Caltex Australia has played down the strong turnaround for its refining business that it plans to partially close, after the company posted a big rise in profits.
Net profit on a replacement cost basis soared up by 74 per cent to $197 million for the six months to June 30.
Replacement cost basis excludes the effect of changes in the world oil price, and reflects the company’s underlying performance.
Better margins from its refinery operations, where imported crude oil is turned into fuel, helped drive the result along with marketing of fuel.
The company’s refineries lost more than $200 million last calendar year but actually posted a profit of $2 million in earnings before interest and tax (EBIT) for the first half.
Australia’s largest blue-collar union has accused Caltex of manipulating its finances in order to close its Sydney oil refinery.
Caltex announced in July that it was shutting the refinery at Kurnell by 2014 and shedding between 330 and 600 jobs and spending $650 million to turn the plant into an import terminal.
Australian Workers’ Union (AWU) boss Paul Howes accused Caltex of being cynical manipulators and poor corporate citizens, in light of the strong profit figure and better financial performance of the refining division.
“This company would rather spend $650 million converting Kurnell into an import facility than maintain it as a profitable refinery, employing Australians and contributing to the Australian economy,” Mr Howes said.
The better result for refining was driven factors,including better plant performance, 8.5 per cent higher production and fewer depreciation charges after a $1.5 billion writedowns of their value.
Caltex chief executive Julian Segal defended the planned closure of Kurnell as being related to long-term issues, such as projected over-supply from mega-refineries in Asia.
“We spent 12 months in preparation for our decision and did a very thorough analysis of what needs to be done, what needs to be planned and we feel very confident we will do the right thing,” he said.
“In 100 years one thing that never changed was our ability to procure, supply and deliver good quality transport fuels to the places they were needed, every time they were needed … sometimes we had refineries to help us do this, sometimes we didn’t.”
Caltex sells one third of Australia’s transport fuel and is the country’s largest convenience retailer.
The fuel supplier and distributor’s main profit driver was an eight per cent jump in earnings before interest and tax from its marketing performance to $367 million.
The company’s historical cost basis net profit, or bottom line including oil price changes, was down 38 per cent to $167 million.
Sales of petrol were down, but stronger premium, diesel, jet fuel and lubricants sales contributed to total receipts from customers of $13.5 billion, up from $12.4 billion previously.
Morningstar analyst Peter Warnes said the short-term outlook was favourable for the company as it supplied transport fuel for big corporations including resources companies.
The company declared a fully franked interim dividend of 17 cents per share, in line with the previous first half dividend.
The company’s shares closed down 22 cents at $15.27.
