Caltex had faced low refiner margins at the start of the year but managed to recover in March and April after its Lytton refinery returned to full capacity following a maintenance shutdown.
The company blamed high oil prices, a revised fuel supply contract with Woolworths and increased competition from rivals such as Viva Energy and BP for its slimmer retail margins. Its main competitor, Viva Energy and Coles Express, recently announced a strategy of dropping prices at the fuel pump to become more competitive.
Oil prices reached a four-year high in October before slumping to about $US50 at Christmas. The price has since rallied again to reach $US70 a barrel.
Caltex has attempted to reduce its exposure to volatile oil prices by expanding its retail convenience arm through the opening of 59 Foodary sites. It expects to launch its first Caltex Woolworths Metro pilot sites – a mini Woolworths store located in a Caltex service station – in the second of half of the year.
The company has bought back around 70 per cent of its franchised retail service stations and expects to control 99 per cent of its sites by 2020. “Having stores in company operation allows us to better standardise and optimise the sites’ performance,” the company said in its trading update.
Despite the disappointing retail results in the first quarter, Caltex chairman Steven Gregg told shareholders at the AGM in Sydney on Thursday he had “full confidence” in the strategy.
“Trading conditions for this business have been challenging of late,” Mr Gregg said. “We are mindful our results have softened over the last year in a tough market.”
“We do believe the growth in non-fuel retail will be substantial going forward, we’re full of confidence.”
Caltex also announced the launch of its first sustainability report, focused on the company’s efforts to shift towards a lower-carbon future and reducing emissions, and confirmed it was examining the potential of electric vehicle charging, which was raised at its last AGM.
“The sites we have are great for charging electric vehicles,” Mr Gregg said. “We are looking at some pilot sites for it later this year.”
Caltex traded 0.4 per cent higher at $25.78 as of 11:41am in Sydney.
Covering energy and policy at Fairfax Media.