AMPOL LIMITED — Interim / Quarterly Report 2019

Aug 26, 2019

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Caltex Australia Limited
ACN 004 201 307
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2019 Half Year
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HALF YEAR INFORMATION GIVEN TO THE ASX UNDER LISTING RULE 4.2A.3
THE 2019 HALF YEAR FINANCIAL REPORT SHOULD BE READ IN CONJUNCTION WITH THE 2018 FINANCIAL
REPORT.
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CALTEX AUSTRALIA LIMITED
LEVEL 24, 2 MARKET STREET SYDNEY
NSW 2000 AUSTRALIA
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Results for Announcement to the Market

Key Results (Millions of dollars)	Key Results (Millions of dollars)	Half year ended 30 June 2019 2018
Revenue from ordinary activities ▲ 1% Profit from ordinary activities after tax/net profit for the period attributable to members: Historical cost basis ▼59% Replacement cost basis excluding significant items after tax1 ▼54%*		10,309 10,192 155 383 135 296
Dividend		2019 2018
Dividends declared Interim dividend: Amount per security (fully franked)2 Final dividend: Amountper security (fullyfranked)		32c 57c N/A 61c
Record date for determiningentitlement to 2019 interim dividend		10 September 2019
Payment date for the 2019 interim dividend		4 October 2019

Comments update

• Replacement cost of sales operating profit (RCOP) NPAT of $135 million, towards the top end of guidance range.

• The Board has declared a fully franked dividend of 32 cents per share for the first half of 2019, which represents a payout of 59% of the 1H 2019 RCOP NPAT.

• Caltex is focusing on capital discipline and reducing costs across the business, with $100 million per annum cost out program announced today.

• Execution of Caltex’s retail strategy continues, leveraging learnings from our work to date and a review of our company-controlled sites to ensure capital is allocated to deliver maximum value for shareholders.

• To date the review has identified ~500 sites that will deliver strong returns and growth from an enhanced convenience offer and disciplined execution and ~50 sites that have a higher and better alternative use and will be divested.

• The review continues on the remainder of the company retail site network. It will provide a clearer roadmap to deliver earnings growth with appropriate returns, while ensuring we maintain the presence of our ~2,000 site-strong StarCard accepting network.

• Interest bearing liabilities at 30 June 2019 was $2,163 million, including $1,264 million of net borrowings and $899 million of lease liabilities with the adoption of AASB16 for the first time. This compares with $955 million net borrowings at 31 December 2018.

1. Replacement cost of sales operating profit (RCOP) excluding significant items (on a pre- and post-tax basis) is a non-International Financial Reporting Standards (IFRS) measure. It is derived from the statutory profit adjusted for inventory (gains)/losses, as management believes this presents a clearer picture of the Company’s underlying business performance as it is consistent with the basis of reporting commonly used within the global oil industry. This is unaudited. RCOP excludes the unintended impact of the fall or rise in oil and product prices (key external factors). It is calculated by restating the cost of sales using the replacement cost of goods sold rather than the historical cost, including the effect of contract-based revenue lags.

2. There is no Conduit foreign income component distributed in relation to the dividend. There is no Dividend Reinvestment Plan in operation.

3. Revenue from ordinary activities includes revenue and other income.

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Key Performance Indicators

	Half year ended 30 June 2019 2018
Profit before interest and tax ($m) Historical cost basis Replacement cost basis excluding significant items Profit after interest and tax ($m) Historical cost basis Replacement cost basis excluding significant items Inventory gains after tax ($m)	285 568 255 443 155 383 135 296 21 87
Basic earnings per share (cents) Historical cost basis Replacement cost basis excluding significantitems	60.6 146.7 52.6 113.3
Return on equity attributable to members of the parent entity after tax, annualised (%) Historical cost basis1 Replacement cost basis excluding significant items1 Net tangible asset backing pershare ($)2	5 23 4 18 9.93 10.72
Interest bearing liabilities ($m) Net Borrowings Lease Liabilities Interest bearing liabilities Gearing (excluding leases) (%) Gearing (lease adjusted) (%)	1,264 899 2,163 29 1,041 - 1,041 24 41 37

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Caltex Sales Volumes
BL
11
10
9 1.58 1.78 1.73 1.49
1.00 0.95
0.75
8
5.86 5.96 6.03
5.52 5.62 5.69
5.38
7
6
5
4
3
2 2.49 2.56 2.52 2.57 2.46 2.41 2.42
1
0
1H 2016 2H 2016 1H 2017 2H 2017 1H 2018 2H 2018 1H 2019
Convenience Retail Australia Wholesale International
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1. This is a non-IFRS un-audited measure that management and the Board consider key for users of the financial statements.

1. Net tangible asset backing per share is derived by dividing net tangible assets by the number of shares issued. Net tangible assets are net assets attributable to members of Caltex less intangible assets. The weighted average number of ordinary shares used in the calculation of net tangible assets per share was 256 million (1H2018: 261 million).

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2019 Half Year Financial Re ort p

FOR CALTEX AUSTRALIA LIMITED ACN 004 201 307

Contents

Directors’ Report	5
Financial Statements	17

The 2019 Half Year Financial Report for Caltex Australia Limited includes:

• Directors’ Report

• Directors’ Declaration

• Independent Auditor’s Review Report

• Half Year Financial Statements

• Notes to the Half Year Financial Statements for the half year ended 30 June 2019

Caltex Australia Group

For the purposes of this report, the “Caltex Group” refers to:

• Caltex Australia Limited (Caltex), the parent company of the Caltex Group listed on the Australian Securities Exchange (ASX)

• Major operating companies, including Caltex Australia Petroleum Pty Ltd

• Wholly owned entities and other entities that are controlled by the Caltex Group

THE 2019 HALF YEAR FINANCIAL REPORT SHOULD BE READ IN CONJUNCTION WITH THE 2018 FINANCIAL REPORT.

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Directors’ Report

The Board

Introduction

The Board of Caltex Australia Limited presents the 2019 Half Year Directors’ Report and the 2019 Half Year Financial Report for Caltex Australia Limited and its controlled entities (the Caltex Australia Group) for the Half Year ended 30 June 2019. An Independent Review Report from KPMG, Caltex’s external auditor, is also provided.

Board of Directors

The following persons were on the Board of Caltex Australia Limited during the Half Year and up to the date of this report unless stated otherwise:

1. St ev e n Gr e g g – Chairman (Independent, Non-executive Director appointed on 9 October 2015; appointed Chairman from 18 August 2017)

2. J uli a n S e g al – Managing Director & CEO (appointed 1 July 2009)

3. Tr ev or B o ur n e – Independent, Non-executive Director (appointed 2 March 2006, resigned 9 May 2019)

4. Mar k C he ll ew – Independent, Non-executive Director (appointed 2 April 2018)

5. Mel in d a Co nr a d – Independent, Non-executive Director (appointed 1 March 2017)

6. Br uc e Mor g a n – Independent, Non-executive Director (appointed 29 June 2013)

7. Bar b ar a W ar d AM – Independent, Non-executive Director (appointed 1 April 2015)

8. Pe n n y W inn – Independent, Non-executive Director (appointed 1 November 2015)

The only change to the composition of the Caltex Board during the six month period ended 30 June 2019 was the resignation of Trevor Bourne on 9 May 2019.

A biography of each Director is available on the Caltex website at www.caltex.com.au.

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1 2 3 4
5 6 7 8
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Directors’ Report CONTINUED

Review of Operations

Company overview

Caltex is one of Australia’s leading transport fuel suppliers and convenience retailers and has safely and reliably fuelled the needs of Australian motorists and businesses for more than a century. Listed on the Australian Securities Exchange, Caltex’s head office is in Sydney and the Company has approximately 7,300 employees in Australia and New Zealand.

Caltex aims to be the leader in complex supply chains and the evolving convenience retail market, by delivering the fuel and other everyday needs of its diverse customers through its networks.

The principal activities of Caltex during the year were the purchase, supply, refining, distribution and sale of petroleum products and the operation of convenience stores throughout Australia and the North Island of New Zealand under the Gull NZ brand. Caltex also supplies fuel to international customers including to Gull NZ and to SEAOIL in the Philippines (a business in which Caltex holds a 20% equity interest). Caltex also buys and sells refined products on the open market both overseas and locally through its shipping and trading entity, Ampol, based in Singapore. There were no significant changes in Caltex’s principal activities during the half year period ended 30 June 2019.

At Lytton in Brisbane, Caltex manufactures fuels, including LPG, petrol, diesel and jet fuel along with lubricants, greases and other small amounts of fuel oil and speciality products.

The products that Caltex manufactures and imports are marketed and distributed to retail and commercial consumers and are supplied via a network of pipelines, terminals, depots and Company-owned and contracted transport fleets.

Group strategy

Our strategy is to build and monetise capability and scale across the fuels and convenience value chain to maximise shareholder value, enabled by a valuable network of well-placed assets. Caltex controls a hard to replicate, network of retail and distribution assets, remaining focused on delivering integrated value and growth across the value chain.

Over the past five years, Caltex has transformed its strategy from that of a refiner-marketer, to a market-leading integrated transport fuels business in Australia, an emerging player in the Asian region as well as commencing our journey in convenience retail.

We have a clear focus with a strategy that is being executed across the following three areas, designed to deliver near-term sustainable cashflow and growth, while also setting Caltex up for the long-term:

1. Protect: maintain and maximise the Australian fuel base and continue as Australia’s first choice for fuel.

2. Grow: continue the transformation to become a leading convenience retailer and further grow Ampol and the international base.

3. Extend: expansion through adjacencies where Caltex is leveraging its capabilities, asset base and customer relationships.

Caltex will draw on its proven track record of adapting to our environment and meeting the unique needs of its customers in executing its strategy. Caltex will continue to allocate capital between opportunities across these areas in line with its Capital Allocation Framework.

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Caltex Group results 30 June 2019

On an historic cost profit basis, Caltex’s after tax profit was $155 million for the first half of 2019. This compares unfavourably to the $383 million after tax profit for the first half of 2018. The 2019 half year includes crude and product inventory gains of $21 million after tax, compared with crude and product inventory gains of $87 million after tax for the half year to 30 June 2018.

A reconciliation of the underlying result to the statutory result is set out in the following table:

Reconciliation of the underlying result to the statutoryresult	June 2019	June 2018
	$m	$m
	(after tax)	(after tax)
Netprofit attributable to equityholders of theparent entity	155	383
Deduct/add: Significant items(gain)/loss	-	-
Deduct/add: Inventory (gain)/loss	(21)	(87)
RCOP NPAT(excluding significantitems)	135	296

On a RCOP[1] basis, Caltex’s after tax profit excluding significant items was $135 million for the first half of 2019 ($296 million for the first half of 2018).

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Caltex RCOP NPAT
$m
700
600 344
341
500 287 263
400
300
294 296
265 262
200
100 135
0 1H RCOP NPAT
2H RCOP NPAT
2015 2016 2017 2018 2019
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Dividend

The Board has declared an interim fully franked dividend of 32 cents per share for the first half of 2019, in line with the dividend policy pay-out ratio of 50%-70%. This compares to Caltex’s 2018 interim dividend of 57 cents per share, fully franked. The record and payment dates for the interim dividend are referenced on page 2.

1. Replacement cost of sales operating profit (RCOP) excluding significant items (on a pre- and post-tax basis) is a non-International Financial Reporting Standards (IFRS) measure. It is derived from the statutory profit adjusted for inventory (gains)/losses, as management believes this presents a clearer picture of the Company’s underlying business performance as it is consistent with the basis of reporting commonly used within the global oil industry. This is unaudited. RCOP excludes the unintended impact of the fall or rise in oil and product prices (key external factors). It is calculated by restating the cost of sales using the replacement cost of

goods sold rather than the historical cost, including the effect of contract-based revenue lags.

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Directors’ Report CONTINUED

Income statement

For the half year ended 30 June 2019

2019 $m 2018 $m

1. Total revenue1 Share of net profit of entities accounted for using the equity method 2. Total expenses, excluding significant items1 Replacement cost earnings before interest and tax Finance income Finance expenses 3.Net finance costs Income tax expense2 Replacement cost of sales operating profit (RCOP) excluding significant items 4. Inventory gain/(loss) after tax Historical cost net profit after tax Interim dividend per share Final dividend per share Basic earnings per share Replacement cost excluding significant items Historical cost

10,309 10,192 3 2 (10,056) (9,749) 255 443 1 1 (65) (28) (65) (27) (56) (120) 135 296 21 87 155 383 32c 57c N/A 61c 52.6c 113.3c 60.6c 146.7c

Discussion and analysis – Income statement

1. Total revenue

▲ 1%

Total revenue is in line with 1H 2018. Lower sales volumes (1H 2019 9.6 billion litres vs 10.2 billion litres in 1H 2018) have been offset by a lower average Australian dollar during 1H 2019 compared to 1H 2018 which results in higher Australian dollar revenue (1H 2019: average 70.62 US cents vs 1H 2018: average 77.14 US).

2. Total expenses – The increase in historical cost of goods sold is driven by the same components replacement cost basis noted above for fuel revenue. ▲ 3%

1. 2019 includes other expense $6 million (1H18: $6 million other income). There have been no significant items recognised in 2019 (1H18: nil).2. Excludes tax payable on inventory gain of $9 million (1H18: $38 million tax gain) and excludes tax cost on significant items of $nil (1H18: $nil).

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Income statement continued

Fuels & Infrastructure EBIT

RCOP EBIT breakdown[1] $193m

Fuels & Infrastructure EBIT consists of the segment’s earnings on fuel products through the Lytton refinery, other Australian earnings (including earnings on sales to the Convenience Retail segment) and International earnings. Lytton EBIT in 1H 2019 was $1 million, down from $105 million in 1H 2018. The US dollar CRM was lower in 1H 2019 at US$7.50/bbl compared with US$10.06/bbl for 1H 2019. CRM represents the difference between the cost of importing a standard Caltex basket of products to eastern Australia and the cost of importing the crude oil required to make that product basket. The CRM calculation represents the average Singapore refiner margin + product quality premium + crude discount / (premium) + product freight – crude freight – yield loss. Lytton 1H 2019 production volumes were 3.0 billion litres (1H 2018: 3.2 billion litres). 1H 2019 Australian EBIT (excluding Lytton) was $161 million, $24 million down on 1H 2018 and International EBIT was $31 million, $2 million down on 1H2018. Total Fuels & Infrastructure volumes decreased by 6% to 9.6 billion litres in 1H 2019. Australian sales (Convenience Retail and Australian Wholesale) declined 4% to 8.1 billion litres, with Australian wholesale volume (B2B and other supply counterparties) declining 4% to 5.7 billion litres. Total sales volumes to Caltex Convenience Retail have fallen 2% to 2.4 billion litres in 1H 2019. International volumes (Gull, Ampol trading, Lytton exports) decreased by 16% to 1.5 billion litres due to fewer Ampol third party sales.

Convenience Retail EBIT

$85m

Convenience Retail EBIT consists of the segment’s earnings on fuel products and shop products at Caltex convenience stores. Convenience Retail EBIT was down 47% on 1H2018 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. Convenience Retail fuel volumes fell 2% to 2.4BL in 1H2019.

Corporate EBIT ($22m) Corporate operating expenses have decreased by $9 million on 1H2018, due to costs incurred in 1H 2018 associated with Group projects, including the new Woolworths fuel supply agreement and expanded partnership arrangement.

RCOP EBIT excluding significant items

$255m

1. The breakdown of RCOP shown here represents a management reporting view of the breakdown and, therefore, individual components may not reconcile to statutory accounts.

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Directors’ Report

CONTINUED

Discussion and analysis – Income statement continued 3. Net finance costs Net finance costs increased by $38 million compared with 1H 2018. The increased ▲ >100% interest cost is due to the adoption of AASB 16 Leases, unwinding of interest expense on discounted provisions, and is partly offset by lower capitalised interest. 4. Inventory gain after tax There was an inventory gain of $21 million after tax in 1H 2019. Over time $21m revenues will increase/decrease as the price of products changes, this includes impacts from the AUD/USD exchange rate movements. As Caltex holds crude and product inventory the price at which the inventory was purchase will often vary from the price at the time of the revenue, thereby creating an inventory gain or loss.

Business unit performance

Fuels & Infrastructure delivered an EBIT result of $193 million, within the guidance range of $190 - 210 million.

Despite softer fuel demand across most customer segments and a negative $40 million EBIT impact from the repriced EG Group (Woolworths) fuel supply contract, 1H 2019 F&I (Ex Lytton) EBIT of $192 million is down only slightly compared with the previous corresponding period (pcp). This is an excellent result achieved through our focus on optimising earnings across the supply chain in the prevailing market conditions. It demonstrates the competitive strength and resilience of our underlying business.

Total Fuels & Infrastructure fuel sales volumes decreased by 6% to 9.6BL in 1H 2019, due to a 16% decrease in international sales volumes to 1.5BL. Australian sales volumes (which includes Convenience Retail and Australian Wholesale) fell by 4% (0.3BL) to 8.1BL.

Included in the Fuels & Infrastructure 1H 2019 result is an EBIT contribution of $1 million from the Lytton refinery, down from $105 million. This is due to the impact of lower Asian region refiner margins and the previously announced unplanned refinery outages caused by a third-party power disruption. The average 1H 2019 CRM was US$7.50 per barrel, down from the 1H 2018 average of US$10.06 per barrel. Total production was 3.0BL, which is a 7% decrease on 1H 2018 production, with impacts from both the unplanned outages and decision making related to margin conditions.

Convenience Retail delivered an EBIT result of $85 million, in line with the guidance of $75 - 85 million. The 47% decline in Convenience Retail EBIT compared with 1H 2018 is the result of prolonged softness in retail fuel margins, which had an unfavourable impact of $65 million.

Convenience Retail fuel volumes fell 1.6% to 2.4BL in 1H 2019, which is slightly better than the 2.1% decline in total industry retail fuel volumes. Volume in 1H 2019 was impacted by economic weakness in addition to crude oil price timing lags and a more competitive wholesale and retail fuel market.

During 1H 2019, Caltex continued the transition of franchise sites to company operations, a key enabler of the company’s convenience retail strategy. A total of 66 franchise sites were transitioned to company operations during the first half, bringing the number of companyoperated sites to 584, with >99% of the network to be company operated by the end of 2020.

Corporate costs total of $22 million decreased by $9 million on 1H 2018.

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Directors’ Report

CONTINUED

Balance sheet

Balance sheet
as at 30 June 2019	Jun 2019	Dec 2018	Change $m
	$m	$m
1. Working capital	903	822	81
2. Property, plant and equipment	3,724	2,890	834
3. Intangibles	556	554	2
4. Interest bearing liabilities	(2,163)	(955)	(1,208)
5. Other non-current assets and liabilities	95	78	17
Total equity	3,115	3,389	(274)

Discussion and analysis – Balance sheet

1. Working The increase in working capital is primarily driven by higher volume of crude and finished capital product on hand and in transit at 30 June 2019.

• $81m

2. Property, The increase in property, plant and equipment is primarily due to the addition of right of use plant and assets on balance sheet of $867 million. This movement is partly offset by capital expenditure equipment and accruals, including major cyclical maintenance, of $89 million, offset by property plant, and

▲ $834m equipment depreciation of $117 million and disposals of $5 million.

3. Intangibles Intangibles have increased primarily due to software additions of $14 million and an increase ▲ $2m due to foreign currency translation difference of $1 million, which is partly offset by amortisation of $13 million and disposals of $1 million.

4. Interest The increase in interest bearing liabilities is primarily due to the addition of lease liabilities of $899 bearing million. Caltex’s gearing at 30 June 2019 was 28.9%, increasing from 22.0% at 31 December liabilities 2018. On a lease-adjusted basis, gearing at 30 June 2019 was 41.0%, compared with 34.6% at 31 December 2018.

▲ $1,208m

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Current Sources of Funding Debt Maturity Profile
A$m Source
Australian
Medium Term Notes 300 and Asian
Institutional
Bilateral Bank Facilities * 2,347 Global Banks 1,212
625
$2,647m 300
195 140 100 75
AUD equivalent. Includes $400m Inventory Finance 2020 2021 2022 2023 2024 Beyond
Facilities. Bank Facilities contain an ‘evergreen provision’ to 2024
Bilateral Bank Facilities (A$) Medium Term Notes (A$)
facilitate extensions.
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5. Other non- Other non-current assets and liabilities increased due to reclassifications of lease accruals following current the implementation of AASB16. assets and liabilities

• $17m

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Directors’ Report CONTINUED

Cash flows

Cash flows
For the half year ended 30 June 2019	2019	2018	Change $m
	$m	$m
1. Net operating cash inflows	272	140	132
2. Net investing cash outflows	(103)	(205)	102
3. Net financing cash outflows	(177)	55	(232)
Net increase/(decrease)in cash held(i)	(8)	(10)	2

Notes:

(i) Excluding effect of exchange rates on cash and cash equivalents.

Discussion and analysis – Balance sheet

1. Net operating cash inflows Higher net operating cash inflows are driven by lower income tax payments due to ▲ $132m lower historic cost profits before tax.

1. Net operating cash inflows

2. Net investing cash outflows

Net investing cash outflows were lower in 1H 2019, due to higher acquisition outlays in 1H 2018, particularly SeaOil Philippines Inc.

▼ $102m

3. Net financing cash outflows

▲ $232m

The net financing outflow in 1H 2019 was driven by dividend payments of $159 million, the completion of the $260 million share buy-back payment in April 2019 and payment of lease liabilities of $49 million, offset by net proceeds/repayments of borrowings of $291 million.

The cash movement is higher due to increased frequency of debt drawdowns and repayments as a result of a higher level of bank facilities drawn.

Business risks and management

There have been no material changes to the description of Caltex’s business risks and management as included in the Operating and Financial Review included in the Annual Report as at 31 December 2018.

Events subsequent to the end of the period There were no items, transactions or events of a material or unusual nature, that are likely to significantly affect the operations of Caltex, the result of those operations or the state of affairs of the Group that have arisen in the period from 30 June 2019 to the date of this report.

Rounding of amounts

Caltex Australia Limited is an entity to which Australian Securities and Investments Commission Class Order 2016/191 (CO2016/191) applies. Amounts in the 2019 Half Year Directors’ Report and the 2019 Half Year Financial Report have been rounded off to the nearest thousand dollars (unless otherwise stated) in accordance with CO2016/191.

The Directors’ Report is made in accordance with a resolution of the Board of Caltex Australia Limited:

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Steven Gregg Chairman

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Julian Segal Managing Director & CEO

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Lead Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001

To the Directors of Caltex Australia Limited

I declare that, to the best of my knowledge and belief, in relation to the review of Caltex Australia Limited for the half-year ended 30 June 2019 there have been:

• i. no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the review; and

• ii. no contraventions of any applicable code of professional conduct in relation to the review.

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KPMG

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Julian McPherson Partner Sydney

27 August 2019

KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.

Liability limited by a scheme approved under Professional Standards Legislation.

14

Directors’ Declaration

The Board of Caltex Australia Limited has declared that:

• (a) in the directors’ opinion, there are reasonable grounds to believe that Caltex Australia Limited will be able to pay its debts as and when they become due and payable; and

• (b) in the directors’ opinion, the consolidated financial statements for the Caltex Australia Group for the half year ended 30 June 2019, and the notes to the financial statements, are in accordance with the Corporations Act, including:

• (i) section 304 (compliance with Accounting Standards); and

• (ii) section 305 (true and fair view).

The Directors’ Declaration is made in accordance with a resolution of the Board of Caltex Australia Limited.

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Steven Gregg Chairman

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Julian Segal Managing Director & CEO

Sydney, 27 August 2019

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Independent Auditor’s Review Report

To the shareholders of Caltex Australia Limited

Report on the Half-year Financial Report

Conclusion

We have reviewed the accompanying Half-year Financial Report of Caltex Australia Limited.

Based on our review, which is not an audit, we have not become aware of any matter that makes us believe that the Half-year Financial Report of Caltex Australia Limited is not in accordance with the Corporations Act 2001 , including:

• giving a true and fair view of the Group’s financial position as at 30 June 2019 and of its performance for the Half-year ended on that date; and

• complying with Australian Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001 .

The Half-year Financial Report comprises:

• Consolidated balance sheet as at 30 June 2019

• Consolidated income statement, Consolidated statement of comprehensive income, Consolidated statement of changes in equity and Consolidated cash flow statement for the Halfyear ended on that date

• Notes including a summary of significant accounting policies and other explanatory information

• The Directors’ Declaration.

The Group comprises Caltex Australia Limited (the Company) and the entities it controlled at the Half year’s end or from time to time during the Half-year.

Responsibilities of the Directors for the Half-year Financial Report

The Directors of the Company are responsible for:

• the preparation of the Half-year Financial Report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001

• such internal control as the Directors determine is necessary to enable the preparation of the Halfyear Financial Report that is free from material misstatement, whether due to fraud or error.

KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity.

Liability limited by a scheme approved under Professional Standards Legislation.

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Auditor’s responsibility for the review of the Half-year Financial Report

Our responsibility is to express a conclusion on the Half-year Financial Report based on our review. We conducted our review in accordance with Auditing Standard on Review Engagements ASRE 2410 Review of a Financial Report Performed by the Independent Auditor of the Entity , in order to state whether, on the basis of the procedures described, we have become aware of any matter that makes us believe that the Half-year Financial Report is not in accordance with the Corporations Act 2001 including: giving a true and fair view of the Group’s financial position as at 30 June 2019 and its performance for the half-year ended on that date; and complying with Australian Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001 . As auditor of Caltex Australia Limited, ASRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual financial report.

A review of a Half-year Financial Report consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Australian Auditing Standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

In conducting our review, we have complied with the independence requirements of the Corporations Act 2001.

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KPMG

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Julian McPherson

Partner

Sydney

27 August 2019

17

Financial Statements

Contents

Primary statements

Consolidated income statement Consolidated statement of comprehensive income Consolidated balance sheet Consolidated statement of changes in equity Consolidated cash flow statement

Notes to the financial statements A Overview

B Results for the half year

B1 Revenue and other income B2 Costs and expenses B3 Segment reporting B4 Earnings per share B5 Dividends declared or paid

C Capital, funding and risk management

C1 Interest bearing liabilities C2 Fair value of financial assets and liabilities C3 Issued capital

D Group structure

D1 Business combinations D2 Controlled entities D3 Investments accounted for using the equity method

E Other information

E1 Commitments E2 Related party disclosures E3 Net tangible assets per share E4 Events after the reporting date E5 Taxation

18

Consolidated income statement

for the half year ended 30 June 2019

Thousands of dollars Note	30 June 2019 30 June 2018
Revenue B1 Cost of goods sold–historical cost	10,308,664 10,185,566 (9,362,791) (8,994,813)
Gross profit	945,873 1,190,753
Other income B1 Other expense B2 Net foreign exchange losses Selling and distribution expenses General and administration expenses	- 6,156 (6,233) - (346) (8,628) (554,590) (506,811) (101,929) (115,067)
Results from operating activities	282,775 566,403
Finance costs Finance income	(65,380) (27,882) 647 688
Net finance costs B2	(64,733) (27,194)
Share of net profit of entities accounted for using the equity method	2,972 1,968
Profit before income tax expense B3.3 Income taxexpense	221,014 541,177 (64,920) (157,999)
Netprofit	156,094 383,178
Profit attributable to: Equity holders of the parent entity Non-controlling interest	155,391 382,548 703 630
Netprofit	156,094 383,178
Basic and diluted earnings per share: Historical cost – cents per share B4	60.6 146.7

The consolidated income statement for the half year ended 30 June 2019 includes no significant items (1H 2018: nil).

The consolidated income statement is to be read in conjunction with the notes to the financial statements.

19

Consolidated statement of comprehensive income

for the half year ended 30 June 2019

Thousands of dollars	30 June 2019 30 June 2018
Profit for the period Other comprehensive income Items that will not be reclassified to profit or loss: Actuarial (loss)/gain on defined benefit plans Taxon items thatwill not bereclassified to profit or loss	156,094 383,178 1,405 (909) (422) 273
Total items that will not be reclassified to profit or loss	983 (636)
Items that may be reclassified subsequently to profit or loss: Foreign operations – foreign currency translation differences Net change in fair value of net investment hedges Effective portion of changes in fair value of cash flow hedges Net change in fair value of cash flow hedges reclassified to profit or loss Tax on items that may be reclassified subsequently to profit or loss	6,046 24,583 (571) (1,745) 2,456 5,759 (9,926) (5,357) 2,241 (140)
Total items that may be reclassified subsequently to profit or loss	246 23,100
Other comprehensive income for the period, net of income tax	1,229 22,464
Total comprehensive income for theperiod	157,323 405,642
Attributable to: Equity holders of the parent entity Non-controllinginterest	156,620 405,012 703 630
Total comprehensive income for theperiod	157,323 405,642

The consolidated statement of comprehensive income is to be read in conjunction with the notes to the financial statements.

20

Consolidated balance sheet

as at 30 June 2019

Thousands of dollars Note	30 June 2019 31 December 2018
Current assets Cash and cash equivalents Receivables Inventories Other	17,717 6,142 1,178,305 1,184,025 2,069,740 1,616,125 48,902 65,293
Total current assets	3,314,664 2,871,585
Non-current assets Receivables Investments accounted for using the equity method Intangibles Property, plant and equipment Deferred tax assets Employee benefits Other	16,607 8,081 152,870 147,442 556,127 554,219 3,724,218 2,889,863 174,093 184,159 2,574 1,721 70,781 70,553
Total non-current assets	4,697,269 3,856,038
Total assets	8,011,933 6,727,623
Current liabilities
Bank overdraft Payables Interest bearing liabilities C1 Current tax liabilities Employee benefits Provisions	18,795 - 2,227,287 1,827,169 215,616 150,421 43,725 65,708 68,163 85,639 55,071 65,257
Total current liabilities	2,628,657 2,194,194
Non-current liabilities Payables Interest bearing liabilities C1 Employee benefits Provisions	26,783 41,686 1,946,210 810,914 41,590 39,667 253,678 252,098
Total non-current liabilities	2,268,261 1,144,365
Total liabilities	4,896,918 3,338,559
Net assets	3,115,015 3,389,064
Equity Issued capital C3 Treasury stock Reserves Retained earnings	502,626 524,944 (3,098) (2,462) 13,743 11,168 2,587,984 2,842,357
Total parent entity interest Non-controlling interest	3,101,255 3,376,007 13,760 13,057
Total equity	3,115,015 3,389,064

The consolidated balance sheet is to be read in conjunction with the notes to the financial statements.

21

Consolidated statement of changes in equity

for the half year ended 30 June 2019

Thousands of dollars	Issued capital Treasury stock Foreign currency translation reserve Hedging reserve Equity compen- sation reserve Retained earnings Total Non- controlling interest Total equity
Balance at 1 January 2018, as previously reported Adjustment - Adoption of AASB 15 Restated balance at 1 January 2018 Total comprehensive income for the half year Profit for the period Total other comprehensive income/(loss)	524,944 (1,210) (12,912) (1,196) (25,403) 2,610,195 3,094,418 13,483 3,107,901 - - - - - (18,542) (18,542) - (18,542) 524,944 (1,210) (12,912) (1,196) (25,403) 2,591,653 3,075,876 13,483 3,089,359 - - - - - 382,548 382,548 630 383,178 - - 22,838 262 - (636) 22,464 - 22,464
Total comprehensive income/(loss) for the half year Own shares acquired, net of tax Shares vested to employees Expense on equity settled transactions Dividends to shareholders	- - 22,838 262 - 381,912 405,012 630 405,642 - (1,565) - - (745) - (2,310) - (2,310) - 309 - - (309) - - - - - - - - 3,583 - 3,583 - 3,583 - - - - - (159,094) (159,094) - (159,094)
Balance at 30 June 2018	524,944 (2,466) 9,926 (934) (22,874) 2,814,471 3,323,067 14,113 3,337,180
Balance at 1 January 2019 Adjustment – Adoption of AASB 16(i) Restated balance as at 1 January 2019 Total comprehensive income for the half year Profit for the period Total other comprehensive income/(loss)
	524,944 (2,462) 33,094 (1,065) (20,861) 2,842,357 3,376,007 13,057 3,389,064
	- - - - - (13,814) (13,814) - (13,814)
	524,944 (2,462) 33,094 (1,065) (20,861) 2,828,543 3,362,193 13,057 3,375,250
	- - - - - 155,391 155,391 703 156,094
	- - 5,475 (5,229) - 983 1,229 - 1,229
Total comprehensive income/(loss) for the half year Own shares acquired, net of tax Shares vested to employees Expense on equity settled transactions Shares bought back(ii) Dividends to shareholders	- - 5,475 (5,229) - 156,374 156,620 703 157,323
	- (4,293) - - 1,288 - (3,005) - (3,005)
	- 3,657 - - (3,657) - - - -
	- - - - 4,698 - 4,698 - 4,698
	(22,318) - - - - (237,839) (260,157) - (260,157)
	- - - - - (159,094) (159,094) - (159,094)
Balance at 30 June 2019	502,626 (3,098) 38,569 (6,294) (18,532) 2,587,984 3,101,255 13,760 3,115,015

(i) Refer to Note A4 for further information.

(ii) 11,103,572 shares were bought back and cancelled during the half year ended 30 June 2019.

The consolidated statement of changes in equity is to be read in conjunction with the notes to the financial statements.

22

Consolidated cash flow statement

for the half year ended 30 June 2019

Thousands of dollars Note	30 June 2019 30 June 2018
Cash flows from operating activities Receipts from customers Payments to suppliers, employees and governments Shares acquired for vesting employee benefits Dividends and disbursements received Interest received Interest and other finance costs paid Income taxes paid	14,407,539 13,893,625 (14,007,755) (13,508,936) (4,293) (1,565) 1,515 100 643 679 (56,441) (26,591) (69,072) (217,061)
Net operating cash inflows	272,136 140,254
Cash flows from investing activities Purchase of investment in associate Purchase of businesses, net of cash acquired Purchases of property, plant and equipment Major cyclical maintenance Purchases of intangibles Net proceeds from sale of property, plant and equipment	- (98,673) - (1,174) (76,871) (95,816) (12,412) (9,533) (14,409) (18,019) 298 17,255
Net investing cash outflows	(103,394) (205,960)
Cash flows from financing activities Proceeds from borrowings Repayments of borrowings Repayment of lease principal Payments for shares bought back Dividends paid B5	5,427,744 3,774,645 (5,136,860) (3,560,060) (48,843) (109) (260,157) - (159,094) (159,094)
Net financing cash inflows/(outflows)	(177,210) 55,382
Effect of exchange rate changes on cash and cash equivalents Decrease in cash and cash equivalents	1,248 3,546 (8,468) (13,870)
Net decrease in cash and cash equivalents Cash and cash equivalents at the beginning of the period	(7,220) (10,324) 6,142 44,521
Cash and cash equivalents at the end of theperiod	(1,078) 34,197

The consolidated cash flow statement is to be read in conjunction with the notes to the financial statements.

23

Notes to the financial statements

for the half year ended 30 June 2019

A Overview

A1 Reporting entity

Caltex Australia Limited (the Company) is a company limited by shares, incorporated and domiciled in Australia. The shares of Caltex are publicly traded on the Australian Securities Exchange. The 2019 Half Year Financial Report for the six months ended 30 June 2019 comprises the Company and its controlled entities (together referred to as the “Caltex Group”) and the Caltex Group’s interest in associates and jointly controlled entities. The Caltex Group is a for-profit entity and is primarily involved in the purchase, refining, distribution and marketing of petroleum products and the operation of convenience stores.

A2 Basis of preparation

The 2019 Half Year Financial Report is a general purpose financial report which has been prepared in accordance with the requirements of the Corporations Act 2001 and Accounting Standard AASB 134 “Interim Financial Reporting”. This Half Year Financial Report is to be read in conjunction with the 2018 Financial Report and any public announcements by Caltex Australia Limited during the half year in accordance with continuous disclosure obligations under the Corporations Act 2001 and the Australian Securities Exchange (ASX) Listing Rules. The 2019 Half Year Financial Report was approved and authorised for issue by the Board of Directors on 27 August 2019.

This is the first set of the Caltex Group’s financial statements where AASB 16 Leases have been applied (refer to section A4 for further discussion).

The Company is of a kind referred to in ASIC Class Order 2016/191 dated 24 March 2016 and in accordance with that Class Order, amounts in the consolidated financial report and Directors’ Report have been rounded to the nearest thousand dollars, unless otherwise stated.

The 2019 Half Year Financial Report has been prepared on an historical cost basis except for derivative financial instruments that are stated at their fair value and lease liabilities.

Except as described below in note A4, the accounting policies applied in these interim financial statements are consistent with those applied as at and for the year ended 31 December 2018, and have been consistently applied by each entity in the Caltex Group.

A3 Cash flow reclassification

To be consistent with current period disclosure and better reflect the nature of the cashflow, the 30 June 2018 cashflow statement has been restated to include excise of $2,673,889,000 in both “Receipts from customers” and “Payments to suppliers, employees and governments”. There has been no change to net operating cash inflows.

A4 Use of judgement and estimates

The preparation of a consolidated financial report in conformity with AASBs requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. Actual results may differ from these estimates. These accounting policies have been consistently applied by each entity in the Caltex Group. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. These are consistent with those applied as part of the 31 December 2018 Annual Financial Report. The Half Year Financial Report does not include full note disclosures of the type required in an annual financial report.

A5 Changes in significant accounting policies

AASB 16 Leases

Caltex Group initially adopted AASB 16 Leases from 1 January 2019. AASB 16 introduced a single, on-balance sheet accounting model for lessees.

As a result, the Caltex Group, as a lessee, has recognised right-of-use assets representing its rights to use the underlying assets and lease liabilities representing its obligation to make lease payments. Lessor accounting remains similar to previous accounting policies.

The Caltex Group has applied AASB 16 using the modified retrospective approach, under which the cumulative effect of initial application is recognised in retained earnings at 1 January 2019. Accordingly, the comparative information presented for 2018 has not been restated.

The details of the changes in accounting policies are disclosed below.

24

Notes to the financial statements

for the half year ended 30 June 2019 (continued)

A4 Changes in significant accounting policies (continued) AASB 16 Leases (continued)

A4.1 Definition of a lease

At the inception of a contract, the Caltex Group assesses whether a contract is, or contains, a lease based on whether it conveys the right to control the use of an identified asset for a period of time in exchange for consideration. On transition, the Caltex Group applied the practical expedient to grandfather the assessment of which contracts are leases. This means that AASB 16 has been applied only to contracts entered into before 1 January 2019 that were identified as leases in accordance with AASB 117 and Interpretation 4. In addition, AASB 16 has been applied to all contracts entered into or changed on or after 1 January 2019.

At inception or on reassessment of a contract that contains a lease and non-lease component, the Caltex Group allocates the consideration in the contract to each lease and non-lease component on the basis of their relative stand-alone prices. Non-lease components are items that are not related to securing the use of the underlying asset.

A4.2 The Caltex Group as a lessee

The Caltex Group leases many assets including and predominantly related to property leases for service stations, terminals, pipelines and wharves. As a lessee, the Caltex Group recognises a right-of-use asset and a lease liability at the lease commencement date for most leases.

At transition, for leases classified as operating leases under AASB117, the Caltex Group has elected to apply practical expedients in AASB 16 C10:

• The use of a single discount rate to a portfolio of leases with reasonably similar characteristics;

• Not to recognise right-of-use assets and lease liabilities for short-term leases that have a lease term of 12 months or less and leases of low-value assets. The lease payments associated with these leases is recognised as an expense on a straight-line basis over the lease term;

• Exclude initial direct costs in measuring right-of-use assets at the date of initial application;

• The use of hindsight, in determining the lease term, if the contract contains options to extend or terminate the lease.

Lease liabilities were measured at the present value of the remaining lease payments, discounted at the Caltex Group’s incremental borrowing rate as at 1 January 2019. Right-of-use assets were measured at either:

• Their carrying amount as if AASB16 had been applied since the commencement date, discounted using the lessee’s incremental borrowing rate at the date of initial application – the Caltex Group applied this approach to its largest leases where a full history of lease payment data was maintained in corporate records; or

• An amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payment – the Caltex Group applied this approach to all other leases.

The Caltex Group presents right-of-use assets in “Property, plant and equipment”. The Caltex Group presents lease liabilities in “Interest bearing liabilities” in the statement of financial position.

Significant accounting policies

The Caltex Group recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, and subsequently at cost less any accumulated depreciation and impairment losses, and adjusted for certain remeasurements of the lease liability. The right-of-use assets are depreciated to the earlier of the end of the useful life of right-of-use asset or the lease term using the straight-line method. Right-of-use asset depreciation expense is included in the “Selling and distribution expenses" and “General and administration expenses” in the income statement based on the function of associated activities.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the Group’s incremental borrowing rate.

The lease liability is subsequently increased by the interest cost on the lease liability (recognised in “Finance costs” in the income statement) and decreased by lease payments made. It is remeasured when there is a modification in future lease payments arising from a change in an index or rate, a change in the estimate of the amount expected to be payable under a residual value guarantee, or changes in the assessment of whether a purchase or extension option is reasonably certain to be exercised or a termination option is reasonably certain no to be exercised.

When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.

The Caltex Group has applied judgement to determine whether or not it is reasonably certain to exercise an extension option.

25

Notes to the financial statements

for the half year ended 30 June 2019 (continued)

A4 Changes in significant accounting policies (continued) AASB 16 Leases (continued)

A4.3 The Caltex Group as a lessor

In contracts where the Group is a lessor, the Group determines whether the lease is an operating lease or finance lease at inception of the lease. The accounting policies applicable to the Group as a lessor are not different from those under AASB117. However, when the Group is an intermediate lessor the sub-leases are classified with reference to the right-of-use asset arising from the head lease, not with reference to the underlying asset.

The Caltex Group was not required to make any adjustments on transition to AASB16 for leases in which it acts as a lessor. The impact of sub-lease contracts on transition to AASB16 was not material to the Caltex Group.

A4.4 Impacts on financial statements

Impacts on transition

On transition to AASB16, the Caltex Group recognised additional right-of-use assets and additional lease liabilities, recognising the difference in retained earnings. The impact on transition is summarised below:

Thousands of dollars	1 January 2019
Right-of-use assets presented in property, plant and equipment Prepayments Deferred tax asset Lease liabilities Payables Retained earnings	893,783
	(17,079)
	6,192
	(910,040)
	13,330
	13,814

Lease terms range from one to 35 years. The weighted average incremental borrowing rate applied is 5.8%.

Thousands of dollars
Operating lease commitment at 31 December 2018 as disclosed in the Caltex Group’s consolidated financial statements Discounted using the incremental borrowing rate at 1 January 2019 Recognition exemption for leases of low-value assets Recognition exemption for leases with less than 12 months of lease term at transition Other Extension options reasonably certain to be exercised Lease liabilities recognised at 1 January2019	1,210,162
	909,796
	(2,515)
	(11,851)
	(25,215)
	39,825
	910,040

Impacts for the period

As a result of initially applying AASB16, in relation to the leases previously classified as operating leases, the Group recognised $867,309 thousand of right-of-use assets and $899,309 thousand of lease liabilities as at 30 June 2019. The Group has also recognised $61,621 thousand of depreciation charges and $29,290 thousand of interest costs from these leases instead of operating lease expense. For purposes of presentation in the cash flow statement, the lease payments are separated into a principal $48,843 thousand (financing activities) and interest $29,284 thousand (operating) component.

26

Notes to the financial statements

for the half year ended 30 June 2019 (continued)

B Results for the half year

This section highlights the performance of the Caltex Group for the half year, including revenue and other income, costs and expenses, results by operating segment, earnings per share and dividends.

B1 Revenue and other income

Thousands of dollars	30 June 2019 30 June 2018
Revenue Sale of goods Other revenue Rental income Royalties and franchise income Transaction and merchant fees Other	10,180,607 10,052,134 15,054 22,143 33,272 36,164 52,093 51,337 27,638 23,788
Totalother revenue	128,057 133,432
Total revenue	10,308,664 10,185,566
Other income Netgain on sale ofproperty, plant and equipment	- 6,156

Significant items

No significant items were recognised in the half year ended 30 June 2019 or 30 June 2018.

B1.1 Revenue from products and services

B1.1 Revenue fromproducts and services
Thousands of dollars	30 June 2019 30 June 2018
Petrol Diesel Jet Lubricants Specialty and other products Crude Non-fuel income and rebates Other revenue	3,536,465 3,351,221 4,720,078 4,475,280 1,123,423 1,193,344 117,708 120,280 172,157 119,360 110,033 554,881 400,743 237,768 128,057 133,432
	10,308,664 10,185,566

B2 Costs and expenses

B2 Costs and expenses
Thousands of dollars	30 June 2019 30 June 2018
Finance costs Interest expense Finance charges on capitalised leases Unwinding of discount on provisions Less:capitalisedfinance costs	26,539 24,724 29,290 16 9,579 3,362 (28) (220)
Finance costs	65,380 27,882
Finance income	(647) (688)
Net finance costs	64,733 27,194
Depreciation and amortisation: Amortisation of intangibles Depreciation and amortisation (excluding intangibles)	18,220 11,196 111,228 108,890
Right-of-use asset depreciation/Right-of-use asset	61,621 -
Total amortisation and depreciation expense	191,069 120,086
Other expense Net loss on sale ofproperty, plant and equipment	6,233 -

27

Notes to the financial statements

for the half year ended 30 June 2019 (continued)

B Results for the half year (continued)

B3 Segment reporting

B3.1 Segment disclosures

The accounting policies used by the Caltex Group in reporting segments are consistent with those applied as part of the 31 December 2018 Financial Report.

Types of products and services

The following summary describes the operations in each of the Caltex Group's reportable segments:

Convenience Retail

The Convenience Retail segment includes revenues and costs associated with Fuels and Shop offerings at Caltex’s network of stores, including royalties and franchise fees on remaining franchise stores.

Fuels & Infrastructure

The Fuels and Infrastructure segments includes revenues and costs associated with the integrated wholesale fuels and lubricants supply for Caltex, including the Company’s international businesses. This includes Lytton refinery, Supply including Ampol Trading and Shipping, B2B sales, Infrastructure, and the Gull and SEAOIL businesses.

B3.2 Information about reportable segments

	Convenience Retail	Fuels & Infrastructure	Total operating segments
Thousands of dollars	30 June 2019 30 June 2018	30 June 2019 30 June 2018	30 June 2019 30 June 2018
External segment revenue	2,548,491 2,400,087	7,760,173 7,785,479	10,308,664 10,185,566
Inter-segment revenue	- -	1,795,816 1,785,383	1,795,816 1,785,383
Total segment revenue	2,548,491 2,400,087	9,555,989 9,570,862	12,104,480 11,970,949
Replacement Cost of Sales Operating Profit (RCOP) before interest and income tax*	84,592 160,824	193,120 313,558	277,712 474,382
B3.3 Reconciliation of reportable segmentprofit or loss
Thousands of dollars			30 June 2019 30 June 2018
Profit or loss Segment RCOP before interest and income tax, excluding significant items Other expenses			277,712 474,382 (22,265) (30,959)
RCOP before interest and income tax, excluding significant items			255,447 443,423
Inventory gains/(losses)			29,597 124,318
Consolidated historical cost profit before interest and income tax			285,044 567,741
Net financing costs Net profit attributable to non-controlling interest			(64,733) (27,194) 703 630
Consolidated profit before income tax			221,014 541,177

B3.3 Reconciliation of reportable segment profit or loss

• Replacement Cost Operating Profit (RCOP) (on a pre and post tax basis) is a non-International Financial Reporting Standards (IFRS) measure. It is derived from the statutory profit adjusted for inventory (losses)/gains as management believes this presents a clearer picture of the Company’s underlying business performance as it is consistent with the basis of reporting commonly used within the global downstream oil industry. This is un-audited. RCOP excludes the unintended impact of the fall or rise in oil and product prices (key external factors). It is calculated by restating the cost of sales using the replacement cost of goods sold rather than the historical cost, including the effect of contract based revenue lags.

28

Notes to the financial statements

for the half year ended 30 June 2019 (continued)

B Results for the half year (continued)

B4 Earnings per share

Cents per share	30 June 2019 30 June 2018
Net profit attributable to ordinary shareholders of parent RCOP excludingsignificant items	60.6 146.7 52.6 113.3
Weighted average number of shares (thousands)	30 June 2019 30 June 2018
Issued shares as at 1 January	260,811 260,811
Shares bought backand cancelled (refertoNote C3)	(11,104) -
Issued shares as at 30 June	249,707 260,811
Weighted average number of shares as at 30 June	256,265 260,811

RCOP is calculated by adjusting the statutory profit for significant items and inventory gains and losses as follows:

Thousands of dollars	30 June 2019 30 June 2018
Net profit after tax attributable to equity holders of the parent entity Adjust: Significant items gains after tax Adjust: Inventory (gains)/losses aftertax	155,391 382,548 - - (20,718) (87,023)
RCOP excluding significant items after tax	134,673 295,525

The impact of dilutive potential ordinary shares is not material and equates to less than $0.01 per share. Therefore, diluted earnings per share equates to basic earnings per share.

B5 Dividends declared or paid

Dividends recognised in the current year by the Company are:

		Franked/	Cents per	Total amount
	Date of payment	unfranked	share	$’000
2019
Final 2018	5 April 2019	Franked	61	159,094
Total amount				159,094
2018
Interim 2018	11 September 2018	Franked	57	148,663
Final 2017	6April 2018	Franked	61	159,094
Total amount			118	307,757

Subsequent events

Since 30 June 2019, the directors declared the following dividend. The dividend has not been provided for and there are no income tax consequences for the Caltex Group in relation to first half 2019.

10 September 2019

Interim 2019

Franked 32

79,906

29

Notes to the financial statements

for the half year ended 30 June 2019 (continued)

C Capital, funding and risk management

C1 Interest bearing liabilities

1 Interest bearing liabilities
Thousands of dollars	30 June 2019 31 December 2018
Current
Bank facilities Capital market borrowings Lease liabilities	56,000 150,257 - - 159,616 164
	215,616 150,421
Non-current Bank facilities Capital market borrowings Lease liabilities	896,594 510,339 309,923 300,575 739,693 -
	1,946,210 810,914

Interest bearing liabilities are initially recorded at fair value, less transaction costs. Subsequently, interest bearing liabilities are measured at amortised cost, using the effective interest method. Any difference between proceeds received net of transaction costs and the amount payable at maturity is recognised over the term of the borrowing using the effective interest method.

Significant Funding Transactions

During the first half of 2019, the Caltex Group extended the tenor on $1,772 million (AUD equivalent) of its existing bilateral bank facilities and upsized its bank facilities by $400 million.

C2 Fair value of financial assets and liabilities

The Caltex Group’s accounting policies and disclosures may require the measurement of fair values for both financial and nonfinancial assets and liabilities. The Caltex Group has an established framework for fair value measurement. When measuring the fair value of an asset or a liability, the Caltex Group uses market observable data where available.

Fair values are categorised into different levels in a fair value hierarchy based on the following valuation techniques:

• Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.

• Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

• Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

If the inputs used to measure the fair value of an asset or a liability are categorised in different levels of the fair value hierarchy, then the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement.

The fair value of cash, cash equivalents and non-interest-bearing financial assets and liabilities approximates their carrying value due to their short maturity.

Fair values of recognised financial assets and liabilities with their carrying amounts shown in the balance sheet are as follows:

Thousands of dollars		Asset/(Liability)
30 June 2019	Carrying amount	Fair value total Quoted market price (Level 1) Observable inputs (Level 2) Non-market observable inputs (Level 3)
Interest bearing liabilities Bank facilities(i) Capital market borrowings(ii) Lease liabilities(iii) Derivatives Interest rate swaps(iv) Foreign exchange contracts (forwards, swaps and options)(iv) Crude and finished product swap and future contracts (iv)
	(952,594)	(947,900) - (947,900) -
	(309,923)	(346,951) - (346,951) -
	(899,309)	(899,309) - (899,309) -
	85	85 - 85 -
	(7,237)	(7,237) - (7,237) -
	26,014	26,014 19,063 6,951 -
Total	(2,142,964)	(2,175,298) 19,063 (2,194,361) -

30

Notes to the financial statements

for the half year ended 30 June 2019 (continued)

C Capital, funding and risk management (continued)

C2 Fair value of financial assets and liabilities (continued)

Thousands of dollars	Asset/(Liability)
31 December 2018 Carrying amount	Fair value total Quoted market price (Level 1) Observable inputs (Level 2) Non-market observable inputs (Level 3)
Interest bearing liabilities Bank facilities(i) (660,596) Capital market borrowings(ii) (300,575) Lease liabilities(iii) (164) Derivatives Interest rate swaps(iv) (550) Foreign exchange contracts (forwards, swaps and options)(iv) 5,787 Crude and finished product swap and future contracts(iv) 55,983	(657,282) - (657,282) - (304,589) - (304,589) - (161) - (161) - (550) - (550) - 5,787 - 5,787 - 55,983 12,229 43,754 -
Total (900,115)	(900,812) 12,229 (913,041) -

Estimation of fair values

(i) Bank facilities

The fair value of bank facilities is estimated as the present value of future cash flows using the applicable market rate.

(ii) Capital market borrowings

The fair value of capital market borrowings is determined by quoted market prices or dealer quotes for similar instruments.

(iii) Lease liabilities

The fair value of lease liabilities is estimated as the present value of future lease payments using the Caltex Group’s incremental borrowing rate.

(iv) Derivatives

Interest rate swaps

The fair value of interest rate swap contracts is the estimated amount that the Caltex Group would receive or pay to terminate the swap at balance date taking into account current interest rates and credit adjustments.

Foreign exchange contracts (forwards, swaps and options)

The fair value of foreign exchange contracts (forwards and swaps) is calculated by reference to current forward exchange rates for contracts with similar maturity profiles as at reporting date. The fair value of foreign exchange options is determined using standard valuation techniques.

Crude and finished product swap and future contracts

The fair value of crude and product swap contracts is calculated by reference to market prices for contracts with similar maturity profiles at reporting date. The fair value of crude and product futures contracts is determined by quoted market prices.

C3 Issued capital

C3 Issued capital
Thousands of dollars	30 June 2019 31 December 2018
Ordinary shares Shares on issue at beginning of period – fully paid Sharesrepurchasedforcash	524,944 524,944 (22,318) -
Shares on issue at end ofperiod – fully paid	502,626 524,944

In April 2019, the Caltex Group repurchased 11,103,572 shares at a total cost of $260 million as part of the Caltex Group’s capital management program. The capital component of the shares repurchased was $22.3 million and is recognised in Issued Capital. Holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at shareholders’ meetings.

In the event of the winding up of Caltex, ordinary shareholders rank after all creditors and are fully entitled to any proceeds of liquidation.

Caltex grants performance rights to senior executives, see the 2018 Financial Report for further detail. For each right that vests, Caltex intends to purchase shares on-market following vesting.

31

Notes to the financial statements

for the half year ended 30 June 2019 (continued)

D Group structure

D1 Business combinations

2019

There were no business combinations during the half year ended 30 June 2019 or 30 June 2018.

D2 Controlled entities

Details of entities over which control has been gained or lost during the period

2019

On 12 February 2019, the Caltex Group gained control of Ampol Shipping & Logistics Pte. Ltd. There were no other entities over which control was gained or lost during the half year ended 30 June 2019.

2018

There were no entities over which control was gained or lost during the half year ended 30 June 2018.

D3 Investments accounted for using the equity method

3 Investments accounted for using the equity method
Name Country of incorporation	% interest 30 June 2019 31 December 2018
Investments in associates and joint ventures Airport Fuel Services Pty. Limited Australia Australasian Lubricants Manufacturing Company Pty Ltd(i) Australia Cairns Airport Refuelling Service Pty Ltd Australia Geraldton Fuel Company Pty Ltd Australia SEAOIL Philippines Inc. Philippines	40 40 50 50 33.33 33.33 50 50 20 20

(i) Australasian Lubricants Manufacturing Company Pty Ltd ceased joint venture operations on 17 April 2015.

The companies listed in the above table were incorporated in Australia and the Philippines, have a 31 December balance date and are principally concerned with the sale, marketing and/or distribution of fuel products and the operation of convenience stores.

32

Notes to the financial statements

for the half year ended 30 June 2019 (continued)

E Other information

E1 Commitments

1 Commitments
Thousands of dollars	30 June 2019 31 December 2018
Capital expenditure contracted but not provided for in the financial report and payable	40,870 11,970

E2 Related party disclosures

Associates

On 1 March 2018, Caltex Australia Limited acquired a 20% equity interest in SEAOIL Philippines Inc. The strategic partnership with SEAOIL offers Caltex Australia the ability to increase the scale and scope of its Singapore-based fuel sourcing and shipping operations.

In the six months ended 30 June 2019, the Caltex Group sold petroleum products to associates of $264,877,000 (1H 2018: $57,556,000) and received income from associates for rental income of $455,000 (1H 2018: $296,000). As at 30 June 2019, the Caltex Group had sales receivables from associates of $22,693,000.

There were no other material related party disclosures during the half year ended 30 June 2019.

Other arrangements with related parties continue to be in place. For details on these arrangements refer to the 2018 Financial Report.

E3 Net tangible assets per share

Dollars	30 June 2019 31 December 2018
Net tangible assets per share	9.93 10.82

Net tangible assets are net assets attributable to members of Caltex, less intangible assets. The weighted average number of ordinary shares used in the calculation of net tangible assets per share was 256 million (2018: 261 million).

E4 Events after the reporting date

There were no items, transactions or events of a material or unusual nature, that, in the opinion of the Board, are likely to significantly affect the operations of Caltex, the results of those operations or the state of affairs of the Caltex Group that have arisen in the period from 30 June 2019 to the date of this report.

E5 Taxation

At the date of this report, the Australian Taxation Office (ATO) had not finalised its position in relation to the extent to which earnings from the Group’s Singaporean entities would be subject to income tax in Australia. Due to the uncertainty over the ATO’s final position, the Group has estimated and recognised tax liabilities for 2014 to date based on the income tax rate of 30%, being the Australian corporate income tax rate. The Singaporean corporate income tax rate is 17%; however due to some of the Group’s Singaporean entities’ status as Global Trader Companies, specified income of those entities is subject to a lower tax rate. The cumulative tax expense for the differential between the Australian and Singapore tax rates recognised in the Financial Statements from 2014 to 30 June 2019 is $168m. Under an administrative agreement made with the ATO, 50% of the differential between the earnings taxable under the Australian and Singaporean taxation rates for the 2014 to 2018 years has been paid or payable pending resolution of the matter. As a result, as at 30 June 2019 $103m is recognised in current tax payable in relation to this matter. If the outcome of the ATO’s decision is in Caltex’s favour, an amount of income tax expense recognised to date could be written back in future periods. If the tax matter is resolved such that the ATO’s position is sustained, there would be no impact on the Caltex income statement or net assets.