Caltex shares copped a hiding yesterday after it shocked the market by revealing that its expected June half earnings had been battered by the surge in oil prices and the plunge in the value of the Aussie dollar and that earnings would more than halve overall.
Good long-term news for shareholders in Caltex yesterday, while some short-term pain suggested (and possible negative impact in earnings for the December half year) in an update released at its 2018 19 investor day.
Credit Suisse observes the first quarter trading update has confirmed previous disclosures regarding margin compression in fuel retailing and poor refiner margins. The broker believes retail fuel margins are likely to remain an uncertain factor for the remainder of the first half.
Caltex has guided to first quarter convenience retail earnings (EBIT) of $160-180m. UBS suspects some of the retail margin headwinds will abate in the second half as crude prices drop and US production lifts.
Australian fuel consumption trends signal premium volumes fell -10% in September and total retail volumes across all products fell -6%. Morgan Stanley expects the decline to moderate towards the end of the year and also expects petrol retailers to adjust pricing strategies for premium products, which could have a negative impact on margin.
It appears Caltex Australia's interim update was quite messy and not exactly what Citi analysts had in mind. They are toying with the idea the share price might well remain weak until more clarity is forthcoming at the scheduled Strategy Day later in the year.