After a year-long review, Caltex is selling up to a quarter of its petrol station land and real estate assets, valued at $500 million, but will keep its refineries and pipelines.
The review into its convenience retail real estate concluded that a “passive” sale and leaseback process was “not financially compelling” as the sale proceeds would be largely offset by the costs of leasing.
Instead, Caltex is now considering a sale and leaseback of up to a quarter of its $2 billion in petrol station real estate via a long-term partnership.
“Caltex is now exploring with appropriately experienced partners, a potential strategic real estate partnership,” the company said.
“These discussions include consideration of the sale of a material part (15 to 25 per cent) of the existing freehold site portfolio – currently estimated to have a total value of approximately $2 billion – with Caltex retaining between 25 to 50 per cent equity interest.
“This will enable Caltex to benefit from market value and development gains, and allows evaluation of the benefits of the partnership structure, with a view to further monetisation where value can be demonstrated.”
The company had been reviewing real estate and infrastructure assets within the group such as 417 freehold petrol station sites, 65 fuel depots, 18 terminals and five pipelines.
Caltex chief financial officer Simon Hepworth told Fairfax Media the sale would be representative of its convenience network as a whole.
“It runs the breadth of the network, we’re not targeting any specific geography or part of the network,” Mr Hepworth said.
However, the company noted the sale did not include its fuels and infrastructure assets, such as the Lytton refinery, which it had decided were in shareholders’ best interests to retain.
Shares in Caltex fell 7.87 per cent to $30.68, their lowest level since July.
“There’s uncertainty around what this strategic real estate partnership means, and any uncertainty is concerning for investors.” – Will Culbert from Contact Asset Management
Caltex has slightly reduced its dividend year on year. It will pay out a fully franked interim dividend of 57¢, payable on October 5, down from 60¢ in the first half of 2017.
The share price decline came despite Caltex reporting its strongest first half in six years, with net profit shooting up 45 per cent year-on-year to $383 million in 2018, from $265 million in the first half of 2017.
One shareholder, BKI Investment, said this slumping share price was due to the reduction in the dividend and the lack of details around the potential sale of real estate.
“There’s uncertainty around what this strategic real estate partnership means, and any uncertainty is concerning for investors,” said Will Culbert, a director at Contact Asset Management which operates shareholder BKI Investment.
“The other disappointing thing is that they’ve cut the dividend. While the results were below expectation other parts of the business performed well, it’s a really mixed result.”
Revenues climbed by 33 per cent to $10.2 billion thanks to a slight increase in sales volumes but mainly due to the average oil price increasing by more than third from $US52 a barrel in 2017 to $US71 a barrel for the first half of 2018.
However, a 36 per cent increase in total expenses and the weaker Australian dollar offset some of these gains.
Caltex also recorded a major win in July as it retained its long-term partnership with Woolworths. The petrol company will continue to supply fuel to the major retailer, beating off an attempt by BP to wrest control away from Caltex.
“We have begun our work with Woolworths to co-create a market-leading convenience offering with compelling customer loyalty and redemption arrangements. The long-term wholesale grocery supply agreement allows us to concentrate on the store offering while completing the transition process,” Caltex chief executive Julian Segal said.
Extracted from The Sydney Morning Herald