Price Fall

Caltex Australia Limited [ASX:CTX] shares are trading at $30.39 at time of writing, which shows a positive climb of 1.26% from yesterday’s figures.

However, the petroleum company which operates a service station chain, have been unable to bounce back from Tuesday’s plummet of 7.86% from a share price of $33.30.

Interestingly, this drop coincided with the release of Caltex’s half-year financial results up to 30 June 2018.

Depressing half year figures for Caltex

Quite a few losses were made apparent in the half year 2018 report.

According to the company, Convenience Retail sector EBIT was down 14% because of the rising oil prices we saw during the first half of 2018. Another factor may be the ‘ongoing store transitions’ which have taken place across Caltex convenience outlets, following the expanded long-term partnership with Woolworths.

The Fuels & Infrastructure sector showed an underwhelming performance as well. The end of FY18 saw an EBIT of $314 million. Though this shows a 9% increase from the 2017 results, it sits below the guidance range of $315–$335 million.

The weak Caltex Refiner Margin (CRM) for June was deemed the cause of this result — a margin that is calculated using the difference between cost of Caltex product and cost of crude oil needed to make that product. CRM for the first half of 2018 sat at US$10.60 per barrel, which compares unfavourably to the 12 month previous CRM of US$12.36 per barrel.

The upside of these results…

While the results aren’t amazing, the Convenience Retail sector EBIT still managed to exceed the profit guidance of $150–$160 million.

And with the new Woolworths Group Ltd [ASX:WOW] merger, Caltex is now exploring real estate strategies, which involve the possibility of selling up to 25% of their existing freehold site portfolio. This portfolio has an approximate value of $2 billion, and Caltex have retained a 25–50% equity interest on it.

Of course, the long-term nature of these restructurings may be what is unsettling current investors, who tend to expect more decisive modes of action when it comes to company mergers.

Regarding the future, the company believes this real estate strategy ‘…will enable Caltex to benefit from the market value and development gains, and allows evaluation of the benefits of the partnership structure, with a view to further monetisation where value can be demonstrated’.

Looking further ahead for Caltex

Now that the Convenience Retail and Fuels & Infrastructure businesses have separated commercially, Managing Director and CEO Julian Segal believes ‘Caltex is primed for sustainable growth’.

He concludes by stating:

These half-year results demonstrate not only Caltex’s progress on transformation, but our unwavering focus on business growth and our continued track record in good decision making to deliver value to our shareholders’.

The company will hope that these incremental climbs continue with the Caltex share price, so they can get back on their feet.

Regards,

Ryan Clarkson-Ledward,

For Markets and Money

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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:


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