AMPOL LIMITED — Earnings Release 2019

Jun 19, 2019

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ASX Release

20 June 2019

CALTEX RELEASES UNAUDITED PROFIT GUIDANCE FOR HALF YEAR ENDED 30 JUNE 2019

Caltex Australia (ASX:CTX) today announces unaudited profit guidance for the first half of 2019.

1H 2019 Profit Guidance (unaudited)	Half year ending 30 June	Half year ending 30 June
	**2019 ($M) **	2018 ($M)
Fuels & Infrastructure (excluding Lytton) EBIT Lytton EBIT Fuels & Infrastructure (F&I) EBIT Convenience Retail (CR) EBIT	190 - 200 0 - 10 190 - 210 75 - 85*	209 105 314 161
Group RCOP EBIT	240 - 270	443
RCOP NPAT HCOP NPAT	120 - 140 150 - 180	296 383

* Includes an approximate $40m impact from the repricing of the EG Group (Woolworths) fuel supply contract

Key Points

• 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.

• 1H 2019 Replacement Cost Operating Profit (RCOP) NPAT outlook is $120 million to $140 million, which is reasonable in the difficult economic environment.

• F&I (excluding Lytton) EBIT would have improved on the previous corresponding period if not for the ~$40 million negative EBIT impact from the repriced EG Group (Woolworths) fuel supply contract.

• Lytton EBIT in 1H 2019 was significantly impacted by ~US$2/bbl lower external refiner margins and the previously disclosed outages.

• 1H 2019 CR EBIT is expected to be ~50% lower than the previous corresponding period, due to the impact of a significant increase in crude oil prices on industry fuel demand and margins, and competitive dynamics in the retail fuel market.

Julian Segal, Caltex Managing Director and CEO said “Caltex has delivered a fair underlying performance in a very challenging market. 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. Despite the prevailing negative conditions and heightened fuel competition, Caltex has gained market share in the retail market and held market share in wholesale markets by leveraging our fuel supply chain expertise and our national retail network. Our strategy continues to drives earnings from improvements in the supply chain, with a renewed focus on fuel supply and our convenience retail offer. ”

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Market Conditions

1H 2019 has presented extraordinary challenges for the industry. Weaker domestic economic activity has impacted domestic demand, including from the transport, agriculture and construction sectors. Combined with a lower external refiner margin and the high price of crude, this has created difficult market conditions for both sales volumes and margins. Industry sales volumes are down ~2% compared with 1H 2018[i] .

Fuels & Infrastructure (F&I)

F&I is expected to deliver an EBIT result in the range of $190 million to $210 million for 1H 2019, below the $314 million EBIT result in 1H 2018. F&I (ex-Lytton) EBIT is expected to be between $190 million and $200 million in 1H 2019, which is down only slightly compared with 1H 2018 and would have improved on the previous corresponding period if not for ~$40 million negative EBIT impact from the repriced EG Group (Woolworths) fuel supply contract.

Lytton refinery EBIT in 1H 2019 is anticipated to be in the range of zero to $10 million, a decrease from $105 million in 1H 2018, primarily due to lower external refiner margins and the previously disclosed outages. The average Caltex Refiner Margin (CRM) for the first five months of 2019 was US$8.22 per barrel, including a CRM of US$7.82 per barrel in May, compared with an average of US$10.06 per barrel in 1H 2018. Lytton’s 1H 2019 sales from production are expected to be 2.9BL. Guidance on full year total production of around 5.8BL is unchanged, subject to market conditions continuing to favour production at these levels.

Our focus on improving earnings across the supply chain has delivered positive financial returns overall for our F&I business, with lower international third-party sales and volumes than 1H 2018 but better Australian earnings.

Total fuels sales volumes are expected to be approximately 9.7BL in 1H 2019, ~5% lower than 10.2BL in 1H 2018. Total Australian Fuels sales volumes are expected to be 8.2 BL in 1H 2019, ~2% lower than the 8.4BL in 1H 2018, reflecting Caltex maintaining market share in a declining market. International volumes are expected to be ~1.5BL in 1H 2019, ~15% lower than 1.8BL in 1H 2018. Gull volumes and earnings in New Zealand remain strong and are growing ahead of the investment case, with Seaoil contributing as expected.

Convenience Retail (CR)

CR is expected to deliver an EBIT result in the range of $75 million to $85 million in 1H 2019, ~50% lower than the EBIT result of $161 million in 1H 2018.

Margins continue to be impacted by a more competitive landscape in 1H 2019 and retail diesel market conditions also remain challenging. However, petrol margin conditions have improved as a result of a recently observed decline in crude oil price, Caltex’s competitive price position and a refocus on our retail fuel offer. This has led to market share gains through the period, with continued growth in premium fuel volumes.

Total CR fuels sales volumes are expected to be ~2.4BL in 1H 2019, ~1-2% lower than the fuels sales in 1H 2018, compared with a ~2-3% reduction in industry retail volumes. Retail shop earnings are expected to be broadly in line with the prior year.

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Corporate costs, debt position, interest, tax expense and significant items

Corporate costs are forecast to be approximately $25 million for 1H 2019, below the $31 million of corporate costs in 1H 2018.

Net debt is forecast to be approximately $1,200 million at 30 June 2019, an increase from $955 million at 31 December 2018, due to the completion of the $260 million Off-market Buy-back (OMBB).

Interest expense in 1H 2019 is forecast to be $65 million, higher than interest expense of $27 million in 1H 2018 given the inclusion of $30 million of lease interest expenses after adopting AASB16, and a higher debt position post OMBB.

INVESTOR CONTACT

MEDIA CONTACT

Dale Koenders Richard Baker Head of Investor Relations Head of Corporate Communications +61 2 9250 5626 +61 2 9250 5369 +61 457 559 036 +61 417 375 667 dale.koenders@caltex.com.au richard.baker@caltex.com.au

Explanatory Notes

The forecast results for 2019 Half Year are unaudited. Statements made on changes in earnings compared with prior periods are based on the mid-point of relative guidance ranges provided.

The forecast results assume a June period end AUD/USD exchange rate of 70 cents, a June 2019 average CRM of US$5.20/bbl, June average Dated Brent crude oil benchmark price of US$63/bbl, and June average AUD/USD exchange rate of 70 cents. Volatility in crude oil prices and the AUD/USD exchange rate can materially impact the forecast result and cash flow, and the company advises that even small changes in these key externalities during the balance of the month of June 2019 can materially affect both the RCOP and historic results for the full year.

AASB16 is a new accounting standard, applicable from 1 January 2019, that requires companies to bring the majority of operating leases on-balance sheet. While subject to change, the guidance provided today reflects Caltex expectation that the adoption of AASB16 will result in a favourable non-cash benefit to EBIT in 1H 2019 of approximately $15 million, but an unfavourable non-cash impact to NPAT in 1H 2019 of approximately $10 million. Full year guidance was provided in the 2018 Result presentation, including guidance of the allocation of these impacts between segments, and further details will be provided at the Caltex 1H 2019 result on 27 August 2019.

Caltex Australia

A proud and iconic Australian company, Caltex [ASX: CTX] has grown to become the nation’s leading transport fuel supplier, with a network of approximately 2,000 Company-owned or affiliated sites. Caltex aims to be the market leader in complex supply chains and the evolving convenience marketplace by delivering the fuel and other everyday needs of its diverse customers through its networks. Caltex has safely and reliably fuelled the needs of Australian motorists and businesses since 1900. It operates as a refiner, importer and marketer of fuels and lubricants. Follow us on LinkedIn, Twitter and Facebook, and for more information visit www.caltex.com.au

i Based on a comparison of Caltex volumes with Department of Energy – Australian Petroleum Statistics

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