Increased competition and the rising price of crude oil had a negative impact on convenience and petrol station owner Caltex’s first quarter earnings.
The retailer announced that earnings from both its fuels and infrastructure business and its convenience business were down in Q1 on the same period in 2018, which contributed to a net profit of $94 million, a 42.7 per cent drop on the $164 million in net profit it saw last year.
Fuel earnings before interest and tax (EBIT) fell to $109 million, down from $156 million last year, while convenience retailing fell by over 50 per cent to $40 million, compared to an EBIT of $90 million in the three months to March 31, 2018.
“Our result shows the impact of both lower refiner margins and a challenging retail environment this quarter,” said Caltex chief executive and managing director Julian Segal.
“Our businesses’ strengths, including a strong balance sheet and our extensive network, as well as our steady focus on the execution of our strategy provide the foundation for delivery of our strategy in 2019.”
Caltex said it will move ahead with the transition of franchise sites into company-owned operations, with over 70 per cent of the retail network now owned internally. The retailer also noted that agreements are in place for it to operate 99 per cent of sites by 2020, allowing the business to “better standardise and optimise the site’s performance.”
Segal laid out the retailer’s growth plans for the remainder of 2019 for shareholders at its annual general meeting on Thursday, May 9, stating a focus on execution and discipline would assist both facets of its business deliver a stronger result in a challenging retail environment.
“Fuels and infrastructure will continue to grow its earnings through its international business, [and] we will continue to run Australia’s largest transport fuel network safely and reliably,” Segal said.
“Convenience retail is refocusing on our core fuel offer and will improve the in-store experience across our network to ensure we attract and retain more customers in a competitive fuels market.”