Refining Weighs on Caltex Australia Profit

By Ross Kelly

SYDNEY--Caltex Australia Ltd. (CTX.AU) said its refinery business was continuing to come under pressure and weigh on earnings.

Australia's only listed oil refiner and fuel marketer, which is 50%-owned by Chevron Corp. ( CVX ), said it expected net profit in the six months through June of between 155 million Australian dollars (US$146 million) and A$175 million. Caltex posted earnings of A$171 million a year earlier.

The profit figure is on a replacement-cost-of-sales basis, which is preferred by the company and analysts because it strips out the value of Caltex's inventories.

Operating profit at the marketing division is expected to grow by 7-8%, offsetting an anticipated loss at the refinery division of A$65 million-to-A$85 million.

Caltex said it was on track to convert its Kurnell refinery in Sydney into a fuel-import terminal in the fourth quarter. It also owns the Lytton refinery in Brisbane, which it has decided to keep running.

Australia's refinery sector is struggling to compete with large new facilities in places such as India that are flooding the market with cheap fuel. Royal Dutch Shell PLC (RDSA) and BP PLC (BP.LN) have also announced Australian refinery closures or sales in recent years.

Sellers of refined products, however, are benefiting from sustained Australian demand for fuel such as gasoline, as the economy continues to perform well relative to western peers.

Write to Ross Kelly at

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