Segal confident Caltex Australia can go for growth

Caltex Australia CEO Julian Segal has voiced confidence in growth opportunities in marketing and distribution, despite a slowdown in earnings growth in the quarter ending March 2013.
Segal said Caltex’s diversity across geographic areas and industries provided strength while also offering plenty of areas of growth.
“What’s good about Caltex is the growth is not coming from any one single particular area; that’s why I am so confident that the business is so very robust,” Segal said after the annual shareholder meeting on May 9.
He pointed to opportunities for expansion within the many sectors Caltex sells to, including mining, agriculture, aviation, lubricants and marine. At service stations, site upgrades invariably triggered an increase in sales of higher-margin premium fuels, he said.
Caltex is becoming more reliant on marketing and distribution as it shrinks its refining business.
It is 30% into converting its refinery in Kurnell into an import terminal. The work is due to be completed in the second half of 2014.
While the decision to close the plant has been welcomed by investors, some analysts such as UBS’ Nik Burns have queried whether Caltex can continue the growth it has seen in marketing.
Burns said that was the key challenge for Caltex, citing pressure in the transport and manufacturing sectors and retail fuel discounting.
In the first quarter, earnings edged up 2% to A$190 million (US$175 million). In refining, earnings surged to A$43 million (US$39.6 million) up from a $60 million (US$ 55.3 million) loss, due to higher margins, but Segal said the improvement wouldn’t last.
Caltex’s marketing business has had growth of 11% a year on average over the past five years, but Segal said there were “ups and downs.”
He stated more acquisitions were likely after two deals last year. “These are businesses that we know well, that we can integrate very quickly and we can manage very well, so there’s really very little risk, operational and commercial,” he said.
On the question of Caltex’s amassed A$1 billion (US$921 million) of franking credits, chairman Elizabeth Bryan said the board had decided “this was not the right time” to make extra payments to shareholders to release the credits. Bryan said the board would review the capital management strategy, including the franking credit balance, once the work to convert the Sydney plant was completed.
(May 10, 2013)