Caltex Australia has become another company to cut dividends after a weak result for 2019, a situation compounded by the takeover interest in the company that in turn has stopped the company from finding a replacement to departing CEO, Julian Segal.
The company will pay a fully franked final of 51 cents a share, down from 61 cents a year ago.
That took the full-year payout to $1.12 a share, down from $1.18 in 2018.
Caltex named its chief financial officer Matthew Halliday as interim chief executive to replace Mr. Segal from next month.
Mr. Segal announced his planned retirement last August, but the takeover activity has prevented the company from finding a full-time replacement, so it has been forced to go to a stopgap measure while the two bidders position themselves for a final offer that will be worth $8.8 billion or more.
Britain’s EG Petroleum and Canadian chain, Couche-Tard (Night Owl) are the two bidders who have been going over Caltex’s books ahead of deciding on whether to turn their interest into a firm offer.
So its probably no surprise that no one with any ambition would move to Caltex while this uncertainty was happening.
News of the stopgap CEO move came with the 2019 results which were weak thanks to weakness in national retail fuel and refining margins which drove a big slump in earnings for the year to December.
For 2019, Caltex Australia’s profit on a historical cost basis was down 31% to $382.8 million, slipping from $560 million a year ago despite an improved second half.
Operating profit on a replacement cost of sales basis fell 38% to $344 million, above the midpoint of the downgraded guidance $320 million to $360 million guidance offered in December.
Total fuel and infrastructure fuel sales volumes increased by 3.0% to 21.1 billion litres in 2019, thanks to a 36% increase in international sales volumes.
However, Australian sales volumes, which includes convenience retail and Australian wholesale fell by 3.0% to 16.3 billion litres, with jet volumes down 4.7%.
Convenience retailing was a problem area with earnings down 35% to $201 million, down 35% on 2018 but in line with the lowered December guidance of $190 million to 210 million in earnings.
“Retail fuel volumes in 2019 were impacted by economic weakness in addition to a more competitive retail fuel market,” the company said in its release to the ASX.
Petrol margins strengthened in the second half but diesel margins, which were more heavily affected by a weak economy, remained soft.
Total fuel production was 5.8 billion litres, down 6% from 2018, reflecting impact of the unplanned outages, planned turnaround and inspection shutdowns at the company’s Lytton Refinery in Brisbane, and lower feedstock purchases.
Total revenue was up 3% to $22.3 billion. Caltex shares dipped 0.9% to $34.15. With two possible bids out there that’s no indication of the way the market thinks the company is going.
The bids will be worth more than $34 a share, end of story, or they won’t happen. If that happens then it’s a question of how low will they go?
