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2018 Annual Report
Capability
Scale
FUELS & INFRASTRUCTURE
International sourcing and supply
0700 HRS Kurnell Fuel Import Terminal
Caltex Australia Limited
2018 Annual Report
Caltex Supply Chain
Refining
Integrated Australian fuel supply chain
Retail fuel and convenience
Network of Assets
2018 Highlights
Message from the Chairman
and the Managing Director & CEO
Operations Reports
Fuels & Infrastructure
Convenience Retail
Our people taking us further
Our approach to sustainability
2018 Financial Report
2
3
5
7
8
10
12
16
17
21
25
29
33
On the Cover
Ampol is Caltex’s international trading and shipping
team based in Singapore. It sources petroleum
products from global markets and connects their
supply chains with our market leading infrastructure
positions, such as our import terminal in Kurnell,
New South Wales (pictured).
This international supply capability underpins
Caltex’s reputation for reliable supply to wholesale
customers, while ensuring the competitiveness
of our refining and retail operations. Ampol
also manages supply to our first international
acquisition, Gull New Zealand, our partner Seaoil
in the Philippines, in which Caltex holds a 20%
equity interest, and our other international
wholesale customers.
About this Report
This 2018 Annual Report for Caltex Australia
Limited (ACN 004 201 307) has been prepared
as at 26 February 2019. Please note that terms
such as Caltex and Caltex Australia have the same
meaning as Caltex Group, unless the context
requires otherwise. An interactive version of the
Annual Report is available on our website. Visit
www.caltex.com.au to download or view a copy.
Shareholders can request a printed copy of
the Annual Report free of charge by emailing
secretariat@caltex.com.au or writing to the
Company Secretary, Caltex Australia Limited,
Level 24, 2 Market Street, Sydney
NSW 2000 Australia.
Lani Rauschenbach, CSA,
The Foodary, Narangba.
1
No other organisation in
Australia has the capability
and scale of Caltex in the
transport fuels and
convenience retail industries.
Our 6,629 employees, peerless infrastructure and
network assets, industry knowledge and customer
relationships allow us to safely and reliably deliver
the fuels that keep Australia’s economy moving and
the everyday retail products that make life easier.
Caltex has a proud and long history in Australia
and over the last five years has transformed
to focus on our two connected businesses –
Fuels & Infrastructure and Convenience Retail.
The capability and scale of both businesses
underpin our performance and provide the building
blocks for our future. The ongoing international
expansion of Fuels & Infrastructure and development
of our Convenience Retail offer are central to our
growth strategy.
OUR CORE BUSINESSES
FUELS & INFRASTRUCTURE
CONVENIENCE RETAIL
2130 HRS | The Foodary, Narangba
2
CALTEX AUSTRALIA 2018 Annual Report
Our Fuels & Infrastructure
division sources, imports,
refines and distributes the
fuels and lubricants that
meet one-third of Australia’s
transport needs.
3
FUELS & INFRASTRUCTURE
Refining
1830 HRS | Lytton Refinery
Caltex’s Lytton refinery is one of the most efficient
small refineries in Asia, representing a major centre
of technical capability, delivering core earnings and
supporting our broader value chain.
Processing crude and feedstocks sourced and
shipped by Ampol, the refinery produces over
6 billion litres of product each year used by
our customers or sold to wholesalers in the
Queensland market.
6.2BL
of total production in 2018
99%+
of inputs converted
to high value products
4
CALTEX AUSTRALIA 2018 Annual Report
Caltex has a proud and long history
in Australia and continues to
succeed in an increasingly
competitive market.
5
FUELS & INFRASTRUCTURE
Integrated Australian
fuel supply chain
1330 HRS | Brisbane Airport
Caltex owns the largest finished product
import terminals in both Australia and
New Zealand and a broad network of assets
that allow us to safely and reliably store and
distribute high quality petrol, jet fuel, diesel
and lubricants sold in our retail business and
used by business and commercial customers.
With our broad network and our capable
team, we are proud to supply our customers
anywhere they need our products and services
across Australia. The scale of our wholesale
demand base in Australia sustains Ampol’s
competitive advantages and supports
Lytton production.
~80,000
total B2B customers
94
bulk fuel storage and
distribution hubs
300KM+
of fuel pipelines
6
CALTEX AUSTRALIA 2018 Annual Report
Through new formats, new
products, new technology and
new services we are redefining
what convenience means for
Australians in the petrol and
convenience market.
7
CONVENIENCE RETAIL
Retail fuel and convenience
2130 HRS | The Foodary, Narangba
Our network of ~800 Caltex-controlled
sites deliver fuel, lubricants and a range of
convenience products and services to more
than three million Australian consumers and
our 70,000 business customers each week.
Our stable and profitable fuels business and
network of strategically located sites underpin
a strong and evolving retail offer. Through
new formats, new products, new technology
and new services we are redefining what
convenience means for Australians in the
petrol and convenience market.
5,000
Convenience Retail employees
3.0M
Australian customers
each week
~800
Caltex-controlled sites
55
36M+
The Foodary sites
across Australia
StarCard
transactions
Approximately
70,000
B2B customers using StarCard at
~2000 branded and unbranded sites
8
8
CALTEX AUSTRALIA 2018 Annual Report
Philippines
(20% OWNED)
Singapore
Network of Assets
We control a hard to replicate,
privileged network of retail and
distribution assets. Our strong
network of assets provides a
platform for growth.
CALTEX AUSTRALIA 2018 Annual Report 9
Australia
New Zealand
(100% OWNED)
Fuels & Infrastructure network (New Zealand)
Retail network
Fuels & Infrastructure network (Philippines)
Fuels & Infrastructure network (Australia)
10
CALTEX AUSTRALIA 2018 Annual Report
2018
Highlights
Caltex made significant progress
executing the Fuels & Infrastructure
and Convenience Retail strategies,
setting the company up for
sustainable growth.
$558M
RCOP NPAT
Approximately
$260M
Off-market Buy-back
6.2BL
produced at
Lytton refinery
182
franchise sites transitioned
to company ownership
Replacement cost of sales operating profit
(RCOP) ($ million)
Earnings per share – RCOP (cents per share)
(excl. significant items)
628
638
493
524
558
332
233
199
238
214
183
123
13
14
15
16
17
18
Year
13
14
15
16
17
18
Year
NPAT of $558 million on a replacement cost of sales operating
profit (RCOP) basis, down 12% on 2017.
11
Over the last five years we have nearly
doubled EPS, maintained our position as
the market leader in Australian transport
fuels, progressed our retail strategy and
established our international footprint.
20.4BL
of transport fuels sold
55
The Foodary retail stores
across Australia (end 2018)
7%
on 2017
32
opened in 2018
Shareholder returns
(cents per share)
International volumes
(billion litres)
100*
117
121
70
102
100*
118
14
15
16
17
18
Year
* Off-market Buy-back
3.51
2.53
1.75
0.61
N/A
14
15
16
17
18
Year
12
Message from
the Chairman and the
Managing Director & CEO
Dear shareholders,
In 2018, Caltex made significant progress executing
the Fuels & Infrastructure and Convenience Retail
strategies, setting the company up for sustainable
growth over 2019-2024, and for long-term success.
It was a year of ongoing transformation and RCOP
NPAT was down slightly on 2017.
There were many highlights from the last 12 months,
including the ongoing expansion of our international
business, solid growth in Australian wholesale sales
volumes, the retention of our fuel supply contract
with Woolworths, the implementation of the loyalty
and rewards aspects of our broader Woolworths
partnership and the continued roll-out of our The
Foodary retail format, which stood at 55 stores by
the end of 2018.
We also announced an Off-market Buy-back of
approximately $260 million which we believe will
benefit all shareholders.
The foundations for long-term success
On 1 January 2018 we commenced the reporting
of our earnings under two core businesses –
Fuels & Infrastructure and Convenience Retail.
For shareholders, this separation allows more
transparency of the value and opportunities that
exist in both businesses. From a management
and governance perspective, it will ensure
our operations are run optimally with clear
accountabilities and key performance indicators
appropriate to grow each business.
Replacement cost of sales
operating profit (RCOP) of
$558M
down 12% on our result in 2017
Safety performance
Safety is of paramount importance to the Board,
executive and all who work at Caltex. Our
safety performance underpins the engagement
and productivity of our workforce and our
commitment to our customers.
In Fuels & Infrastructure, the business which
manages our most hazardous operations, the
measures for Total Recordable Injury Frequency
Rate (TRIFR) and Days Away From Work Injury
Frequency Rate (DAFWIFR) improved this year;
and our measure for contractor days away from
work was the best result we’ve had in our history.
In Convenience Retail, outcomes for TRIFR
and DAFWIFR increased slightly as we began
to embed Caltex’s high standards for injury
reporting and proactive care to transitioned
franchise sites.
In 2019, we will aim to improve Convenience
Retail safety performance by implementing
programs that reinforce safe work practices and
embed the right safety behaviours. This includes
the introduction of safe work practice reviews
and observations, leadership programs focussed
on cultural and behavioural change and the
implementation of audits to all transition stores to
ensure all of Caltex’s stores have the appropriate
safety resources and standards in place.
Strong financial and operational
performance
On a historic cost profit basis, Caltex’s after-
tax profit was $560 million in 2018. This result
was down approximately 9% on our 2017 result
of $619 million after tax. Under our preferred
method of reporting, replacement cost of sales
operating profit (RCOP), we achieved a NPAT
of $558 million, which is above our 2018 profit
guidance and down 12% on our result in 2017.
Fuels & Infrastructure again performed strongly.
Despite the impact of lower regional refining
margins and an unplanned outage at our Lytton
refinery, the business achieved an EBIT outcome
in line with guidance of $570 million. Highlights
included strong growth in our international
business and the ongoing extraction of additional
value from our integrated supply chain.
Excluding Lytton refinery earnings, Fuels &
Infrastructure’s EBIT increased by 21% on
2017. Total Australian fuels sales volumes were
16.9 billion litres, which is 2% higher than the
16.6 billion litres of sales achieved in 2017.
Wholesale fuel volumes in Australia, excluding
Woolworths, were up 10%; an exceptional result.
CALTEX AUSTRALIA 2018 Annual Report
The Foodary, Narangba
Small image: Managing Director & CEO Julian Segal
(on the left) and Chairman Steven Gregg.
13
Fuels & Infrastructure continues to leverage its
integrated supply chain to protect and grow its
wholesale fuel volumes and earnings.
Our Convenience Retail business delivered an
EBIT result of $307 million, which is above the top
end of guidance, although approximately 8% lower
than the equivalent result in 2017. The overall
result was impacted by rising crude and product
prices through most of 2018, which impacted
both volumes and margin, as well as by the
impact of ongoing site transition from franchise
operations. Total Convenience Retail fuels sales
volumes were 4.9 billion litres, which is 4% less
than the 5.1 billion litres of fuels sales in 2017 and
in line with change in the total market.
Our Convenience Retail team has made great
progress in 2018, finishing the year with positive
momentum ready for 2019 – a year of execution.
Developing our growth opportunities
In 2018 we progressed the growth opportunities
in international fuel sourcing and supply and in
Australian convenience retail.
Our position as the leading transport fuels
company in Australia allowed us to develop and
expand Ampol as our international sourcing
and supply organisation, based in Singapore.
Having established this position, we are now
leveraging the capability we have across Fuels
& Infrastructure as a platform for growth.
2018 was the first full year of operations for our
first international investment – Gull New Zealand
– and we finalised the acquisition of a 20% equity
interest in leading independent fuel operator,
Seaoil in the Philippines.
We are already delivering benefits from this growth
strategy. International supply volumes in 2018 were
3.5 billion litres, an increase of 39% on 2017 through
supply to Gull, Seaoil and other international
customers. Each of these businesses represent
an attractive growth platform in their respective
markets which we will support to realise the full
value of these investments in the years ahead.
In Convenience Retail, we have continued to
develop our operations to take advantage of the
clear growth available in this market.
In February we announced the decision to
transition the remaining franchisee retail sites to
company operations by the end of 2020, and by
the end of 2018 we have transitioned almost 200
stores. This was an important strategic decision
which will accelerate change in our retail offer and
which underpins our plans to deliver an earnings
uplift in this business.
We also further developed our convenience retail
offer. From concept to the first store in 2017, we
were pleased with the milestone of our 50th The
Foodary this year. We also built-out exciting new
formats with quick service restaurant partners such
as Boost Juice and Guzman y Gomez.
14
CALTEX AUSTRALIA 2018 Annual Report
Message from the Chairman
and the Managing Director & CEO
CONTINUED
182
retail sites transitioned
to company ownership
in 2018
The most significant step in our retail strategy so
far – the strategic partnership with Woolworths
– also began this year. The September launch of
loyalty and rewards, which extends fuel discounts
and allows customers to earn and ultimately redeem
Woolworths Rewards points at our stores, will
provide customers with more reasons to choose
Caltex. The team has also made significant progress
on the new co-branded convenience retail offering
using the Caltex fuel brand and the Woolworths
Metro retail brand, which will be rolled out in 2019.
Our people strategy continues to deliver
Successful and transformative change can only be
achieved with a workforce of diverse and highly-
capable employees. In 2018, we made further good
progress with our people strategy, launching our
new employment value proposition and advancing
our diversity and inclusion goals.
CEO Julian Segal became a Pay Equity Ambassador
for the Workplace Gender Equality Agency
(WGEA), promoting our commitment to an
inclusive workplace through equal access to career
opportunities, development and pay equity.
A detailed gender pay audit was also conducted to
identify any gender bias in our salary and short-term
incentive reviews. The audit found no gender bias
in salary reviews and incentive payments; and a pay
difference of just 1% in favour of males in like-for-
like roles, which we still aim to improve.
In October we announced the retirement of
Simon Hepworth as Chief Financial Officer (CFO).
Simon commenced his career with Caltex in 1996
and has undertaken the role of CFO since 2001.
The Board thanks Simon for his long service,
his unwavering focus on delivering shareholder
value and his outstanding contribution to the
transformation of Caltex.
Mick Donnelly, Shift Manager, Lytton Refinery.
Wade Clucas, Area Operator, Lytton Refinery.
15
In 2019, a key part of this is leveraging the
emerging opportunities of the Woolworths
partnership, including piloting our first Caltex
Woolworths Metro store.
At a corporate level, we made the decision to
increase our dividend payout to between 50%
and 70% and remain committed to conducting
our operations with capital discipline, so that we
can support the highest possible returns to our
shareholders and meet our TSR objectives.
We also announced an Off-market Buy-back of
approximately $260 million, which is consistent
with our previously articulated capital allocation
framework. We believe this Buy-back will benefit
all shareholders and it demonstrates our progress
in transitioning the business to one that generates
more reliable cash flows. Including this Buy-back,
Caltex has returned over $1.6 billion in capital to
shareholders since 2016, while maintaining a return
on capital employed of around 20%.
On behalf of Caltex’s Board and management,
we sincerely thank our employees and business
partners and you, our shareholders, for continued
support of our company.
We look forward to updating you in 2019.
Steven Gregg
Chairman
Julian Segal
Managing Director & CEO
Sustainability reporting
As a Board we recognise that environmental, social
and governance (ESG) issues are significant to our
investors and other stakeholders. For this reason,
we will soon launch our inaugural Sustainability
Report, capturing our performance on our key
sustainability issues in 2018.
Many of these ESG issues have previously been
addressed through our OHS & Environmental Risk
Committee and through targeted management,
but our Sustainability Report and broader program
will provide greater transparency about our
efforts to address these issues. It will also provide
benchmarking against best practice, identifying gaps
in our performance and our targets for the future.
A summary of our 2018 Sustainability Report is
provided on pages 28-31 of this Annual Report and
the full report will be made available on our website
in March 2019.
Positioned to create more value
for shareholders
Over the last five years we have nearly doubled
EPS, maintained our position as the market leader
in Australian transport fuels and established our
international footprint to become an emerging
participant outside Australia. The Board and
management team believe that the transformation
of Caltex will create more value for shareholders
over the coming years.
In Fuels & Infrastructure, we have a business that
has been at the heart of our transformation and
offers steady earnings, strong cash flows and
growth internationally. In Convenience Retail, we
have a business which is primed for growth. It
enjoys a stable earnings base from its core fuels
offer and, with the expansion of capability in the
retail shop operations, it will provide sales and
margin uplift over time.
We have several specific priorities that we
will deliver for shareholders in 2019. Fuels &
Infrastructure will continue to grow its earnings
through its international business; we will continue
to run Australia’s largest transport fuel network
safely and reliably; and we will look to improve
margin throughout the supply chain.
Convenience Retail is focused on growing stable
profits in a more competitive fuels market, while
further developing the capabilities and formats
required to capture the significant opportunity
we have. The petrol and convenience sector is
currently valued at over $8 billion in Australia
but represents only a small subset of the broader
convenience market.
16
CALTEX AUSTRALIA 2018 Annual Report
20.4BL
Total fuel sales
LARGEST
Australian fuel
importer
20
Sourced from
20 countries
13
Supplied and sold volume
to Caltex and customer
operations in 13 countries
~80,000
total B2B customers, including
~1,500 large commercial/
industrial customers
Lytton Refinery.
Small image: Kay Tumataroa,
Operator, Lubricants,
Lytton Refinery.
17
OPERATIONS REPORTS
Fuels &
Infrastructure
With capability and scale across the
transport fuels supply chain, we have
secured our position as the market
leader in Australia and become an
emerging player in the Asian region.
For more than 118 years we have safely and reliably
supplied high quality fuels and lubricants to our
diverse customer base. Our capability in product
sourcing, our peerless infrastructure and our
network assets, coupled with our strong customer
relationships, allow us to run an integrated business
and drive value from international sourcing through
to the wholesale supply of fuels and lubricants.
In a changing and ever-competitive market, Fuels
& Infrastructure has transitioned successfully over
the last five years from a refiner to create a strong
platform for both domestic and international
growth. In 2018 we continued to strengthen these
foundations, including key achievements such as the
retention of our longstanding Woolworths wholesale
fuel supply agreement for another 15 years, the
execution of our partnership with Seaoil in the
Philippines and the continued growth of volumes
sourced and supplied by our Ampol team. We also
continued to leverage our industry knowledge
and strong relationships to continue to build our
wholesale fuel supply volumes.
Strong safety performance
Our long history of strong safety performance
underpins our commitment to customers and
employees. In 2018, Fuels & Infrastructure’s safety
performance improved on last year, reflecting our
commitment to safe and reliable operations. Our
high standards for our safety management systems
are brought to life by our leadership team and
safety resources located across our business, who
work day-to-day with our operational teams and
customers to help them stay safe. Our focus on
leadership in the field this year translated into fewer
recordable injuries and days away from work for our
employees and a reduction in spills.
Strong growth in international sourcing and
supply operations
Over the last five years we have focused on
growing our international fuel sourcing and
supply capabilities through our Ampol business
in Singapore. Ampol was established in 2013 to
source crude and finished products to meet Caltex
requirements, leveraging our leading infrastructure
positions, such as the Kurnell fuel import terminal in
New South Wales, and optimising our supply chain
around our refinery in Lytton, Queensland.
18
18
CALTEX AUSTRALIA 2018 Annual Report
Case Study
Our heritage
of capability
The iconic Golden Fleece company
was born from a Melbourne shipping
and import/export business
established in 1895 by Harold
Crofton Sleigh.
When Sleigh imported Californian ‘motor spirit’ to
Australia in 1913, he marketed it as Golden Fleece
and continued to do so until 1981 when the brand
was acquired by Caltex.
Golden Fleece went on to become a household name
in Australia and a brand that evokes fond memories
for many Australians today. The company’s
presence was evident across most aspects of
the developing Australian lifestyle and economy
– agriculture, defence, shipping, petrol – and had
a major presence at national and local events.
The proud Australian company undertook complex
marketing and promotional activities and was at
the forefront of the developing local petroleum
industry, including as a pioneer of single branded
service stations. From the first tanker owned by
an Australian petroleum company, to the largest
restaurant chain in the country at its height,
Golden Fleece was ahead of its time and the
Merino ram became a comforting symbol on
the road for the everyday motorist.
In September 2018, Caltex acquired a
468-piece collection of Golden Fleece
memorabilia from Paul Lukes and Clare
Gordon, avid Golden Fleece collectors in
Sydney. The collection includes a 1948
Fargo truck which delivered petrol in
New South Wales until the 1960s.
The collection is a tribute to a significant
part of Caltex’s history and the history
of the petroleum industry in Australia.
Image: 1948 Golden Fleece
Fargo truck which delivered
petrol in New South Wales
until the 1960s.
Throughout this time, Ampol has grown
significantly and now handles over 3 billion litres
of international volumes each year. Our scale in
key Asian markets allows Ampol to capture value
by sourcing product directly, and as the largest
importer into Australia, with growing supply
volumes to other markets around the world, Ampol
is a strategic customer for virtually every export-
focused refiner in Asia and globally.
This trading and shipping expertise has been built
from scratch using the broad base of industry
knowledge in Singapore and across Caltex. This
homegrown capability is evidence of the transition
strategy that has been successfully executed since
the closure of the Kurnell refinery in 2014 and
of Caltex’s ability to transform to deliver growth.
Caltex is now the largest importer of fuel products
into Australia and the capabilities of Ampol and
from across Fuels & Infrastructure provide a
platform for international growth. Our investments
in Gull New Zealand and in Seaoil in the
Philippines, which have both performed strongly
in 2018, are the first examples of this strategy.
Lytton refinery continues to perform well
Our Lytton team continues to produce around
35% of the fuel sold by Caltex and represents
a major centre of technical expertise critical to
deliver core earnings.
While earnings and volumes through Lytton were
down in 2018, impacted by a lower Caltex Refiner
Margin and an unplanned outage in October,
Lytton’s operating performance continues to
be strong. Our focus on reliable and efficient
operations and high value products, plus
optimisation across our Fuels & Infrastructure
business, has allowed us to continue to produce
at record levels over recent years and with
reduced earnings volatility. This has helped
transform Lytton into a solid driver of earnings
and an important part of our value chain.
In 2018 we commenced execution of our
renewed Lytton turnaround and inspection (T&I)
strategy replacing large, site-wide, multi-year
events with annual events of reduced scale. This
approach will smooth cash flow impacts and
reduce safety, execution and margin risks. The
CALTEX AUSTRALIA 2018 Annual Report 19
We are delighted with the performance of our
acquisition of Gull, a challenger brand in the North
Island of New Zealand. In 2018, Gull has grown
earnings and fuel volumes, continuing to grow its
network and customer base.
Our strategic partnership with Seaoil, an independent
fuel company in the Philippines, also commenced in
2018, with Ampol now supplying wholesale fuel to
Seaoil operations and Caltex holding a 20% equity
interest in the business. Our investment in Seaoil
has performed strongly in 2018. The Philippines
is a fast growing, deregulated and short market
and the partnership provides an opportunity to
transfer capability from Caltex’s existing strengths
in managing complex supply chains.
These investments provide a platform for growth,
giving us access to fast growing assets and allowing
us to capitalise on synergies from supply chain
integration and to further capture value through
growth in fuel supply volumes.
Focused on execution in 2019
Fuels & Infrastructure is a strong and efficient
business that continues to deliver strong cash flow
and earnings for Caltex. In 2019 we will continue
to run our business safely, reliably and competitively
to deliver continued earnings growth.
The focus for Fuels & Infrastructure will be on further
optimising the performance of Lytton, growing
Australian wholesale fuel volumes above market
growth rates, extracting further benefits from our
international investments and increasing international
supply volumes.
Stuart Wharton,
Head Operator, Lytton Refinery.
Michael Mason, Driver, Larissa Cortez Bran, Terminal Manager
and Rob McIlwain, Driver; Lytton Terminal.
activity in 2018 delivered successful outcomes
across all key metrics, including on safety, quality,
schedule compliance and cost.
We are committed to continuous improvement in
the operation of Lytton and have also made modest
investments, such as modifications to crude unit
pre-heat and distillation capacity, to improve plant
utilisation, throughput and margin capture.
Leveraging our advantaged infrastructure
and improving wholesale customer volumes
and relationships
The heart of our business is the scale enabled
through our strong demand base in Australia.
The Australian economy is, and will remain, heavily
dependent on transport fuels for mining, shipping,
transport, agriculture and industrial purposes.
In 2018 we continued to leverage the strength
and scale of our integrated network to drive
earnings value growth through the safe and reliable
supply of fuel to Caltex-owned retail sites and our
B2B customers.
Our strategic focus remains on maximising the value
from our infrastructure position, and our Kurnell
terminal – the largest product import terminal in
Australia – is just one of our advantaged distribution
assets in New South Wales, which is Australia’s
largest state for fuel imports.
In 2018 we successfully defended and grew domestic
business and commercial volumes by steadfastly
defending our market position through the strength
of our assets and through our industry knowledge
and relationships. Overall, wholesale fuel volumes
increased by approximately 4% to 12.1 billion litres.
Excluding supply to Woolworths, our wholesale
fuel volumes increased by 10%, which is above
market growth and was achieved through strong
performance in diesel and jet fuel.
The key highlight was the retention of the
Woolworths fuel supply contract which was renewed
for a further 15 years. Securing this fuel volume will
allow us to make the right long-term decisions to
further optimise our domestic supply chain.
By combining our supply chain capability in Fuels
& Infrastructure with our strong Convenience Retail
network, we achieve scale, volumes and brand
credibility; which underpins our leading fuel card
offer, StarCard. We have longstanding and trusted
relationships with our broad base of end customers
across major Australian industries and we’re known
for our track record of supplying high quality fuel
safely and reliably combined with local support.
Longer term the Australian business and commercial
customer markets are less prone to disruption from
emerging alternate transport solutions given the
dominance of heavy vehicles in key sectors. We will
continue to grow our sales volumes, and we believe
that commercial diesel and aviation markets are both
expected to see growth over the medium term.
International expansion is enabling growth
In 2018 we focused on expanding our network and
supply chain internationally to enable future growth,
leveraging our scale and capability foundation.
20
CALTEX AUSTRALIA 2018 Annual Report
4.9BL
Total fuel sales
182
franchise sites transitioned
to company operations
55
The Foodary retail stores,
32 opened in 2018
6.7ML
sold through new
FuelPay app
The Foodary, Altona North.
Small image: Hazma Butt,
CSA, Alexandria store.
21
OPERATIONS REPORTS
Convenience
Retail
2018 was a landmark year for the
Convenience Retail business as we
established the strategic foundations
that provide a strong base for future
growth. Supported by a stable and
profitable fuels business, each pillar
of our transformation is based around
making life easier for our customers
and team members – this is what the
essence of convenience means to us.
The petrol and convenience markets are highly
competitive and growing. Operating in a relatively
underdeveloped market in Australia, coupled
with changing customer expectations and an
ever-increasing digitally-enabled world, the
opportunity for the Convenience Retail business
to grow is significant. The petrol and convenience
sector is currently valued at over $8 billion in
Australia but represents only a small subset of the
broader convenience market.
Moreover, we have put the foundations in place
that will drive our future success – in 2018 we
have defined our core retail formats, invested in
IT to deliver unrivalled customer service, taken
steps to deliver consistent experiences across
our network with the transition from franchise
to company-owned sites and progressed our
strategic partnership with Woolworths, which
will be an important part of our future. We head
into 2019 with momentum and are focused on
executing our growth strategy.
Building a safe and customer-focused
retail culture
In 2018, Convenience Retail saw an increase
in reported safety incidents as the business
transformation led to greater focus on the
operations of our new company operated
stores. Our commitment is to continue to focus
on transition processes and targeted training
programs to improve this result and the safety of
our almost 5,000 Convenience Retail employees.
Leading the fuel market
Fluctuating crude oil prices continued to challenge
the retail fuel market in 2018. High board prices
hit and this had an impact on demand across
the market. Total Convenience Retail fuels sales
volumes were 4.9BL in 2018, 4% lower than the
5.1BL of fuels sales in 2017 – reflecting total
market volume weakness.
22
CALTEX AUSTRALIA 2018 Annual Report
Case Study
Making safety
personal
At the beginning of 2018, our Health, Safety and
Wellbeing Team researched different mechanisms
to ensure our team members are always thinking
and acting safely. This led to the design and
roll-out of our ‘Why I Stay Safe’ initiative. The
initiative sees every Caltex team member wearing
their own safety vest which has a clear photo
pocket for team members to add a photo of their
personal reason for staying safe.
Pictured is Shane Werner,
our Store Manager at The Foodary
in Kippa-Ring, Queensland. In
his vest, he has a picture of his
14-year-old daughter, Mia, and
his 11-year-old son, Noah, at their
local beach on Bribie Island.
“The safety vest is a great way of making safety
personal and reminding us each and every day why
we need to think and work safely so we can get
home to our families,” said Shane. “When I put the
vest on and see Mia and Noah, it’s a nice reminder
of why I love going home every day.”
In 2019, we’ll be running promotional ‘Why I Stay
Safe’ campaigns, to reward our team members for
keeping safety top of mind at all times.
Image: Shane Werner, Store
Manager, The Foodary, Kippa Ring,
Queensland. In his ‘Why I Stay Safe’
vest is a picture of his 14-year-old
daughter, Mia, and his 11-year-old
son, Noah, at their local beach on
Bribie Island.
Caltex has unique levers in place to maintain a
market leading position in retail fuel. This includes
our StarCard business solution, our partnership
with Woolworths which drives customer value
and loyalty through Woolworths Rewards, the
ongoing integration of technology to improve the
customer experience and our new retail formats.
On top of this, the integration with our Fuels &
Infrastructure business, the largest importer of
fuel in Australia, is critical; with the scale of these
wholesale operations a competitive advantage.
While the outlook for volume in 2019 is flat, we
are confident we will benefit from our unique
strengths and network.
Our network strength is our advantage
Our large, well-located retail real estate network
gives us a significant advantage. The Convenience
Retail network includes ~800 Caltex-controlled
sites, more than 70,000 StarCard customers
and 3 million transactions each week. With large
scale comes the need for a unified approach
and capability.
The decision to transition to a company operated
network will enable us to simplify our operations,
provide customers with more consistent
experiences and accelerate change in our
convenience retail offer. In 2018, we successfully
transitioned 182 stores from franchise to company
operation. We now have agreed transition plans
with all but a few franchisees and are on track to
operate our network by 2020.
In addition to this transition to drive greater
consistency, we are evolving to reshape and
unlock the value of our network by redefining
our offer with clear points of difference along
with building a customer-centric team culture.
Developing market leading Convenience
Retail formats
The opportunity to make life easier for our
customers through our formats fuels our passion
to execute with excellence. Our format strategy,
which includes The Foodary, StarMart and Caltex
Woolworths Metro (launching in 2019), was further
developed in 2018 and is now well defined and
understood. These formats meet the diverse
needs of our customers.
23
In 2018, we opened a further 32 The Foodary
stores, including our 50th store in Manly, Sydney.
This breakthrough format is fast becoming famous
for its barista-made coffee, food for now and our
quick service restaurant (QSR) partners. Popular
QSR restaurants such as Boost Juice and Guzman
y Gomez are tapping into a new demographic
previously not captured and drive further traffic and
incremental sales at our stores. The Foodary format
is also outperforming on fuel and we’re seeing
strong shop gross margins, with return on investment
significantly improving over time.
Ensuring The Foodary is right at each site is critical
and over the last 12 months we have invested time
in better understanding the drivers for success. With
a reinvigorated focus on ensuring we have the right
format, product mix, services and marketing, we will
ensure this offer continues to grow.
StarMart continues to be a key driver for us and in
2018, we focused on getting the basics right with
refreshed self-serve coffee and delivering value to
customers through key promotions, such as our Meal
Deal offer. Meal Deals save customers up to 30%
on meals throughout the day and differentiate us
from our competitors. We know our customers are
enjoying this – we more than doubled our Meal Deal
sales year-on-year.
Driving customer advocacy and satisfaction is also
a key priority, and our newly launched Voice of
the Customer program allows us to hear directly
from customers. Since our national launch in April,
we have received close to 210,000 surveys and
over 68,000 customer ‘high fives’ calling out great
customer service. Since launch, our overall Net
Promoter Score has grown from 63 to a high of 74
in December, averaging 68 since launch.
Partnerships are key to our success
Our expanded and extended partnership with
Woolworths will accelerate capability and de-risk
execution of our transformation. Two key elements
of this agreement were executed in November 2018
with the expansion of the 11 million-member strong
Woolworths Rewards loyalty program to Caltex
stores. In less than two months, we distributed over
140 million points to over 1.3 million customers who
scanned their Woolworths Rewards cards at our
stores. We also expanded and doubled our network
which offers the four cents off per litre, taking this
value-driven offer to more than 220 stores. These
initiatives continue to improve both the fuel and shop
offer for our customers.
In 2019, we’ll unlock the value of the Caltex
Woolworths Metro format and continue our work with
Woolworths on wholesale grocery supply. Executing
these parts of our agreement will be a key priority.
Strategic partnerships with NRMA, Hyundai and
Toyota also launched in 2018. These offer their
customers exclusive fuel discounts allowing us to
recruit new customers.
Our sponsorship assets continued to build awareness
of our brand with partners in the Caltex Socceroos
and Supercars. Caltex ambassador, Autobarn
Lowndes Racing driver and Supercars legend,
Craig Lowndes, conquered Mount Panorama to win
his seventh Bathurst 1000. We also partnered with
Australia’s greatest footballer, Tim Cahill, to celebrate
our national football team performing at the FIFA
World Cup. Transforming five StarMart stores into
‘CAHILLTEX’ engaged customers and built further
brand awareness, while paying homage to a retiring
great of Australian football.
Finding new ways to make a difference
in a digital future
Expectations from our customers are higher than
ever and our new FuelPay app delivers a faster way
to pay for fuel. Available at over 600 stores, FuelPay
allows our customers to fill up, skip the queue and
pay with three quick taps on their mobile device.
The launch was backed with a national marketing
campaign across radio, television, social media and
digital advertising. FuelPay has been downloaded
more than 150,000 times, selling 6.7 million litres
through the app.
Innovation is critical to our success and launching
our inaugural innovation program, Caltex Spark,
allowed us to work closely with start-up and scale-up
businesses to look at potential new opportunities. The
12-week program led to a partnership with Halo, an
on-demand mobile fuel service allowing customers to
schedule a fuel delivery straight to their car using an
app which is launching in 2019. Trials with car selling
service CarBar and sustainable packaging company
Pak360 are also ongoing.
Focused on executing in 2019
We’re energised by the progress we’ve seen in
2018, and the opportunities that 2019 brings. As
we strive to deliver a market-leading convenience
retail offer that makes a difference for our customers,
we’ll continue to adapt and evolve in the changing
marketplace and in this highly competitive landscape.
Our key priorities for 2019 are simple – we will
focus on executing the building blocks set up in
2018. This includes building on our established
formats, launching our new Metro format, improving
wholesale supply of products to stores with our
partner Woolworths, further leveraging our new
partnerships, delivering sustainable fuel profits and
creating an environment our team members enjoy
working in every day.
Lisa McCallum, Assistant Marketing Manager, Loyalty;
Mark Stemp, Head of Loyalty; and Tamara Duschl, Chief
Customer Officer, join Woolworths staff at the official
launch of Woolworths Rewards at our Neutral Bay store.
24
CALTEX AUSTRALIA 2018 Annual Report
“The capability of our people and our
culture are key drivers of our success.
This is why we focus on implementing
people programs that attract and retain
the best talent and make Caltex a great
place to work.”
Joanne Taylor, EGM, Human Resources
6,629
Employees working across nine
employment entities located in
Australia, New Zealand and Singapore
83%
Employee
engagement score
67%
Working in flexible
working arrangements
Mick Donnelly, Shift Manager,
Lytton Refinery
Wade Clucas, Area Operator,
Lytton Refinery.
Small image: Judy Yoo, Retail
Training Coordinator.
25
Our people
taking us further
In 2018 Caltex launched a new
employment value proposition (EVP),
rolled out programs to build a fair
and flexible workplace and
reaffirmed its commitment to
gender equity, Indigenous
employment and inclusiveness.
These programs have extended the cultural
transformation that commenced in 2017 with the
launch of a newly defined purpose and refreshed
organisational values.
Employment value proposition and
employee engagement
Building upon the insights from the Culture
Survey conducted in 2017, we undertook
comprehensive research in 2018 to uncover
the core strengths and unique elements of our
employment proposition. Caltex’s heritage and
longevity of success, the calibre and expertise
of our people, flexible workplace culture, and
opportunities for career growth presented by the
scale of our network, were universally attractive
to our employees. A desire from employees to
play a role in our community programs was also
identified and this will be accelerated through the
Caltex Foundation in 2019.
The resulting value proposition, ‘You Take Us
Further’, was developed to bring these strengths
to life and builds on our purpose and corporate
values which were relaunched in 2017. The
new proposition differentiates Caltex from its
competitors across key employee segments
and was launched externally in November 2018
through our digital employment presence.
Refreshed candidate communications strategies
and collateral support our talent acquisition efforts,
telling the story of how our people drive our
success and, reciprocally, how Caltex invests to
ensure the professional growth of our people. Our
employment brand identity is being implemented
through multiple touchpoints, bringing to life the
experience of working with Caltex; an ASX-listed
business that is transforming itself.
In 2018 we also conducted our bi-annual
Employee Engagement Survey to get feedback
from our employees on working at Caltex. The
survey reinforced that values-led leadership and
flexibility are strengths that make Caltex a great
place to work. Our overall engagement score
of 83% was significantly above the Australian
corporate average and on par with the oil and
gas and retail industry averages.
26
26
CALTEX AUSTRALIA 2018 Annual Report
Case Study
CareerSeekers
a boost for
inclusiveness
at Caltex
Inclusiveness is important to ensure
Caltex builds a high-performing
workforce that respects and encourages
diverse views and perspectives. In 2018
Caltex was proud to be one of
CareerSeekers’ newest employment
partners when we hosted our first
refugee intern, Zaynab El Emary.
The CareerSeekers model bridges the gap between
new Australians and employers seeking to create
a more diverse workforce. CareerSeekers is the sister
program to the CareerTrackers Indigenous program,
which Caltex has partnered with since 2013.
Always on the lookout for new and diverse
engineering talent to bring into the business,
we were excited to have Zaynab on board. Zaynab
lives in Melbourne and is studying Engineering at
Monash University. Over her university winter
break she worked at our Newport Terminal in
Engineering Services.
Michael Linehan, Regional Projects Manager
at Newport and one of Zaynab’s managers, said
that Zaynab was a great addition to the team.
“It has been refreshing to have someone on
site who has just started their studies and is
learning about our business from scratch.
In the short time she has been with us, I have
seen her confidence grow – she is a
talented engineer,” he said.
Image: Rachael Hennin, Talent and
Development Advisor; Zaynab El Emary,
Caltex Career Seekers Intern; and Ash
Nugent, Deputy CEO, Career Seekers.
Our new employment value proposition and
implementation of engagement programs have
supported our efforts to build a workforce of
diverse and highly capable people required to
support our two core businesses to deliver the
Caltex strategy.
A fair and flexible workplace
In 2018, Managing Director & CEO Julian Segal
became a Pay Equity Ambassador for the Workplace
Gender Equality Agency (WGEA), promoting
our commitment to an inclusive workplace
through equal access to career opportunities,
development and pay equity. Mr Segal has
personally championed having a diverse Caltex
executive team, with three out of seven (42%)
of his direct reports being female.
A detailed gender pay audit was conducted in 2018
to identify any gender bias during the salary and
short-term incentive review. The audit found no
gender bias during the salary review, with females
receiving an average increase of 1.7% compared to
the male average of 1.6%. Similarly, there was no
gender bias found in incentive payments with the
average payment score for females of 129.9% and
males of 129.5%. The review identified that Caltex
has a pay difference of 1% in favour of males in
like-for-like roles, which we still aim to improve.
Continued focus on developing women in their
careers will be crucial to achieving our gender
equity objectives. Caltex acknowledges that
sustainability is reliant on a pipeline of future female
leaders, built up from earlier career stages. For this
reason, we have invested in talent, development and
early career programs to build our pipeline.
In 2018 Caltex established its first Women in
Engineering Scholarship through UNSW. This
Scholarship aims to encourage and assist a female
student to achieve a bachelor’s degree in engineering
over a four-year period. Towards our goal of early
career talent pooling, we have increased Caltex’s
profile with the university through the scholarship
promotion and involvement of Caltex leaders in
associated events; developing industry case studies
to present at the university, and hosting networking
events on behalf of the UNSW Women in Engineering
Society – all providing greater access to a pool of
potential future candidates.
The Caltex Graduate Program plays a key role in
sourcing diverse talent for the future, with over
60% (10 out of 15) female graduates hired in 2018
for the 2019 intake. By business area, female
graduates make up four out of six positions in
Fuels & Infrastructure, three out of five positions in
Convenience Retail, and three out of four positions
across Group functions.
Our talent development programs will continue to
identify and develop employees exhibiting potential
for promotion. Of the 2018 talent pool identified
through our succession planning processes, 45% are
women; which is 8% higher than at the same time
in 2017 and 10% higher than female representation
among the eligible group.
CALTEX AUSTRALIA 2018 Annual Report 27
Female representation at Caltex
Board
37.5%
Senior
Leaders
34.4%
Executive
Team
37.5%
Overall
Company
40.7%
The rate of female promotions into the Senior
Leadership group has been favourable, with seven
of 13 promotions recognising talented women
within Caltex.
Flexibility
Flexibility continues to be a priority for Caltex as
both an enabler of inclusiveness and part of our
employment value proposition.
Caltex people value flexibility in many different forms
and our policy on flexible work has demonstrated
many positive benefits. Two out of three employees
who responded to the 2018 Employee Engagement
Survey utilise some form of flexible work
arrangement, and these employees on average were
6% more engaged. 83% of all employees surveyed
in 2018 agreed that their leaders are considerate
of their lives outside of work.
To ensure that we sustain these outcomes, in
2018 Caltex ran a Focus on Flexibility campaign to
share case studies on successful flexible working
arrangements and to support leaders to make
decisions consistent with our desired culture.
Flexibility also continues to be essential to parents
at Caltex. In 2018 we reviewed our Parental Leave
Policy to remove the minimum tenure for access
to paid parental leave. This initiative aligns to our
employment value proposition – making it easier for
expectant parents to join Caltex, manage the care of
their newborn and then return to work. This change
was promoted both internally and externally to
attract diverse candidates and promote our inclusive
and flexible work environment.
Indigenous employment market capability
Caltex’s inaugural Reconciliation Action Plan (RAP)
was launched in 2018 to reinforce our commitment
to making a meaningful difference to the lives
of Indigenous Australians. The RAP is a public
declaration of our commitment to reconciliation
under the three pillars of building respect,
relationships and opportunities.
Under the Opportunity pillar, attracting and retaining
Aboriginal and Torres Strait Islander employees is a
key area of focus.
In 2018 the number of employees who identified as
Aboriginal or Torres Strait Islander increased from
83 employees to 147 employees, representing over
2% of our total workforce.
Caltex has strengthened our partnership with
CareerTrackers, a program that provides Caltex
with a future pipeline of Indigenous talent. We
have increased the number of Indigenous interns
employed through the CareerTrackers program
from three to eight in 2018 and employed our first
Indigenous school-based trainee.
Inclusiveness
During 2018, Caltex acknowledged and celebrated
a series of events such as R U OK day, Harmony
Day, International Women’s Day, Close the Gap,
National Reconciliation Week and NAIDOC week,
with a number of these being led by our ‘Women
in the Fuels Industry’ and ‘Indigenous Trailblazers’
employee groups and supported by the Caltex
Diversity and Inclusion Council.
Caltex was also a key sponsor of the external
International Women’s Day event ‘Superhero
Daughter Day’. Taking place across Australia,
this event was run by the non-profit Tech Girls
Movement and focused on providing primary
school-aged girls the opportunity to participate
in interactive activities that introduce them to the
world of science, technology, engineering and
maths (STEM). Over 60 Caltex employees and their
families attended the event across Sydney, Brisbane,
Melbourne and Adelaide.
Caltex has continued its support for veteran
employment in 2018 and has participated in veteran
employment fairs, raised funds and provided office
space for the non-profit ‘Soldier On’.
Finally, Caltex employed its first CareerSeekers
intern within the engineering team of our Fuels &
Infrastructure business. CareerSeekers is a program
designed to give asylum seekers and refugees
the opportunity to gain paid experience in the
Australian marketplace and reconnect to their
profession of choice. As well as helping to broaden
the cultural talent profile at Caltex, this program also
ensures that Caltex is an inclusive organisation and
plays a part in efforts to resettle asylum seekers and
refugees in Australia.
28
CALTEX AUSTRALIA 2018 Annual Report
2018 key performance measures
Our People
Our Business
Personal safety
Total Recordable Injury Frequency Rate1
7.71
Fuels &
Infrastructure
(down from 8.23 in 2017)
10.43
Convenience
Retail
(up from 2.94 in 2017)
Days Away From Work Injury Frequency Rate2
1.45
Fuels &
Infrastructure
(down from 2.29 in 2017)
2.81
Convenience
Retail
(up from 0.59 in 2017)
69
Voice of Customer4
$20.2BN
Spent with suppliers
$7.1BN
Total tax expense
$1.6BN
Capital returned to
shareholders since 2016
Process Safety
1 Tier One event
(no change since 2017)
1 Tier Two event
(down from two events in 2017)
O u r Business
c
u
t i n g o u r business responsibly
d
n
o
C
Innovating for
our customers
Corporate governance
Risk management
Responsible procurement
Human rights
eople
r p
u
o
r
o
f
g
n
i
r
a
c
d
n
a
g
n
i
g
e
l
p
o
e
P
r
u
O
Health
and safety
Diversity and
inclusion
Employee
engagement
a
g
n
E
Community investment
and engagement
Reconciliation
K
e
e
ping our communities m o v i n
Carbon
management
and climate
change
Pollution
prevention
Resource
efficiency
P
r
o
t
e
c
t
i
n
g
t
h
e
e
n
v
i
r
o
n
m
e
nt
O
u
r
E
n
v
i
r
o
n
m
e
n
t
ard
g f o r w
Our Commu n i t y
Our Community
Established Caltex
Foundation
$1.97M
invested in communities
in 20183
Our Environment
950,653
tonnes Scope 1 and
Scope 2 carbon emissions
(increase of 6% since 2017)
99.2
Lytton refinery
Energy Intensity Index
Solar installations across
58 Caltex stores in 2018/19
Developed and implementing
an inaugural Reconciliation
Action Plan
0 major spills (>8,000L)
5 minor spills (>160L <8,000L)
0 marine spills
Our framework
extends across
the four sectors
as illustrated.
For key performance measurements
regarding number of employees,
female representation, employee
engagements and flexible working
arrangements, see ‘Our people taking
us further’ on pages 24-27.
29
Our approach
to sustainability
As Australia’s largest transport
fuels supplier, Caltex is focused on
building and monetising capability and
scale across the fuels and convenience
value chain to maximise shareholder
value. We recognise that along with
delivering value for shareholders, we
also need to make a positive contribution
in the communities where we operate,
care for our people, protect the
environment and act in an ethical
and transparent manner.
Sustainability framework
We have established a sustainability
framework which is focused on our key risks
and opportunities that are most relevant to our
business and stakeholders. To identify these, we
undertook a materiality review during the year using
several processes including stakeholder feedback,
employee surveys and media and industry peer
reviews. Our framework extends across four sectors,
as illustrated on the opposite page.
This year we have prepared our inaugural Sustainability
Report, which provides an overview of initiatives
delivered in 2018 across each of our focus areas and
our performance to date. Our 2018 Sustainability
Report is available on our website www.caltex.com.au.
In the coming year, we will update our materiality
assessment and take a more detailed look at how
we are responding to sustainability issues facing
our business. This assessment will guide the further
enhancement of our sustainability strategy and
supporting performance management system,
driving further integration of sustainability into our
broader business strategy. The preparation of our
strategy will involve further developing our baseline
data to help establish meaningful targets that will
improve performance and behaviours and increase
transparency across our key material issues.
1. Total number of occupational injuries per 1 million hours
worked. Occupational injuries include an injury requiring
days away from work, restrictions in the work performed
or medical treatment.
2. Total number of days away from work per 1 million hours
worked. Days away from work is defined as the number
of days a worker is certified by a physician to be unfit to
perform normal duties, starting from the day after the
incident occurred.
3. Total community investment value includes management
costs and additional contributions to the community
including employee volunteering.
4. Convenience Retail NPS score is for the period April to
December 2018.
Image: Phillip Brenton,
Environmental Engineer,
Lytton Refinery; and
Anne McCormick,
Environment Team Leader,
Lytton Refinery.
30
CALTEX AUSTRALIA 2018 Annual Report
2018 performance highlights
Key initiatives delivered in 2018 are outlined below.
Our
People
Our
Community
Our
Business
Innovation
• Launch of Caltex Spark, an initiative
focused on partnering with start-ups
to drive innovation, job creation and
increased productivity
• Creation of FuelPay, allowing our
customers to fill up and pay without
leaving their vehicles
Launch of Voice of
Customer at our
Convenience Retail sites,
receiving feedback from
our customers to enhance
their experience
Corporate governance
• Refresh of our Code of Conduct
• Refresh of our Whistleblower Policy
Risk management
• Review of the Caltex Risk
Management Framework
• Continued delivery of our cyber
security strategy
Responsible procurement
• Development of our Supplier Code
of Conduct
Human rights
• Development of a new Human
Rights Policy
Community investment
and engagement
• Established the Caltex Foundation
to drive a more coordinated
and strategic approach to
community investment
Continued support of the
Caltex Best All Rounder
program to encourage
children to do their best
at school
• Supporting Soldier On, providing
services to those returning from
service to secure their future
• Partnership with Australian Road
Safety Foundation and the Fatality
Free Friday campaign to raise
awareness of road safety
• Through Rural Aid, supporting rural
communities and farmers through
drought conditions
Reconciliation
• Development of our inaugural
Reconciliation Action Plan
Celebrating and
acknowledging the history,
culture and achievements
of Aboriginal and Torres
Strait Islander peoples
through events such as
NAIDOC week
Health and safety
Fuels & Infrastructure
• Delivery of a Safety Leadership
program
• Simplified hazard identification
tools to assist workers to identify
and implement controls
• Delivery of a Move4Life manual
handling training program
• Implementation of a Safe Guard
Field check system to review
implemented plant safe guards
Convenience retail
• Delivery of the ‘Why I Stay Safe’
employee engagement program
• Enhanced incident reporting and
escalation process
• Integration of Safety in Design
principles into new developments
and fit-outs
• Introduction of Safety Share
in-store meetings
• Development of Food Safety
System to mitigate risk
Diversity and inclusion
• Delivery of a ‘Focus on Flexibility’
campaign to share ideas and
encourage more flexible work
arrangements
• Updated Parental Leave Policy
adding additional flexibility for new
parents returning to work
• Recruitment of a CareerSeeker
Intern, providing an asylum seeker
the opportunity to gain paid work
experience
• Continued focus on developing
female leaders, including
supporting our first Women in
Engineering scholar
• Supported the Superhero Daughter
Day, providing school-aged
children the opportunity to interact
with STEM activities
• Continued support of CareerTrackers
and Clontarf Foundation, providing
educational opportunities for
Indigenous students
Employee engagement
• Re-run of our employee
engagement survey
• Development of our Employment
Value Proposition – ‘You Take Us
Further’ – demonstrating the unique
elements that make Caltex an
attractive place to work
• Launch of LinkedIn Learning for
our employees
Our
Environment
Carbon management and
climate change
• Development of a Climate
Change Position Statement and
commitment to align disclosures
to the TCFD framework
• Installation of photovoltaic (PV)
panels at 58 of our retail sites
across 2018/19
Supporting Virgin
Australia’s biojet fuel trial
Pollution prevention
• Continued focus on spill prevention
through an organisation-wide
improvement program
• Continued delivery of our
Underground Petroleum Storage
System monitoring and replacement
program; replacement of seven
tank systems in 2018
Resource efficiency
• Continued analysis of energy
efficiency opportunities across
our Convenience Retail sites
• Trial of compostable coffee cups
at four Victorian The Foodary stores
• Installation of Return to Earn
reverse vending machines at three
New South Wales stores
Removal of single-use
plastic bags nation-wide
from January 2019
• Delivery of a smart e-waste
initiative at our Market Street
head office
• Development of our Australian
Packaging Covenant (APC)
three-year action plan focusing
on private label packaging
31
Case Study
Leveraging our
network to improve
resource efficiency
Caltex is committed to managing
the use of natural resources to further
commercial and environmental
outcomes. Our efforts help us reduce
our operating costs, support the
preferences of our customers and help
us build a more sustainable and
competitive business.
Two recent initiatives in our Convenience Retail
business highlight this commitment – the roll-out of
the NSW Government’s Container Deposit Scheme
(CDC) across three of our stores and the decision to
eliminate single-use plastic bags.
In late 2017, the NSW Government introduced the
CDS, providing residents the ability to ‘return and
earn’ 10 cents from every eligible drink container
deposited. In partnership with Tomra, we installed
return to earn reverse vending machines at our
Seven Hills, Concord West and Luddenham stores
across Sydney. Since installation in September
2018, 1,038,481 containers have been collected,
averaging 260,000 containers per month. We are
very proud to play a role in reducing waste going to
landfill and will continue to look at opportunities to
roll out additional reverse vending machines across
our stores in the coming years.
Caltex also recognises that the removal of
single-use plastic bags is not only important to our
customers, but that the scale of our operations
gives us the opportunity to play a key role in
reducing the impact of plastics on our environment.
From January 2019, we will stop offering
single-use plastic bags at all our retail sites and
introduce alternatives for our customers, including
our The Foodary hessian bags and reusable bags
made from 80% recycled content.
Image: Caltex’s first Return and Earn vending
machine at our Seven Hills store in Sydney’s west.
32
CALTEX AUSTRALIA 2018 Annual Report
33
2018 Financial
Report
FOR CALTEX AUSTRALIA LIMITED
ACN 004 201 307
Contents
Directors’ Report
Financial Statements
34
75
Comparative Financial Information
120
Replacement Cost of Sales Operating
Profit Basis of Accounting
Shareholder Information
Directory
121
122
124
The 2018 Financial Report for
Caltex Australia Limited includes:
• Directors’ Report
• Lead Auditor’s Independence Declaration
• Directors’ Declaration
•
Independent Auditor’s Report to the
Shareholders of Caltex Australia Limited
• Consolidated Income Statement
• Consolidated Statement of
Comprehensive Income
• Consolidated Balance Sheet
• Consolidated Statement of Changes
in Equity
• Consolidated Cash Flow Statement
• Notes to the Financial Statements
for the year ended 31 December 2018
Caltex Group
For the purposes of this report,
the “Caltex Group” refers to:
• Caltex Australia Limited (Caltex), the parent
company of the Caltex Group listed on the
Australian Securities Exchange (ASX)
• Major operating companies, including
Caltex Australia Petroleum Pty Ltd
• Wholly owned entities and other entities that
are controlled by the Caltex Group
34
Directors’ Report
The Board
Introduction
Caltex Australia Limited presents the 2018
Directors’ Report (including the Remuneration
Report) and the 2018 Financial Report for
Caltex Australia Limited (Caltex) and its controlled
entities (Caltex Group) for the year ended
31 December 2018. An Independent Audit
Report from KPMG, as external auditor, is
also provided.
Board of Directors
The Board of Caltex Australia Limited comprises
Steven Gregg (Chairman), Julian Segal (Managing
Director and CEO), Trevor Bourne, Mark Chellew,
Melinda Conrad, Bruce Morgan, Barbara Ward AM
and Penny Winn.
The following changes to the composition of the
Board have occurred since 1 January 2018:
• Mr Mark Chellew was appointed to the Caltex
Board as an Independent Non-executive
Director, effective 2 April 2018.
The Board made changes to the composition
of its standing Committees effective from
1 January 2019.
1
3
5
7
2
4
6
8
1 Steven Gregg
Chairman and Independent Non-executive Director
Date of appointment: 9 October 2015
Appointed Chairman: 18 August 2017
Board committees:
Nomination Committee (Chairman) and attends
meetings of the Audit Committee, the Human
Resources Committee and the Safety and Sustainability
Committee in an ex-officio capacity.
Steven has over 30 years’ experience in the investment
banking and management consulting sectors in
Australia and the United Kingdom. He brings to the
Board extensive executive, corporate finance and
strategic experience.
Steven is a director of Challenger Limited and
Challenger Life Company Limited, a director of
Tabcorp Holdings Limited and William Inglis & Son
Limited. He is the Chairman of Unisson Disability
Limited and a trustee of the Australian Museum.
He has previously served as Chairman of Goodman
Fielder Limited and Austock Group Limited.
Steven has held various roles with ABN AMRO, most
recently as Global Head of Investment Banking and the
CEO for the United Kingdom. Following this, he was a
Partner in the Strategy and Financial Institutions practice
at McKinsey & Company in Sydney and internationally.
Steven holds a Bachelor of Commerce from the
University of New South Wales.
2 Julian Segal
Managing Director and CEO
Date of appointment: 1 July 2009
Julian joined Caltex from Incitec Pivot Limited, a
leading global chemicals company, where he served
as the Managing Director and CEO from June 2005 to
May 2009. Prior to Incitec Pivot, Julian spent six years
at Orica in a number of senior management positions,
including Manager of Strategic Market Planning, General
Manager – Australia/Asia Mining Services, and Senior
Vice President – Marketing for Orica Mining Services.
Julian is a director of the Australian Institute of
Petroleum Limited (appointed 1 July 2009).
Julian holds a Bachelor of Science (Chemical
Engineering) from the Israel Institute of Technology
and a Master of Business Administration from the
Macquarie Graduate School of Management.
3 Trevor Bourne
Independent Non-executive Director
Date of appointment: 2 March 2006
Board committees:
Safety and Sustainability Committee (Chairman to
1 January 2019), Human Resources Committee and
Nomination Committee
Trevor brings to the Board broad management
experience in industrial and capital-intensive industries,
and a background in engineering and supply chain.
Trevor is Chairman of Senex Energy Limited, a director
of Sydney Water Corporation and a director of Virgin
Australia Holdings Limited. He was previously a
founding director of Origin Energy Limited for 12 years.
CALTEX AUSTRALIA 2018 Annual Report 35
From 1999 to 2003, he served as CEO of Tenix
Investments. Prior to Tenix, Trevor spent 15 years at
Brambles Industries, including six years as Managing
Director of Brambles Australasia, 15 years at BHP and
8 years with the then Orica subsidiary Incitec Pivot.
Trevor holds a Bachelor of Science (Mechanical
Engineering) from the University of New South
Wales and a Master of Business Administration from
the University of Newcastle and is a Fellow of the
Australian Institute of Company Directors.
4 Mark Chellew
Independent Non-executive Director
Date of appointment: 2 April 2018
Board committees:
Safety and Sustainability Committee, Human
Resources Committee and Nomination Committee
Mark brings to the Board international expertise
in industry, strategy, governance and large capital
projects with a background in manufacturing, mining
and process industries. He is currently Chairman of
Cleanaway Waste Management Limited, a director of
Virgin Australia Holdings Limited and a director of
Infigen Energy Limited. Mark was formally Chairman
of the industry body Manufacturing Australia.
Mark was the CEO and Managing Director of Adelaide
Brighton and, prior to that, held executive positions at
Blue Circle Industries and CSR.
Mark holds a Bachelor of Science (Ceramic
Engineering) from the University of New South
Wales, a Master of Engineering (Mechanical) from the
University of Wollongong and a Graduate Diploma of
Management from the University of New South Wales.
5 Melinda Conrad
Independent Non-executive Director
Date of appointment: 1 March 2017
Board committees:
Audit Committee, Human Resources Committee
and Nomination Committee
Melinda brings to the Board over 25 years’ experience
in business strategy, marketing and technology-led
transformation, and brings skills and insights as an
executive and director from a range of industries,
including retail, financial services and healthcare.
Melinda is currently a director of ASX Limited,
a director of Stockland Group and a director of
the George Institute for Global Health. She is a
Member of the ASIC Director Advisory Panel and the
Australian Institute of Company Directors Corporate
Governance Committee.
Melinda has previously served as a director of
OFX Group Limited, The Reject Shop Limited,
David Jones Limited, APN News & Media Limited
and the Garvan Medical Research Institute
Foundation. Melinda held executive roles at
Harvard Business School, Colgate-Palmolive,
and several retail businesses as founder and
CEO and in strategy and marketing advisory.
Melinda holds a BA (Hons) from Wellesley College
in Boston and an MBA from Harvard Business
School. She is a Fellow of the Australian Institute
of Company Directors.
6 Bruce Morgan
Independent Non-executive Director
Date of appointment: 29 June 2013
Board committees:
Audit Committee (Chairman), Safety and
Sustainability Committee and Nomination Committee
Bruce brings to the Board expertise in financial
management, business advisory services, risk and
general management. He is the Chairman of Sydney
Water Corporation, a director of Origin Energy
Limited and a director of Redkite, the University
of New South Wales Foundation and the European
Australian Business Council.
Bruce served as Chairman of the Board of
PricewaterhouseCoopers (PwC) Australia for six years
until 2012 and was elected a member of the PwC
International Board where he served for four years.
Bruce previously held roles as managing partner of
PwC’s Sydney and Brisbane offices. An audit partner
of the firm for over 25 years, he was focused on
financial services and energy and mining sectors,
leading some of the firm’s most significant clients
in Australia and internationally.
Bruce holds a Bachelor of Commerce (Accounting
and Finance) from the University of New South Wales
and is a Fellow of the Australian Institute of Company
Directors and Chartered Accountants Australia and
New Zealand.
7 Barbara Ward AM
Independent Non-executive Director
Date of appointment: 1 April 2015
Board committees:
Human Resources Committee (Chairman),
Audit Committee and Nomination Committee
Barbara brings to the Board strategic and financial
expertise in senior management roles. Barbara is a
director of Qantas Airways Limited and a number of
Brookfield Multiplex Group companies.
Barbara was formerly a director of the Commonwealth
Bank of Australia, Lion Nathan Limited, Multiplex
Limited, Data Advantage Limited, O’Connell Street
Associates Pty Ltd, Allco Finance Group Limited, Rail
Infrastructure Corporation, Delta Electricity, Ausgrid,
Endeavour Energy and Essential Energy. She was also
Chairman of Country Energy, NorthPower and HWW
Limited, a Board Member of Allens Arthur Robinson,
The Sydney Opera House Trust and Sydney Children’s
Hospital Foundation and served on the Advisory
Board of LEK Consulting.
Barbara was CEO of Ansett Worldwide Aviation
Services from 1993 to 1998. Prior to that, she held
various positions at TNT Limited (including General
Manager Finance) and also served as a Senior
Ministerial Advisor to The Hon PJ Keating.
Barbara holds a Bachelor of Economics and a
Master of Political Economy from the University
of Queensland and is a member of the Australian
Institute of Company Directors.
36
The Board continued
Leadership Team
8 Penny Winn
Independent Non-executive Director
Date of appointment: 1 November 2015
Board committees:
Safety and Sustainability Committee (Chairman
from 1 January 2019), Audit Committee and
Nomination Committee
Penny brings to the Board Australian and
international strategic, major transformation
and business integration, technology and retail
marketing experience. Penny is currently Chairman
of Port Waratah Coal Services Ltd, a director of
CSR Limited and a director of Goodman Limited
and Goodman Funds Management Limited. She
has previously served as a director of a Woolworths
business (Greengrocer.com), a Myer business (sass
& bide) and Quantium Group.
Prior to her appointment to Caltex, Penny was
Director Group Retail Services with Woolworths
Limited, and she has over 30 years of experience
in retail with senior management roles in Australia
and internationally.
Penny holds a Bachelor of Commerce from the
Australian National University and a Master of
Business Administration from the University of
Technology, Sydney. She is a graduate of the
Australian Institute of Company Directors.
1
3
5
7
2
4
6
8
1 Andrew Brewer
Executive General Manager, Transformation
Andrew Brewer was appointed to this position in
2017. He is an experienced senior executive in the
energy and resources sector. Commencing his career
as a professional electrical engineer, Andrew has held
leadership roles in engineering, project management,
maintenance, reliability, operations, business strategy,
planning and general management.
Andrew’s career has spanned the minerals
processing, resources and energy industries across
Australia and in Canada where he was Downstream
Country Chair and General Manager of the Burnaby
oil refinery for Chevron Canada. Andrew also
previously managed the Kurnell refinery.
Caltex has announced changes to its leadership
team. Please visit https://www.caltex.com.au/
our-company/investor-centre/asx-announcements
for further information.
CALTEX AUSTRALIA 2018 Annual ReportDirectors’ ReportCONTINUED 37
2 Viv Da Ros
Chief Information Officer
Viv Da Ros was appointed to this position in
December 2016 and is responsible for leading
the technology transformation program at Caltex.
He is a commercially-driven senior technology
executive focused on customer-centric, innovative
solutions which deliver operational efficiencies and
engagement. His nearly 30 years of experience
includes senior leadership positions in Australia, Asia
and Europe, predominantly in the retail sector with the
ASW Group, Tesco, KPMG and Dairy Farm International.
Viv holds a Master of Business Administration from
Manchester Business School and a Master of Project
Management from the University of Technology, Sydney.
3 Simon Hepworth
Chief Financial Officer
Simon Hepworth was appointed to this position
in 1999. He joined Ampol in 1996, after 10 years
with Arthur Andersen. He is responsible for Finance,
Accounting and decision support, Treasury,
Taxation, Investor Relations, Information Technology
and Procurement.
Simon holds a Bachelor of Arts and a Masters of Applied
Finance. He is a member of the Institute of Chartered
Accountants in England and Wales. He is also a member
of the Australian Institute of Company Directors.
4 Richard Pearson
Executive General Manager, Convenience Retail
Appointed in August 2017, Richard Pearson is
accountable for leading the transformation of Caltex’s
retail and consumer fuel business.
Richard has worked in retail and consumer goods for
20 years in Australia and the UK with a broad range of
leadership experience across commercial functions.
Before joining Caltex, Richard was a member of the
leadership team at Coles Supermarkets where he was
most recently the Supply Chain & Strategy Director.
Prior to this, Richard was the Merchandise Director and
the Director responsible for Coles Express. Richard
holds a Bachelor of Arts from Cambridge University.
5 Lyndall Stoyles
Executive General Manager, Legal and Corporate Affairs
Appointed as Executive General Manager Legal and
Corporate Affairs in October 2016, Lyndall Stoyles
manages Caltex’s legal, secretariat, internal audit,
compliance and corporate affairs teams. As Executive
General Manager Legal and Corporate Affairs, she
is responsible for providing legal advice to Caltex’s
Board, CEO and broader leadership team. She is also
Company Secretary to the Board.
Lyndall has more than 20 years’ experience in
advising on competitor, commercial and corporate
head office legal issues. Prior to joining Caltex,
Lyndall was Group General Counsel and Company
Secretary for former logistics business Asciano and
spent more than a decade with Clayton Utz advising
on competition, commercial and corporate law issues
in a broad range of industries.
Lyndall holds a Diploma of Law/Master of Law from
the University of Sydney and is a member of the
Australian Institute of Company Directors.
6 Alan Stuart-Grant
Executive General Manager, Strategy and
Corporate Development
Appointed as Executive General Manager, Strategy
and Corporate Development in November 2017,
Alan Stuart-Grant manages Caltex’s strategy, corporate
development and M&A activities.
Prior to joining Caltex, Alan held a senior position in
the Oil and Gas department of Glencore plc, and prior
to that spent more than a decade in private equity
and investment banking, working in Sydney, London
and Singapore.
Alan holds a Bachelor of Science (Business
Administration) degree from the University of Bath,
and is also a member of the Australian Institute of
Company Directors.
7 Joanne Taylor
Executive General Manager, Human Resources
Joanne Taylor joined Caltex in 2016.
She is an accomplished senior leader, having worked
in human resources and operational roles for businesses
such as McDonald’s Australia, Westpac, The Star and
The Australian Industry Group.
Joanne’s last role at McDonald’s was Senior
Vice President Human Resources, Corporate
Communications and Supply Chain. Prior to this,
her roles included leading the franchise and company
operations across New South Wales and the Australian
Capital Territory for approximately 290 retail stores.
Joanne holds a Bachelor of Commerce from the
University of New South Wales.
8 Louise Warner
Executive General Manager, Fuels & Infrastructure
Appointed as Caltex Australia’s Executive General
Manager Fuels & Infrastructure in 2017, Louise Warner
is responsible for managing the safe and reliable
supply of high-quality fuels, lubricants and related
services to Caltex’s valued customers across Australia
and New Zealand. The Fuels & Infrastructure business
incorporates the wholesale commercial and operating
functions for Caltex Australia including B2B Sales who
serve large and small businesses across Australia, Ampol
Trading & Shipping in Singapore, the Lytton refinery
in Brisbane, Distribution assets (terminals, pipelines,
depots, aviation) across Australia and Gull New Zealand.
Louise holds a Bachelor of Engineering (Chemical)
from the University of New South Wales. Having joined
Caltex Australia in 1999 as a process engineer at the
Kurnell refinery she has worked in a range of project,
supply and technical leadership roles across Caltex
before gaining commercial and trading experience in
London, Amsterdam and Nigeria through a secondment
to Chevron in the UK. Louise founded Caltex Australia’s
first overseas operations, Ampol Singapore, which
established the company’s regional trading and
shipping capability. On her return to Australia Louise
has helped Caltex take the next steps to transform
its business model, including the recent acquisition
of Gull New Zealand and establishment of a strategic
partnership with SEAOIL in the Philippines.
38
Operating and financial review
The purpose of the operating and financial review (OFR) is to enhance the periodic financial reporting and provide shareholders
with additional information regarding the Group’s operations, financial position, business strategies and prospects. The review
complements the Financial Report on pages 75 to 119.
The OFR may contain forward-looking statements. These statements are based solely on the information available at the time
of this report, and there can be no certainty of outcome in relation to the matters to which the statements relate.
Company overview
Caltex is one of Australia’s leading transport fuel suppliers and convenience retailers and has safely and reliably fueled the needs
of Australian motorists and businesses for more than a century. Listed on the Australian Securities Exchange, Caltex’s head
office is in Sydney and the Company has approximately 6,600 employees in Australia and New Zealand.
Caltex aims to be the leader in complex supply chains and the evolving convenience retail market, by delivering the fuel and
other everyday needs of its diverse customers through its networks.
The principal activities of Caltex during the year were the purchase, supply, refining, distribution and sale of petroleum
products and the operation of convenience stores throughout Australia and the North Island of New Zealand under the Gull NZ
brand. Caltex also supplies fuel to international customers including to Gull NZ and to SEAOIL in the Philippines (a business
in which Caltex holds a 20% equity interest). Caltex also buys and sells refined products on the open market both overseas
and locally through its shipping and trading entity, Ampol, based in Singapore. There were no significant changes in Caltex’s
principal activities during the 2018 financial year.
At Lytton in Brisbane, Caltex manufactures fuels, including LPG, petrol, diesel and jet fuel along with lubricants, greases and
other small amounts of fuel oil and speciality products.
The products that Caltex manufactures and imports are marketed and distributed to retail and commercial consumers and
are supplied via a network of pipelines, terminals, depots and Company-owned and contracted transport fleets.
Group strategy
Our strategy is to build and monetise capability and scale across the fuels and convenience value chain, to maximise
shareholder value enabled by a valuable network of well-placed assets. Caltex controls a hard to replicate, privileged network
of retail and distribution assets, remaining focused on delivering integrated value and growth across the value chain.
Over the past five years, Caltex has transformed its strategy from that of a refiner-marketer, to a market-leading integrated
transport fuels business in Australia, an emerging player in the Asian region as well as commencing our journey in
convenience retail.
Five Years Ago
50% owned by Chevron
Loss making refinery & supply
Low asset utilisation
International supply by Chevron
Generic retail offer
2013
EPS: 123 cents
DPS: 34 cents
ROCE*: 16.5%
Today
Independent ASX 50 company
Profitable refining operations
Asian Trading & Shipping hub
Growing international expansion
Retail transformation commenced
2018
EPS: 214 cents
DPS: 118 cents
ROCE*: 19.0%
* ROCE calculated as RCOP EBIT over net assets plus net debt.
In 2017, Caltex made the decision to change its operating model by establishing two inter-dependent, but different businesses
which require separate cultures, processes and systems both with significant growth options.
From 1 January 2018, the company merged Supply, B2B, Refining and Infrastructure into one business unit (Fuels &
Infrastructure) to better optimise our value chain. Convenience Retail focuses on the company’s consumer-facing petrol
and convenience (P&C) business. There remains strong operational linkages across the business units in fuel supply, shared
resources and StarCard sales.
CALTEX AUSTRALIA 2018 Annual ReportDirectors’ ReportCONTINUED 65%
of EBIT
Caltex Australia
39
35%
of EBIT
Fuels and
Infrastructure
ü Full supply chain view
ü Improved efficiency
ü Continued focus
on international
Convenience Retail
ü Foster retail culture
ü Apply retail specific KPIs
ü Focus on expansion
Operational Linkages
• Fuel supply
• Shared resources
• StarCard sales
The Fuels & Infrastructure business focuses on a “Protect and Grow” strategy which is delivering value through three strategic priorities:
1. Optimise our infrastructure position: Maintain a relentless focus on a cost-competitive supply chain through excellence in
infrastructure and refinery management and being proactive in adapting to changing market dynamics and pursuing new
infrastructure opportunities.
2. Grow trading and shipping: Continue to develop and expand the capabilities and operations of Ampol. This allows Caltex to capture
opportunities for value creation in sourcing and delivering product and enables international expansion into the Asia Pacific region.
3. Protect and grow our supply base: Execute organic and inorganic strategies to increase marketing volumes in target regions
to support long term infrastructure investment and competitive supply.
The Convenience Retail business focuses on an “Extend” strategy which is delivering value through two strategic priorities,
underpinned by our valuable network of well-placed assets:
1. Enhance the fuel retail customer offering: Continue to develop elements of the fuel site retail offer which will attract more
customers to Caltex sites and increase customers’ spend whilst there.
2. Create new customer solutions in the convenience marketplace: Leverage Caltex’s existing strong consumer-facing business,
including our network of over 900 retail sites and over three million weekly customer visits, to build a new and differentiated
convenience offer for customers across multiple formats, products, locations and channels.
Key Successes
Retained scale
and customer
relationships
Developed new
formats and
partnerships
International
Sourcing and
Supply
Fuels & Infrastructure
Refining
Distribution
Wholesale
Retail
Convenience Retail
Our recent focus on building capability has been in the two parts of the value chain which offer the most material upside
As a key part of our group strategy, in 2018 Caltex extended and expanded its long-term partnership with Woolworths to
include the co-creation of a market-leading convenience offering as well as a long-term wholesale grocery supply, loyalty
and redemption arrangements. This new strategic partnership with Woolworths enables Caltex to strengthen and accelerate
its Convenience Retail Strategy while maintaining the fuel supply Woolworths petrol business, which further strengthens the
platform for long term Fuels & Infrastructure growth.
Creation of AmpolRecord production volumesAdvantaged national position 40
Operating and financial review continued
Caltex Group results 31 December 2018
On an historical cost profit basis, Caltex recorded an after-tax profit of $560 million for the 2018 full year, including significant
items of $12 million loss. This compares with the 2017 full year profit of $619 million, which included significant items of
$14 million loss. The 2018 result includes a product and crude oil inventory gain of $14 million after tax, which compares with
an inventory gain of $12 million after tax in 2017.
A reconciliation of the underlying result to the statutory result is set out in the following table:
Reconciliation of the underlying result to the statutory result
Net profit attributable to equity holders of the parent entity
Deduct/add: Significant items (gain)/loss
Deduct/add: Inventory (gain)/loss
RCOP NPAT (excluding significant items)
2018
$m
(after tax)
2017
$m
(after tax)
560
12
(14)
558
619
14
5
638
On an RCOP1,2 basis, Caltex recorded an after-tax profit for the 2018 full year of $558 million. This compares with an RCOP
after-tax profit of $621 million for the 2017 full year, excluding significant items.
CALTEX RCOP NPAT
Caltex RCOP NPAT
$m
700
600
500
400
300
200
100
0
341
344
287
263
265
262
294
296
175
180
256
165
2013
2014
2015
2016
2017
2018
■ 1H RCOP NPAT
■ 2H RCOP NPAT
Dividend
The Board has declared a final fully franked dividend of 61 cents per share for the second half of 2018, in line with the dividend
policy pay-out ratio of 50% to 70%. Combined with the interim dividend of 57 cents per share for the first half, this equates to a
total dividend of 118 cents per share for 2018 (fully franked). This compares with a total dividend payout of 121 cents per share
(fully franked) for 2017. The record and payment dates for the final dividend are 4 March 2019 and 5 April 2019 respectively.
1. Replacement cost of sales operating profit (RCOP) excluding significant items (on a pre- and post-tax basis) is a non-International Financial Reporting
Standards (IFRS) measure. It is derived from the statutory profit adjusted for inventory (gains)/losses, as management believes this presents a clearer
picture of the Company’s underlying business performance as it is consistent with the basis of reporting commonly used within the global oil industry.
This is unaudited. RCOP excludes the unintended impact of the fall or rise in oil and product prices (key external factors). It is calculated by restating
the cost of sales using the replacement cost of goods sold rather than the historical cost, including the effect of contract-based revenue lags.
2. Pricing lags on product sales has now been excluded from RCOP earnings, and now included in movement in inventory as a component of inventory
gain/loss. While 2017 HCOP profits remain unchanged, there has been a minor change in 2017 RCOP profits. All references to RCOP have been restated
within this document.
CALTEX AUSTRALIA 2018 Annual ReportDirectors’ ReportCONTINUED Income statement
For the year ended 31 December 2018
1.
2.
Total revenue1
Share of net profit of entities accounted for using the equity method*
Total expenses2
Replacement cost earnings before interest and tax
Finance income
Finance expenses
3. Net finance costs
4.
5.
Income tax expense3
Replacement cost of sales operating profit (RCOP)
Significant items gain/(loss) after tax
Inventory gain/(loss) after tax
Historical cost net profit after tax
Interim dividend per share
Final dividend per share
Basic earnings per share
Replacement cost (excluding significant items)
Historical cost (including significant items)
Discussion and analysis – Income statement
41
2018
$m
21,744
10
(20,928)
826
3
(52)
(49)
(218)
558
(12)
14
560
57c
61c
2017
$m
(restated)*
16,234
–
(15,275)
959
3
(70)
(67)
(254)
638
(14)
(4)
619
60c
61c
214c
215c
238c
237c
1. Total revenue
▲ 34%
Total revenue increased due to a combination of higher sales volumes, the impact of higher average
crude prices and revenue contributions from the acquisitions of Gull NZ, SEAOIL and Milemaker
Petroleum. Product prices are denominated in US dollars.
The weighted average Brent crude oil price in 2018 was US$71/bbl, compared to US$54/bbl
in 2017.
Total expenses also increased primarily as a result of higher replacement cost of goods sold due to
the higher price of refined product.
2. Total expenses –
replacement
cost basis
▲ 37%
1. Includes other income of $13 million (2017: $2 million).
* This amount was mistyped in the 2018 Preliminary Financial Statements, the correct rounding is now shown.
2. Includes significant item loss of $12 million (2017: $14 million loss).
3. Excludes tax payable on inventory gain of $6 million (2017: $6 million tax payable) and excludes tax cost on significant items of $5 million
(2017: $10 million).
* Product duties and taxes have been reclassified to be presented net in revenue. Appropriate disclosure has been included in the full year report of the
reclassification of prior period comparative amounts.
42
Operating and financial review continued
Income statement continued
RCOP EBIT breakdown1
Fuels & Infrastructure EBIT
$570m
Fuels & Infrastructure EBIT consists of the segment’s earnings on fuel products through the Lytton refinery, other
Australian earnings (including earnings on sales to the Convenience Retail segment) and International earnings.
Lytton EBIT in 2018 was $161 million, a decrease of 51% from 2017. The US dollar CRM was lower in 2018 at
US$9.99/bbl compared with US$13.02/bbl for 2017 (-23%). In AUD terms, the CRM was 8.40 Australian cents per litre
in 2018, compared with 10.67 Australian cents (-21%) per litre in 2017 driven by the lower USD margin, offset by a
slightly lower AUD. CRM represents the difference between the cost of importing a standard Caltex basket of products
to eastern Australia and the cost of importing the crude oil required to make that product basket. The CRM calculation
represents the average Singapore refiner margin + product quality premium + crude discount / (premium) + product
freight – crude freight – yield loss. Lytton production volumes were 6.2 billion litres (2017: 6.2 billion litres).
2018 Australian EBIT (excluding Lytton) was $358 million, $15 million increase on 2017 and International EBIT was
$68 million, $45 million increase on 2017.
Total Fuels & Infrastructure volumes increased by 7% to 20.4 billion litres in 2018. Australian sales (Convenience
Retail and Australian Wholesale) grew by a net 2% to 16.9 billion litres, with Australian wholesale volume (B2B,
Woolworths and other supply counterparties) growth of 4%, underpinned by growth from B2B in both diesel
and jet. Total sales volumes to Caltex Convenience Retail have fallen 4% to 4.9 billion litres in 2018. International
volumes (Gull, Ampol trading, Lytton exports) increased by 39% to 3.5 billion litres due to growth in Ampol activity,
a full period of contribution from Gull, and the commencement of managing supply for SEAOIL.
Convenience Retail EBIT
Convenience Retail EBIT consists of the segment’s earnings on fuel products and shop products at Caltex
convenience stores.
Convenience Retail EBIT was down 8% on 2017 due to the ongoing transition of franchise stores to company
operations and new format rollout. Convenience Retail fuel volumes fell 4% to 4.9BL in 2018, broadly in line with
the total market. Volume in 2018 was impacted by historically high board prices, from the increase in global crude
pricing and a decline in the Australian exchange rate through the year.
Corporate EBIT
Corporate operating expenses have increased by $10 million on 2017, due to costs associated with Group
projects, including the new Woolworths fuel supply agreement and expanded partnership arrangement.
RCOP EBIT excluding significant items
$307m
($51m)
$826m
1. The breakdown of RCOP shown here represents a management reporting view of the breakdown and, therefore, individual components may not
reconcile to statutory accounts.
CALTEX AUSTRALIA 2018 Annual ReportDirectors’ ReportCONTINUED
43
Discussion and analysis – Income statement continued
3. Net finance costs
▼ 26%
4. Significant items
after tax
$17m
Net finance costs decreased by $18 million compared with 2017. The drivers of the reduction
in interest cost is due to the unwinding of interest expense of the remediation provision, interest
savings from the hybrid redemption, partly offset by lower capitalised interest.
During 2018, there were net significant items of $17 million loss ($12 million loss after tax).
The significant items consist of the loss on exit from Caltex’s 49% interest in Kitchen Food
Company of $27 million, offset by the partial writeback of the Franchisee Employee Assistance
Fund ($10 million).
During 2017, there were net significant items of $24 million loss ($14 million loss after tax).
The significant items are a result of the announced establishment of the Franchisee Employee
Assistance Fund ($20 million), restructuring and redundancy costs associated with the capability
and competitiveness project Quantum Leap ($23 million), offset by the profit on sale of Caltex’s
fuel oil business and the utilisation of prior period capital losses to partially offset tax expense
on the profit on sale.
5. Inventory gain after tax
$12m
There was an inventory gain of $12 million after tax in 2018. Over time revenues will increase/
decrease as the price of products changes, this includes impacts from the AUD/USD exchange
rate movements. As Caltex holds crude and product inventory the price at which the inventory
was purchase will often vary from the price at the time of the revenue, thereby creating an
inventory gain or loss.
Business unit performance
Fuels & Infrastructure delivered an EBIT result of $570 million,
within the guidance range of $560-580 million provided in
December. This result includes unfavourable externalities
of $16 million, comprising a net realised loss (after hedging)
on foreign exchange.
Total Fuels & Infrastructure fuel sales volumes increased by
7% to 20.4BL in 2018, underpinned by a 39% increase in
international sales volumes to 3.5BL. This was due to growth
in Ampol activity, a full period of contribution from Gull NZ,
the commencement of managing supply on behalf of SEAOIL
and increasing international third-party sales.
Australian sales volumes (Convenience Retail and Australian
Wholesale) grew by a net 2% (0.3BL) to 16.9BL. Sales to
Australian Wholesale customers (excluding Woolworths) were
up by 10%, an exceptional result. This was partly offset by lower
sales to Caltex Convenience Retail and to Woolworths, reflecting
the decline in the Australian Retail fuel sector during 2018.
Included in the Fuels & Infrastructure 2018 result is an EBIT
contribution of $161 million from the Lytton refinery, down
$167 million due to the impact of lower refiner margins and
the impact of the previously announced refinery outage. The
average 2018 CRM was US$9.99 per barrel, which compares
unfavourably with the 2017 average of US$13.02 per barrel.
Total production was 6.2BL which is in line with 2017.
Convenience Retail delivered an EBIT result of $307 million,
above the guidance of $295-305 million provided in December.
During 2018, Caltex continued the transition of franchise
sites to Company operations, a key enabler of the
Company’s convenience retail strategy. A total of 182
franchise sites were transitioned to Company operations
during the year, with a total 516 sites within the Caltex Retail
network of 793 sites Company operated as of 31 December
2018. The transition of sites from franchise to company
operation impacted Retail earnings by approximately
$20 million and was a key driver of the Convenience Retail
EBIT result being 8% lower than the 2017 result.
The expanded Woolworths loyalty and fuel redemption
arrangements commenced in November 2018, with encouraging
early results. The first new Caltex Woolworths Metro convenience
store is now expected to open in 2H 2019.
Corporate costs total of $51 million increased by $10 million
on 2017, given major project activities (Woolworths strategic
partnership, the asset optimisation review, commercial
separation, and other business development opportunities)
in 1H 2018.
44
Operating and financial review continued
Balance sheet
as at 31 December 2018
Property, plant and equipment
Intangibles
1. Working capital
2.
3.
4. Net debt
5. Other non-current assets and liabilities
Total equity
Discussion and analysis – Balance sheet
2018
$m
822
2,890
554
(955)
78
3,389
2017
$m
595
2,818
517
(814)
(8)
3,108
Change
$m
227
72
37
(141)
86
281
1. Working capital
▲ $227m
2. Property, plant
and equipment
▲ $72m
3. Intangibles
▲ $37m
4. Net debt
▲ $141m
The increase in working capital is primarily driven by higher volume of trade sales outstanding,
and lower crude payables at 31 December 2018.
The increase in property, plant and equipment is primarily due to capital expenditure and accruals,
including major cyclical maintenance, of $293 million, partly offset by depreciation of $224 million
and disposals of $40 million.
Intangibles have increased primarily due to software additions of $62 million and an increase due
to foreign currency translation difference of $11 million, which is partly offset by amortisation of
$31 million, impairment of $3 million and disposals of $2 million.
Net debt increased by $141 million to $955 million at 31 December 2018. Caltex’s gearing
at 31 December 2018 (net debt to net debt plus equity) was 22.0%, increasing from 20.8%
at 31 December 2017. On a lease-adjusted basis, gearing at 31 December 2018 was 34.6%,
compared with 36.1% at 31 December 2017.
Current Sources of Funding
Debt Maturity Profile
Medium Term
Notes
Bilateral Bank
Facilities*
A$m
Source
Australian
and Asian
Institutional
300
1,946
Global Banks
$2,246m
* AUD equivalent. Includes $250m Inventory Finance
Facilities. Bank facilities contain an ‘evergreen provision’
to facilitate extensions.
A$
1,500
1,200
900
600
300
0
1,311
375
140
45
2019
2020
2021
2022
2023
300
75
Beyond
2023
■ Bilateral Bank Facilities*
■ Medium Term Notes
5. Other non-current
assets and liabilities
Other non-current assets and liabilities increased due to SEAOIL Investment, partly offset by
a decrease in deferred tax asset.
▲ $86m
CALTEX AUSTRALIA 2018 Annual ReportDirectors’ ReportCONTINUED
45
2018
$m
597
(426)
(223)
(38)
2017
$m
735
(800)
(135)
(200)
Change
$m
(138)
(374)
88
(162)
Cash flows
For the year ended 31 December 2018
Net operating cash inflows
1.
2. Net investing cash outflows
Net financing cash outflows
3.
Net increase/(decrease) in cash held(i)
Notes:
(i) Excluding effect of exchange rates on cash and cash equivalents.
Discussion and analysis – Cash flows
1. Net operating cash
inflows
▼ $138m
2. Net investing cash
outflows
▼ $374m
3. Net financing cash
outflows
▲ $88m
While receipts from customers are higher in 2018, this was more than offset by higher payments to
suppliers, employees and governments – as both are driven by current product prices and volumes.
Net investing cash outflows were lower in 2018, due to higher acquisition outlays in 2017,
particularly Gull NZ.
The net financing outflow in 2018 was driven by dividend payments of $308 million, partly offset
by net proceeds/repayments of borrowings of $87 million. In 2018 there was refinancing of bank
facilities and capital market borrowings.
Similarly, in 2017 the net financing outflow was driven by dividend payments of $292 million, partly
offset by net proceeds/repayments of borrowings of $159 million. In 2017 there was refinancing of
bank facilities and capital market borrowings.
Capital expenditure
Capital expenditure in 2018 totalled $469 million. Excluding major T&I spending at Lytton refinery of $39 million, capital
expenditure was $430 million. Capital expenditure in 2019 is expected to range between $320 million and $385 million.
CALTEX CAPITAL EXPENDITURE
Caltex Capital Expenditure
$m
1,000
800
600
400
200
0
329
95
385
469
503
454
353
2014
2015
2016
2017
2018
■ Capex (incl. T&I)
■ Milemaker acquisition
■ Gull acquisition
46
Operating and financial review continued
Business outlook and likely developments
This section includes information on Caltex’s prospects for
future financial years. As Caltex’s financial prospects are
dependent to a significant extent on external factors (such
as market competitiveness, exchange rates and refiner
margins), it is difficult to provide an outlook on Caltex’s
financial prospects. Therefore, this section includes a general
discussion of the key business drivers. To the extent that there
are statements which contain forward-looking elements, they
are based on Caltex’s current expectations, estimates and
projections. Such statements are not statements of
fact, and there can be no certainty of outcome in relation
to the matters to which the statements relate. Accordingly,
Caltex does not make any representation, assurance or
guarantee as to the accuracy or likelihood of fulfilment
of any forward-looking statements.
Overview
Caltex’s focus is to maintain a leading position within the
transport fuels industry regionally and growing convenience
retailing. In support of this, priorities include the optimisation
of the entire value chain from product sourcing to customer,
underpinned by the company’s product sourcing requirements
via Ampol Singapore.
The Lytton refinery will continue to focus on capturing further
operational and margin improvements.
Fuels and Infrastructure
Optimising our infrastructure position means we run our
assets in a safe and cost efficient way. This means we can
supply what our customers need, anywhere they need it,
safely and reliably, ultimately making their lives easier.
Ampol plays a critical role in our integrated value chain by
leveraging our infrastructure positions such as the Kurnell
terminal, optimising the supply chain around the Caltex
Lytton refinery, including crude and feedstock, sourcing from
a broader range of locations, and make-or-buy decisions
around premium fuels. The international market knowledge
provided by the experienced team and the strong shipping
and operational capability allows Caltex to access new
opportunities more rapidly as market conditions change.
This includes re-optimising the trade flow for Australia and
capturing sales into new markets such as New Zealand,
the Philippines and other regional supply locations.
Our conservative approach to trading and shipping remains
unchanged, with our activities focused on our strength of
physical supply and optimisation. We continue to improve
our risk management capability, by enhancing our prudent
commodity risk management systems to enable opportunities
in the international market, capture higher earnings and
reduce cash flow volatility.
We take pride in our expertise in managing complex supply
chains and have demonstrated continued investment in
distribution infrastructure into every corner of Australia
throughout 2018, enabling us to better serve our customers
and remain their supplier of choice.
Convenience Retail
As our customers’ needs and wants evolve, we continually
focus on making a difference for customers and building a
convenience retail offer that gives them a reason to come
to our sites whether that be to fill up their vehicle, enjoy a
barista made coffee or have a digitally enabled experience
to enjoy both.
During 2018, Caltex continued the transition of franchise
sites to Company operations, a key enabler of the Company’s
convenience retail strategy. A total of 182 franchise sites were
transitioned to Company operations during the year, with a
total 516 sites within the Caltex Retail network of 793 sites
Company operated as of 31 December 2018. The transition
of sites from franchise to company operation impacted
Retail earnings by approximately $20 million and was a key
driver of the Convenience Retail EBIT result being 8% lower
than the 2017 result.
The expanded Woolworths loyalty and fuel redemption
arrangements commenced in November 2018, with
encouraging early results. The first new Caltex Woolworths
Metro convenience store is now expected to open in 2H 2019.
Lytton
The Lytton refinery is Caltex’s sole refinery. Lytton Refinery
continues to deliver on its promise to be a safe, reliable and
competitive part of our supply chain.
Business risks and management
There are a number of risks that could have an impact on
Caltex achieving its financial goals and business strategy.
A range of factors, some of which are beyond Caltex’s control,
can influence performance across Caltex’s businesses.
Caltex has adopted a risk management framework to
proactively and systematically identify, assess and address
events that could potentially impact its business objectives.
This framework integrates the consideration of risk into the
Company’s activities so that:
• risks in relation to the effective delivery of the Company’s
business strategy are identified
• control measures are evaluated; and
• where potential improvements in controls are identified,
improvement plans are scheduled and implemented.
These risks are assessed on a regular basis by management,
and material risks are regularly reported to the Board
and its committees. These reports include the status
and effectiveness of control measures relating to each
material risk. The Board, the Audit Committee, the Safety
and Sustainability Committee and the Human Resources
Committee each receive reports on material risks relevant
to their responsibilities. The Board and the Safety and
Sustainability Committee also receive risk updates throughout
the year. Caltex’s Current Risk Management Summary and
Governance Polices and Documents are all available on its
website at www.caltex.com.au/our-company/investor-centre/
corporate-governance.
We have not included information where it would be likely
to result in unreasonable prejudice to Caltex. This includes
information that is confidential or commercially sensitive or
could give a third party a commercial advantage (for example,
details of our internal budgets and forecasts), except where
disclosure is required pursuant to our continuous
disclosure obligations.
CALTEX AUSTRALIA 2018 Annual ReportDirectors’ ReportCONTINUED Key areas of materiality Risks
Monitor and manage risk
47
• The CRM is a key metric which drives the
• Caltex regularly monitors the CRM and
Caltex Refiner Margin
(CRM)
Commodity Price Risk
profitability of Caltex’s refinery.
• The CRM represents the difference between
the cost of importing a standard Caltex basket
of products to eastern Australia and the cost of
importing the crude oil required to make that
product basket.
• A low CRM will adversely impact Caltex’s refining
earnings and cash flows.
• Caltex is exposed to the risk of price movements
in both crude and finished product through its
purchase and sales transactions, as these impact
Caltex’s earnings and cash flows.
Foreign Exchange Risk • Caltex is exposed to the effect of changes in
foreign exchange rates.
• Caltex purchases crude and products in USD and
sells predominantly in AUD, with pricing formulas
reflecting changes in the AUD/USD exchange
rate. Due to timing differences between payments
for purchases and pricing of sales, a change in
the foreign exchange rate may negatively impact
Caltex’s earnings and cash flow.
• Additionally, the CRM is determined principally
with reference to the USD Singapore spot
product price relative to the US dollar Brent crude
price. An increase in the AUD/USD exchange rate
will adversely impact Caltex’s Australian dollar
refiner margin, and therefore refining earnings
and cash flows.
reports this as part of its updates to senior
management and the Board.
• Caltex’s policy has been not to hedge
refiner margins.
• Caltex seeks to manage this exposure by
matching purchase and sales transactions
price timing where possible, and by utilising
both crude and finished product derivative
contracts to manage remaining exposures in
accordance with Group Treasury Policy.
• Foreign exchange contracts (forwards,
swaps and options) are used to hedge
foreign currency exposure in accordance
with Group Treasury Policy. The instruments
used to manage foreign exchange risk
expose Caltex to fair value foreign exchange
rate risk and counterparty credit risks.
• Exposure limits are set for each
counterparty to ensure that Caltex is not
exposed to excess counterparty credit risks.
Liquidity Risk
• Due to the nature of the underlying business,
Caltex must maintain sufficient cash and
adequate committed credit facilities to meet
the forecast requirements of the business. From
time to time, Caltex will be required to refinance
its debt facilities. There is no certainty as to
the availability of debt facilities or the terms on
which such facilities may be provided to Caltex
in the future.
• Caltex seeks to prudently manage
liquidity risk by maintaining a capital
structure that supports its activities and
centrally monitoring cash flow forecasts
and the degree of access to debt and
equity markets.
• A key element of its funding strategy is the
use of committed undrawn debt facilities,
with an extended facility maturity profile.
Operational Risk
• The nature of many of Caltex’s operations is
• To mitigate against potential losses from
inherently risky. Major hazards may cause injury
or damage to people and/or property. Major
incidents may cause a suspension of certain
operations and/or financial loss.
such risk, Caltex has in place:
– an integrated management system for
managing safety, health and environment;
and
• Caltex’s operations are heavily reliant on
information technology and these systems
could be disrupted due to external threat or
systems error.
– a comprehensive risk management
framework which actively manages
and mitigates these risks from the
corporate Group level through to the
local site operating level and involves
active engagement at the senior
management level.
• Caltex also manages certain major risk
exposures through its comprehensive
corporate insurance program, which
provides cover for damage to facilities and
associated business interruption as well as
product liability.
• Caltex’s information technology (IT) and
systems are subject to regular review and
maintenance and business continuity plans
are in place. Caltex actively monitors and
responds to potential local and global IT
security threats.
48
Business risks and management continued
Key areas of materiality Risks
Monitor and manage risk
Competitive Risk
• Caltex operates in a highly competitive market
• Caltex has in place various strategies
space, and could be adversely impacted by new
entrants to the market or increased competition
from existing competitors, changes in contractual
terms and conditions with existing customers,
and/or the loss of a major customer.
to manage competitive risks which are
designed to sustain and improve margins
by reducing costs, improving operating
efficiencies and encouraging sustainable
performance.
Environmental Risks
• Caltex imports, refines, stores, transports and
sells petroleum products. Therefore, Caltex
is exposed to the risk of environmental spills
and incidents. Caltex is also responsible for
contaminated sites which it operates or has
previously operated.
Demand for
Caltex’s Products
Labour Shortages
and Industrial Disputes
Caltex’s operating and financial performance
is influenced by a variety of general economic
and business conditions beyond Caltex’s
control, including:
• economic growth and development, the level of
inflation, and government fiscal, monetary and
regulatory policies;
in the event of a global or a local economic
downturn, demand for Caltex’s products and
services may be reduced; and
•
• advances in automotive technologies including
fuel efficiency improvements as well as
technology substitution to hybrids, electric
vehicles and fuel cell electric vehicles…
… all of which may operate to impact Caltex’s
financial performance.
There is a risk that Caltex may not be able to
acquire, deploy or retain the necessary labour for
operations and development projects. This may
disrupt operations or lead to financial loss.
Credit Risk
• Credit risk represents the loss that would be
recognised if counterparties failed to perform as
contracted. Primary credit exposure relates to
trade receivables.
• These strategies include the implementation
of organisational restructuring, geographic
diversification, and the allocation of capital
expenditure to those businesses with the
potential to deliver strong earnings growth.
• As part of its approach to managing
these risks, Caltex applies strict operating
standards, policies, procedures and training
to ensure compliance with all applicable
environmental laws; and Caltex’s spills
performance is a key performance metric.
• Caltex is focused upon achieving better
environmental outcomes across its business
as part of its strategy to deliver solid and
sustained performance.
• Further details on how Caltex manages its
environmental regulations and performance
are outlined below in ‘Environmental
regulations’.
• To manage these risks, Caltex has
implemented key initiatives to reduce
costs, improve operating efficiencies
and encourage sustainable performance
within Caltex.
• These initiatives include the implementation
of organisational restructuring, geographic
diversification, and the allocation of capital
expenditure to those businesses with the
potential to deliver strong earnings growth.
Caltex aims to be an employer of choice; it has
in place and actively manages its employee
agreements and it monitors the external
labour markets as well as its internal employee
retention data.
• Caltex has a Board approved credit policy
and a process for the management and
diversification of the credit risk to Caltex.
• The credit quality of Caltex’s customers
is consistently monitored to identify any
potential adverse changes in the credit risk
of the customers.
• Caltex minimises concentrations of credit
risk by undertaking transactions with a large
number of customers across a variety of
industries and networks.
• Security is required to be supplied by
certain groups of Caltex customers to
minimise risk.
CALTEX AUSTRALIA 2018 Annual ReportDirectors’ ReportCONTINUED 49
Key areas of materiality Risks
Monitor and manage risk
Climate Change
and Sustainability
• The physical and transitional risks associated
with climate change may affect our ability to
deliver shareholder value. The most significant
risks currently identified include reduced
demand for petroleum products due to
technology developments, changing consumer
preferences and market conditions, introduction
of carbon policies and regulatory burden and
supply disruptions.
Regulatory Risks
• Caltex operates in an extensively regulated
industry and operates its facilities under
various permits, licences, approvals and
authorities from regulatory bodies. If those
permits, licences, approvals and authorities
are revoked or if Caltex breaches its permitted
operating conditions, it may lose its right to
operate those facilities – whether temporarily
or permanently. This would adversely impact
Caltex’s operations and profitability.
• Changes in laws and government policy in
Australia or elsewhere, including regulations
and licence conditions could materially
impact Caltex’s operations, assets, contracts,
profitability and prospects. Some examples
of potentially impactful legislative changes
include amendments to the Fair Work Act (Cth),
specifically the protecting vulnerable workers
amendments; the modern slavery laws;
environmental law reforms; and potentially
Work Health and Safety Act reforms.
• The Board oversees our sustainability
approach, with the Board’s Safety and
Sustainability Committee assisting with
governance and monitoring as reflected in
the Committee’s Charter.
• Caltex focuses on building resilience to
the transitional and physical risks posed
by climate change including undertaking
scenario analysis, supporting the use of
renewable energy sources and low carbon
products, reducing the carbon intensity
of our operations, undertaking external
engagement and advocacy and improving
transparency and reporting.
• Caltex supports the recommendations of
the Task Force on Climate-related Financial
Disclosures and have developed an
implementation plan to ensure full alignment
by 2021. For further information, refer to the
2018 Sustainability Report due for release
on 28 March 2019.
• Caltex applies strict operating standards,
policies, procedures and training to ensure
that it remains in compliance with its various
permits, licences, approvals and authorities.
• Additionally, Caltex proactively manages
regulatory risks through a combination of
vigilance regarding current regulations,
contact with relevant bodies/agencies
and working in partnership with various
stakeholders to reduce the likelihood of
significant incidents that could impact Caltex
and/or the communities in which it operates.
• Caltex engages with regulatory bodies and
industry associations to keep abreast of
changes to laws.
• Caltex has in place a stakeholder
engagement plan that is actively managed
to mitigate the impact from major
policy changes.
Compliance with environmental regulations
In 2018, companies in the Caltex Group held 18 environmental
protection licences relating to the Lytton refinery, nine
terminals, one aviation refuelling facility, a lubricants
manufacturing facility, a bulk shipping facility, four depots
(under two licences) and three service stations.
Any instances of non-compliance against these licences were
reported to the environmental regulator. All significant spills
and environmental incidents were recorded and reported as
required to government authorities.
Regular internal audits are carried out to assess the efficacy
of management systems to prevent environmental incidents,
as well as to control other operational risks. Improvement
actions determined through the audit process are reviewed
by the Board’s Safety and Sustainability Committee and
senior management.
Caltex is committed to achieving 100% compliance with
environmental regulations and to ensuring that all licence
breaches have been investigated thoroughly, and corrective
actions are taken to prevent recurrence.
The business had no environmental infringements in 2018.
Lead auditor’s independence declaration
The lead auditor’s independence declaration is set out on
page 70 and forms part of the Directors’ Report for the
financial year ended 31 December 2018.
50
Events subsequent to the end of the year
On 20 February 2019, the Group announced changes to
its senior leadership team. Richard Pearson will leave the
role of Executive General Manager, Convenience Retail,
in March 2019. Caltex announced that Joanne Taylor will
then be appointed as the Executive General Manager,
Convenience Retail.
On 26 February 2019, the Group announced its intention
to conduct an off-market share buy-back of approximately
$260 million, which is expected to be completed in the
second quarter of 2019.
There were no items, transactions or events of a material
or unusual nature that are likely to significantly affect the
operations of Caltex, the results of those operations or the
state of affairs of the Group subsequent to 31 December 2018.
Environmental regulations
Caltex is committed to compliance with Australian laws,
regulations and standards, as well as to minimising the impact
of our operations on the environment. The Board’s Safety and
Sustainability Committee addresses the appropriateness of
Caltex’s OHS and environmental practices to manage material
health, safety and environmental risks, so that these risks are
managed in the best interests of Caltex and its stakeholders.
Caltex sets key performance indicators to measure
environmental, health and safety performance and drive
improvements against targets. In addition to review by the
Board, progress against these performance measures is
monitored regularly by the Managing Director and CEO and
the Executive General Managers.
Risks are examined and communicated through the Caltex
Risk Management Framework, an enterprise-wide risk
management system which provides a consistent approach
to identifying and assessing all risks, including environmental
risks. Under the framework, risks and controls are assessed,
improvements are identified, and regular reports are made
to management and the Board.
The Caltex Operational Excellence Management System
is designed to ensure that operations are carried out in
an environmentally sound, safe, secure, reliable and efficient
manner. Its operating standards and procedures support
the Caltex Environment Policy, and the Caltex Health
and Safety Policy.
In 2018, Caltex made its tenth submission under the National
Greenhouse and Energy Reporting Scheme, reporting energy
consumption and production as well as greenhouse gas
emissions from Group operations. Caltex also continued to
disclose information on emissions under the National Pollutant
Inventory. Caltex continues to remain a signatory to the
Australian Packaging Covenant.
CALTEX AUSTRALIA 2018 Annual ReportDirectors’ ReportCONTINUED 51
Remuneration Report
The Directors of Caltex Australia Limited present the Remuneration Report prepared in accordance with section 300A of the
Corporations Act 2001 (Cth) (Corporations Act) for the Caltex Group for the year ended 31 December 2018.
The information provided in this Remuneration Report has been audited as required by section 308(3C) of the Corporations Act,
apart from where it is indicated that the information is unaudited.
1. Remuneration snapshot
1a. Key Management Personnel (KMP)
This Remuneration Report is focused on the KMP of Caltex, being those persons with authority and responsibility for planning,
directing and controlling the activities of Caltex. KMP includes the Non-executive Directors and Senior Executives (including
the Managing Director and CEO).
Unless otherwise indicated, the KMP were classified as KMP for the entire financial year.
Current Non-executive Directors
Steven Gregg
Trevor Bourne
Mark Chellew
Melinda Conrad
Bruce Morgan
Barbara Ward AM
Penny Winn
Current Senior Executives
Julian Segal
Simon Hepworth(i)
Richard Pearson(ii)
Louise Warner
Chairman and Independent, Non-executive Director
Independent, Non-executive Director
Independent, Non-executive Director (appointed 2 April 2018)
Independent, Non-executive Director
Independent, Non-executive Director
Independent, Non-executive Director
Independent, Non-executive Director
MD and CEO
Chief Financial Officer
Executive General Manager, Convenience Retail
Executive General Manager, Fuels and Infrastructure
Note:
(i) Mr Hepworth has announced he intends to retire in mid-2019. Matthew Halliday will assume the position of Chief Financial Officer from 15 April 2019,
with Mr Hepworth working with Mr Halliday for a transition period.
(ii) On 20 February 2019, the Group announced changes to its senior leadership team. Richard Pearson will leave the role of Executive General Manager,
Convenience Retail, in March 2019. Caltex announced that Joanne Taylor will then be appointed as the Executive General Manager, Convenience Retail.
1b. Senior Executive remuneration outcomes in 2018
Remuneration element Outcome
MD and CEO
remuneration
There were no changes to the fixed remuneration of the MD and CEO remuneration package in 2018.
The MD and CEO’s target STI opportunity increased from 60% to 70% of base salary and stretch STI
opportunity increased proportionally to 140%.
Other Senior Executive
remuneration increase
No Senior Executive, aside from the EGM Fuels and Infrastructure received a salary increase in 2018.
The EGM Fuels and Infrastructure received a fixed remuneration increase of 13.8%. This increase
reflects enhanced capability within the role, ensures scope and responsibilities between roles are
appropriately rewarded and seeks to address relativities between Senior Executives.
STI
LTI
RCOP NPAT performance in 2018 was 88.9% of target and the average 2018 STI award for Senior
Executives was 87.9% of target. The outcome continues to demonstrate the strong alignment
between STI payments and profit achieved.
The 2015 LTI grant had a performance period from 1 January 2015 to 31 December 2017 and vested
in April 2018. This grant was subject to the achievement of relative TSR against S&P/ASX 100
companies (75%), and a strategic profit growth measure (25%).
Over the 2015 to 2017 performance period, when averaged for TSR purposes, Caltex’s share price
increased from $31.08 to $34.00 and its TSR was 31.2%. This placed Caltex at the 32nd percentile
against S&P/ASX 100 companies, resulting in no vesting for the TSR portion of the 2015 LTI grant.
The Board determined that the Company performed very well against the strategic growth measures
due to strong profit growth in step-out ventures in Ampol. As a result, 22.38% of the 2015 grant
vested on 1 April 2018 and the remaining 77.62% lapsed. There was no clawback during 2018.
52
Remuneration Report continued
1. Remuneration snapshot continued
1c. Summary of 2018 Non-executive Director fees
Non-executive Director fees are fixed and do not have any variable components. The Chairman receives a fee for chairing the
Caltex Board and is not paid any other fees. Other Non-executive Directors receive a base fee and additional fees for each
additional Committee chairmanship and membership, except for the Nomination Committee where no additional fee is paid.
Non-executive Director base fees increased by 2% in 2018, after no increases in 2017. Audit and Human Resources Committee
Chairs also received a $10,000 increase in Chair fees, with the Safety and Sustainability Chair receiving a $4,000 increase.
All Committee membership fees increased by $2,000, aside from the Nomination Committee for which no fees are paid.
Superannuation contributions were made at a rate of 9.5%. No additional retirement benefits were paid.
Fees paid to Non-executive Directors are subject to a maximum annual Non-executive Director fee pool of $2.5 million (including
superannuation). This fee pool was approved by shareholders at the 2016 AGM and was not increased at the 2018 AGM.
See sections 4a and 4b for further detail.
1d. Outlook for FY19 (unaudited)
Key issues and changes to remuneration arrangements in FY19 are outlined below:
Change
MD and CEO
remuneration
Commentary
The Board determined that it would again freeze the fixed remuneration of the MD and CEO for 2019,
and there are no changes to his remuneration. The MD and CEO last received a fixed remuneration
increase in April 2015.
Senior Executive
remuneration
No Senior Executive, aside from the EGM Fuels and Infrastructure, will receive a salary increase
in 2019.
The EGM Fuels and Infrastructure will receive a fixed remuneration increase of 6% which is aligned
with market and reflects a strong 2018 performance by the Fuels and Infrastructure business unit.
LTI
See section 3d for further detail on the performance of the 2016 LTI award which vests in April 2019.
Non-executive
Director fees
Non-executive
Director fee pool
Non-executive Director fees will not change in 2019 with the exception of an increase to the Safety
and Sustainability Chair fees of $6,000 bringing its fee into line with other Committee Chair fees.
There will be no change to the Non-executive Director fee pool for 2019.
2. Oversight and external advice
2a. Board and Human Resources Committee
The Board takes an active role in the governance and oversight of Caltex’s remuneration policies and practices. Approval of
certain key human resources and remuneration matters are reserved for the Board, including setting remuneration for Directors
and Senior Executives and any discretion applied in relation to the targets or funding pool for Caltex’s incentive plans.
The Human Resources Committee assists the Board to fulfil its corporate governance and oversight responsibilities in relation
to Caltex’s remuneration framework, incentive plans, succession planning, remuneration and diversity and inclusion disclosures,
including setting the measurable objectives for achieving diversity and inclusion. It also reviews, on an annual basis, progress
made towards achieving these objectives.
The Human Resources Committee undertakes functions delegated by the Board, including approving Caltex’s annual
remuneration program and aspects of its incentive plans.
The Human Resources Committee seeks to put in place appropriate remuneration arrangements and practices that are clear
and understandable, that attract and retain talent and capability, and support superior performance and long-term growth in
shareholder value.
Further information about the role of the Board and the Human Resources Committee is set out in their charters, which are
available on the Company’s website (www.caltex.com.au).
CALTEX AUSTRALIA 2018 Annual ReportDirectors’ ReportCONTINUED 53
2b. External advice
The Human Resources Committee is independent of management and is authorised to obtain external professional advice as
necessary. The use of external specialists to provide advice and recommendations specifically in relation to the remuneration
of Non-executive Directors, the MD and CEO and Senior Executives is either initiated directly, or approved by, the Human
Resources Committee, and these specialists are directly engaged by the Human Resources Committee Chairman.
During 2018, Caltex received ‘remuneration recommendations’ (as defined in the Corporations Act) from Aon Hewitt in relation
to Non-executive Director fees and the remuneration for the MD and CEO and other Senior Executives.
Aon Hewitt has provided a formal declaration confirming that the recommendations provided were free from ‘undue influence’
by the members of the KMP to whom the recommendations were related, and the Board is satisfied that the recommendations
were made free from any undue influence. No KMP were involved in the selection and appointment of Aon Hewitt or in the
development of any advice or recommendations in relation to their own roles.
The fee paid to Aon Hewitt for the above remuneration advice and recommendations was $39,326 excluding GST. Aon Hewitt
also provided additional services (Finance and HR related) to Caltex over 2018. The fee for these additional services was
$28,950 excluding GST.
3. Senior Executive remuneration
3a. Remuneration philosophy and structure
The overarching goal of the Caltex remuneration philosophy and structure is to support the delivery of top quartile shareholder
returns, the Company’s key measure of success. The guiding philosophy for how Caltex rewards Senior Executives and all other
employees is outlined below:
Guiding philosophy
Commentary
Alignment with
shareholders’ interests
The payment of short-term incentives is dependent upon achieving financial and non-financial
performance measures that are aligned with shareholders’ interests. Long-term incentives are
aligned with the Company’s key measure of success (Total Shareholder Return) and focuses
Executives on long-term decision-making using Return on Capital Employed (ROCE) as the
secondary measure (from 2019).
Share retention arrangements within the LTI scheme require all Executives to build up and maintain
shareholdings to encourage further alignment with Caltex shareholders.
Further detail on these measures is outlined in section 3d.
Performance focused
and differentiated
The Company’s reward, performance planning and review systems are closely integrated to maintain
a strong emphasis and accountability for performance at the Company, department and individual
levels. Rewards are differentiated to incentivise and reward superior performance.
Market competitive
Ensure gender equity
in remuneration
outcomes
All elements of remuneration are set at competitive levels for comparable roles in Australia and allow
Caltex to attract and retain quality candidates in the talent market.
Remuneration is reviewed to remove gender-based pay differences on a like-for-like job level basis.
Market positioning and peer groups
The Company’s remuneration philosophy is to position fixed remuneration at the median of a customised peer group of
companies, with total remuneration able to reach the upper quartile for outstanding performance. For 2018, the customised
peer group consisted of 20 companies that are broadly of comparable size and complexity and which the Board considers
to be leading competitors for capital and people.
The Board recognises that external stakeholders often assess pay reasonableness against a pure market capitalisation peer
group. Due to this, in making pay decisions, the Board also considers pay positioning against a secondary peer group.
This secondary peer group consists of 20 companies (10 with a market capitalisation directly above, and 10 with a market
capitalisation directly below, that of Caltex). Externally managed trusts and overseas domiciled companies are excluded.
Remuneration structure
Our Senior Executive remuneration structure consists of:
1. Fixed remuneration – this comprises base salary, non-monetary benefits and superannuation. Superannuation is payable
at a rate of 9.5% of base salary and on any cash short-term incentive payments. Where an employee’s superannuation
contributions are above the superannuation contributions limit, the employee may elect to receive the excess amount
as cash in lieu of superannuation.
2. Variable remuneration – this comprises a mix of cash short-term incentive (only payable if a RCOP NPAT gateway of 80%
is met) and equity-based incentives awarded upon the achievement of financial and non-financial performance measures.
Superannuation is also paid on any short-term incentive payments.
The remuneration structure (including the remuneration mix) is reviewed annually by the Board.
54
Remuneration Report continued
3. Senior Executive remuneration continued
3b. Remuneration mix
The ‘at target’ remuneration mix for Senior Executives is outlined below.
The remuneration mix is skewed towards variable pay to better align Executive pay and performance, and within the variable
pay components, the mix is skewed towards the long-term incentive. External advisers have confirmed that Caltex has a more
stretching relative TSR vesting schedule than most ASX 100 companies. See section 3d for further information on the relative
TSR vesting schedule.
2018 Remuneration mix “at target”
MD and CEO
37%
26%
Other Senior
Executives
0%
20%
45%
40%
27%
60%
80%
■ Base Salary
■ At Risk – STI Cash
■ At Risk – Equity
37%
28%
100%
Notes:
(i) ‘At target’ performance in the remuneration mix for ‘Other Senior Executives’ reflects a STI target of 60% of base salary for Mr Hepworth, Mr Pearson
and Ms Warner.
(ii) LTI Equity comprises performance rights granted under the Caltex Equity Incentive Plan (CEIP). It assumes that the relative TSR measure is achieved at
the 75th percentile, with the profit growth and strategic convenience retail measure achieved at target. Grants of performance rights under the CEIP are
made at the maximum stretch level of 150% of base salary for the MD and CEO and 90% of base salary for other Senior Executives. The proportion of
the grant that vests is based on meeting service and performance conditions.
3c. Performance based ‘at risk’ remuneration – 2018 STI Plan
Plan
STI awards are made under the Rewarding Results Plan.
Plan rationale
Performance period
2018 target and
maximum stretch
opportunity levels
Financial gateway
Use of discretion
Payment vehicle
The Plan rewards a combination of financial and non-financial performance measures that are
aligned to the creation of shareholder value. Primary emphasis is placed on RCOP NPAT, and
the non-financial measures focus our Executives and employees on executing the most critical
objectives aligned to the annual business plan.
The performance period is for 12 months ending 31 December 2018.
MD and CEO – the target STI opportunity is 70% of base salary and the maximum stretch STI
opportunity is 140% of base salary.
Other Senior Executives – the target STI opportunity is 60% of base salary and the maximum stretch
STI opportunity is 120% of base salary.
RCOP NPAT performance, including the cost of incentives, needs to be at least at 80% of target
before any short-term incentives are payable.
The Human Resources Committee, in its advisory role, reviews proposed adjustments to Rewarding
Results outcomes where there are exceptional unforeseen and uncontrollable impacts on the agreed
performance measures and makes recommendations for any changes to performance measures,
which may only be approved by the Board.
During 2018, the Board determined that RCOP NPAT would be adjusted for two items in the
financial statements that are classified as significant items, specifically the Kitchen Food Co
expense write-off would be included and the Franchisee Employee Assistance Fund write-back
excluded for incentive purposes. Accordingly, the adjusted RCOP NPAT to be used for incentive
purposes is $538 million.
STI awards are delivered in cash. STI deferral was removed for STI awards made to Senior
Executives from payments made in 2016 onwards because the long-term incentive share retention
arrangements came into place at this time. See section 3d for further detail.
Payment frequency
STI awards are paid annually. Payments are made in April following the end of the
performance period.
Setting and evaluating the performance of Executives in 2018
Performance measures for 2018 were derived from the business plan in line with the Company direction set by the Board. The
Board approved the 2018 business plan and has regularly monitored and reviewed progress against plan milestones and targets.
The approved Caltex business plan was then translated into department objectives. The Company objectives were approved by
the Human Resources Committee at the start of the performance year.
Within each business unit, specific performance agreements were then developed for individual employees, thus completing the
link between employees and the delivery of the business plan. Performance agreements must be agreed between the employee
and his or her manager. Senior Executives set their performance agreements jointly with the MD and CEO, and the MD and
CEO’s performance objectives are approved by the Board.
CALTEX AUSTRALIA 2018 Annual ReportDirectors’ ReportCONTINUED 55
Senior Executive performance objectives and outcomes
The table below outlines the common performance objectives that applied to all the Senior Executives over 2018. These
measures accounted for between 50% and 55% of the Senior Executives’ scorecards. The remaining 45-50% of performance
objectives were customised to the Executive’s remit. Such objectives included delivery of specific strategic growth projects/
milestones, achievement of divisional EBIT targets, and achievement of key retail development targets. For the MD and CEO’s
scorecard, the additional objectives included Fuels and Infrastructure strategic objectives (15%, focusing on growth in profitable
fuels volume and profitable M&A ventures), Convenience Retail strategic objectives (15%, focusing on Retail EBIT, the Franchisee
transition project, and Convenience Development growth metrics) and a People Capability objective (10%, with Succession,
Capability and Diversity targets). Actual performance against the common objectives has been provided.
Measure
Descriptor
of measure
Weighting
Actual performance range
Commentary on performance
l
B
e
o
w
T
h
r
e
s
h
o
d
l
Personal safety
– Fuels and
Infrastructure
Performance is
measured based on
the total treatable
injury frequency rate
(TTIFR)
5-7.5%
Personal safety
– Convenience
Retail
Performance is
measured based on
the total treatable
injury frequency rate
(TTIFR)
5%
ü
Process safety
(assessed at
company or
business unit
level)
Performance is
measured based on
the number of spills
5-7.5%
RCOP NPAT
See explanation of
RCOP NPAT below
40%
Free cash flow
(FCF)
FCF excluding
growth capital
expenditure and
dividends
5%
T
a
r
g
e
t
S
t
r
e
t
c
h
T
a
r
g
e
t
t
o
S
t
r
e
t
c
h
ü
l
T
h
r
e
s
h
o
d
t
o
T
a
r
g
e
t
ü
ü
ü
In FY 2018 the F&I personal safety
performance as measured by Total
Recordable Injury Frequency Rate (TRIFR)
was 7.71 which historically (based upon
the last five years) is a solid result and
represents an improvement of 6% over the
previous year. The Days Away from Work
Injury Frequency Rate (DAFWIFR, formerly
known as the lost time injury frequency rate)
at 1.45 is down from 2.21 in 2017.
Personal Safety results in Convenience Retail
did not meet the threshold performance
with a 2018 TRIFR achieved of 10.43. The
majority of the incidents involved slips,
trips and falls and less significant muscular
skeletal injuries arising from employees’
duties. Several key initiatives have been
rolled out or are being developed to
address personal safety performance
in Convenience Retail.
2018 spill and process safety results
represented a very strong result for
Caltex. There were no major spills or
marine spills and four recordable spills.
This compares with nine recordable spills in
2017. A similar positive trend is observable
in Tier 1 and Tier 2 process safety incidents.
The 2018 RCOP NPAT result was below a
challenging target for 2018. Despite strong
results from our expanded international F&I
business, growth in Australian wholesale
sales volume, and the retention of fuel
supply to the Woolworths network, our
profit was impacted by weakness in regional
refining margins.
Free cash flow results were between
threshold and target for 2018.
If business objectives are achieved at threshold level, 60% of the target STI opportunity would be payable. If 100% of the target
is achieved, 100% of the STI target opportunity would be payable. If business objectives are achieved at the maximum level,
200% of the STI target opportunity would be payable. Payments are pro-rated between threshold and target, and between
target and maximum. This payout schedule deliberately incentivises over-plan performance.
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Remuneration Report continued
3. Senior Executive remuneration continued
3c. Performance based ‘at risk’ remuneration – 2018 STI Plan continued
RCOP NPAT (explanation of the relevance of this measure to the Caltex business and treatment of significant items)
The Board has selected replacement cost of sales operating profit (RCOP) NPAT as the primary STI measure because RCOP
NPAT removes the impact of inventory gains and losses, giving a truer reflection of underlying financial performance.
Gains and losses in cost of goods sold due to fluctuations in the AUD price of crude and product prices (which are impacted by
both the USD price and the foreign exchange rate) constitute a major external influence on Caltex’s profits. RCOP NPAT restates
profit to remove these unintended impacts. The Caltex RCOP methodology is consistent with the methods used by other
refining and marketing companies for presentation of their financial results.
As a general rule, an increase in crude prices on an AUD basis will create an earnings gain for Caltex (but working capital
requirements will also increase). Conversely, a fall in crude prices on an AUD basis will create an earnings loss. This is a direct
consequence of the first in first out (FIFO) costing process used by Caltex in adherence with accounting standards to produce
the financial result on a historical cost basis.
With Caltex holding approximately 30 to 45 days of inventory, revenues generally reflect current prices in Singapore whereas
FIFO costing reflects costs some 30 to 45 days earlier. The timing difference creates these inventory gains and losses.
To remove the impact of this factor on earnings and to better reflect the underlying performance of the business, the RCOP
NPAT methodology calculates the cost of goods sold on the basis of theoretical new purchases instead of actual costs from
inventory. The cost of these theoretical new purchases is calculated as the average monthly cost of cargoes received during
the month of those sales. Similarly, where there are sales revenues on a different basis to current month pricing, the revenue
is recalculated on current pricing with the resulting pricing lag a component of reported inventory gains and losses.
Each year the Board reviews any significant items, positive and negative, and considers their relevance to the RCOP NPAT result.
The Board may exclude any exceptional events from RCOP NPAT that management and the Board consider to be outside the
scope of usual business. Exclusions may be made to give a clearer reflection of underlying financial performance from one
period to the next.
3d. Performance based ‘at risk’ remuneration – 2018 LTI Plan
Plan
LTI awards are granted under the CEIP.
Plan rationale
The Plan aligns Executive rewards with the shareholder experience. This is done through the use of
relative TSR as the primary performance measure, and through the use of strategic growth measures
which contribute towards the delivery of top quartile shareholder returns as the secondary measure.
The Plan has also been designed to act as a retention mechanism and to encourage Senior Executives
to build and retain Caltex shares over the long term.
LTI instrument
Performance rights are granted by the Company for nil consideration. Each performance right is a right to
receive a fully-paid ordinary share at no cost if service-based and performance-based vesting conditions
are achieved. Performance rights do not carry voting or dividend rights.
The Board may determine to pay Executives the cash value of a share in satisfaction of a vested
performance right, instead of providing a share or restricted share. It is expected such discretion will only
be exercised in limited cases, typically where the Executive is a ‘good leaver’ from Caltex, i.e. where the
employee ceases employment due to redundancy or retirement.
Allocation
methodology
The number of performance rights granted is determined by dividing the maximum opportunity level
by the 20-day volume weighted average share price up to the first day of the performance period,
discounted by the value of the annual dividend to which the performance rights are not entitled.
No discount is applied for the probability of achieving the performance measures.
Performance
period
2018 target and
maximum stretch
opportunity
levels
The performance period is three years commencing on 1 January in the year the awards are made.
For the 2018 awards, this is the three-year period from 1 January 2018 to 31 December 2020.
The MD and CEO received a grant of performance rights based on a maximum stretch LTI value of 150%
of base salary. The target LTI value is 100% of base salary.
Other Senior Executive grants were based on a maximum stretch LTI value of 90% of base salary.
The target LTI value is 60% of base salary.
CALTEX AUSTRALIA 2018 Annual ReportDirectors’ ReportCONTINUED 57
Performance
measures
For 2018, the LTI performance measures were relative TSR (weighted at 60%), a Fuels and Infrastructure
strategic growth measure (weighted at 20%), and two Convenience Retail measures (each weighted at 10%).
Relative TSR
Relative TSR is assessed against a comparator group of S&P/ASX 100 companies. The vesting schedule is:
Performance scale
Vesting %
Below Threshold
Threshold: 50th percentile
Between Threshold and Target
Target: 75th percentile
Between Target and Stretch
Stretch: 90th percentile
Zero
33.3% of the rights will vest
Pro-rata vesting occurs between these relative performance levels
66.6% of the rights will vest
Pro-rata vesting occurs between these relative performance levels
100% of the rights will vest
Strategic growth measures – Fuels and Infrastructure
The 2018 Fuels and Infrastructure growth measure will measure material changes to earnings which result
from mergers and acquisitions and step-out ventures. The growth will be measured in annualised RCOP
EBIT. The scope of the metric will not include growth in existing business activities. Before this hurdle is
assessed, the Board must also be satisfied that an appropriate return on average funds employed gateway
has been met for any applicable M&A project.
The Board may exercise discretion regarding both the application of the gateway and in assessing
how the profit growth result is measured. This measure was chosen as it reflects the importance of
earnings growth outside our core business in achieving Caltex’s key success measure of top quartile
shareholder returns.
Strategic growth measures – Convenience Retail
There are two evenly weighted components to this measure.
One component of this measure is the successful integration of franchisee-operated stores into the
Calstores company operation over the three-year period to 31 December 2020. It will be measured by
the Board’s assessment of several project criteria including:
• the quality of teamwork, stakeholder management (including the fair and equitable treatment of
franchisees and their employees), communications and change management;
• delivery of project milestones on time; and
• any material changes in circumstances affecting the schedule and costs of the project.
This measure has been chosen due to the major impact that this project will have on the future of
the Company’s Convenience Retail strategy and the importance the Board places on management
ensuring that this project is executed/carried out fairly and equitably with regard to treatment of all
the key stakeholders.
The second Convenience Retail measure also has a 10% weighting and will measure the incremental
earnings resulting from new format stores, M&A and step-out ventures in the Company’s Convenience
Retail division. Growth will be measured based on EBIT from sites that have been converted to new Caltex
formats or from other new retail business ventures including M&A. When this is assessed, the Board must
be satisfied that an appropriate return on average funds employed gateway has been met. This measure
was chosen as it reflects the importance of earnings growth in our Convenience Retail division from new
format stores, and/or M&A at an appropriate return in the Convenience Retail area, in achieving Caltex’s
key success measure of top quartile shareholder returns.
For all strategic measures, at threshold performance 33.3% of rights vest, at target 66.66% of rights vest,
with 100% of rights vesting requiring a stretch performance level. Pro-rata vesting occurs between these
relative vesting levels.
Disclosure of performance outcomes
Specific details of the strategic measures have not been disclosed due to commercial sensitivity.
However, in the 2020 Remuneration Report, the Board will set out how Caltex performed against these
measures. See below in this section for the Board’s rationale for the performance outcomes of the LTI
awards that were granted in 2016 and that vest in April 2019.
Shares to satisfy vested performance rights are usually purchased on market.
Shares allocated upon vesting of performance rights will carry the same rights as other ordinary shares
(including dividends and voting rights).
Shares acquired
upon vesting of
the performance
rights
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Remuneration Report continued
3. Senior Executive remuneration continued
3d. Performance based ‘at risk’ remuneration – 2018 LTI Plan continued
Share retention
arrangements
The share retention arrangements are designed to encourage all Executives to build up and maintain
sizeable shareholdings in Caltex for a longer period of time and further align the interests of Caltex
Executives and shareholders.
Under the share retention arrangements, 25% of the vested portion of performance rights will be
converted into restricted shares. These shares are unable to be sold for a further period of four years
(until 1 April 2025 for the 2018 LTI awards). This effectively extends the life of the LTI plan from three years
to seven years. For LTI awards from 2016, retention arrangements may be waived if the Executive can
demonstrate he or she holds the equivalent of 100% of their base salary in shares prior to vesting.
Based on this policy, if it is assumed that the LTI awards vest at target levels over a period of four years,
the MD and CEO and Senior Executives would have theoretical shareholdings of 100% and 60% of their
base salary respectively.
On ceasing employment, all dealing restrictions on the restricted shares cease to apply, subject to the
application of the Clawback Policy.
Clawback Policy
See section 3e for information on the Caltex Clawback Policy.
Termination
provisions
If a participant ceases to be an employee due to resignation, all unvested equity awards held by the
participant will lapse, except in exceptional circumstances as approved by the Board.
The Board has the discretion to determine the extent to which equity awards granted to a participant under
the LTI plan vest on a pro-rated basis where the participant ceases to be an employee of a Group company
for reasons including retirement, death, total and permanent disablement, and bona fide redundancy. In
these cases, the Board’s usual practice is to pro-rate the award to reflect the portion of the period from the
date of grant to the date the participant ceased to be employed. In addition, the portion of the award that
ultimately vests is determined by testing against the relevant performance measures at the usual time.
Any unvested performance rights may vest at the Board’s discretion, having regard to pro-rated
performance.
Change
of control
provisions
Legacy LTI awards
The 2016 and 2017 LTI awards will vest in April 2019 and April 2020 respectively. The operation of these awards is broadly
consistent with the 2018 awards, with a 60% weighting on relative TSR and 40% strategic measures (with the 2017 award having
two strategic measures). Further detail on these awards is set out below, including the vesting performance for the 2016 award.
Performance measure
Commentary
Relative TSR – 2017 grant
The operation of the relative TSR measure is the same as that outlined above under the
2018 awards.
Strategic measures
Performance measures
2017:
The profit growth strategic measure is based on a profit growth target at the end of 2019
(in reference to 2016) attributable to M&A (core and non-core) and step-out ventures
(new products/services/geographies), excluding refining activities (20% weighting). A RoAFE
financial gateway applies to the 2017 strategic profit growth measure.
The second 2017 strategic hurdle measures the implementation of Caltex’s Convenience
Retail strategy. The Board will measure this through both quantitative and qualitative metrics,
including: the roll-out of new format across the existing and new Calstores network; the
average percentage sales uplift per store; and a customer metric, based on improvement in
customer feedback using net promoter score methodology (20% weighting).
Disclosure and performance assessment
2017: The Board will set out in the 2019 Remuneration Report how Caltex performed against
the 2017 measures, including the Board’s rationale for the relevant vesting percentage.
CALTEX AUSTRALIA 2018 Annual ReportDirectors’ ReportCONTINUED 59
2016 LTI vesting outcomes
Relative TSR (60% weighting)
The operation of the 2016 relative TSR measure was the same as that outlined above under the 2018 awards. Caltex’s
three-year TSR performance compared to S&P/ASX 100 companies over the period from 1 January 2016 to 31 December 2018
was -16%, placing it at the 8th percentile of the comparator group. As no percentage of this tranche vests unless the Company’s
TSR performance achieves at least the 50th percentile performance, no portion of the performance rights subject to the relative
TSR performance measure will vest on 1 April 2019.
Profit growth (40% weighting)
The strategic measure is based on a profit growth target at the end of 2018 (in reference to 2015) attributable to M&A (core
and non-core) and step-out ventures (new products/services/geographies), excluding refining activities. As at the end of 2018,
three ventures have collectively generated NPAT of over $77 million of profit growth in 2018, the final year of the 2016 to 2018
performance period when compared to that budgeted by Caltex at the start of the performance period.
These three ventures were:
• Acquisition of Gull New Zealand which has driven strong growth in volumes sold and new site growth;
•
Investment in SEAOIL which has provided an excellent return on investment, driving new supply opportunities for Ampol; and
• Continued step-out and growth initiatives by Ampol in areas such as freight optimisation, blending optimisation and arbitrage
opportunities as well as growth in third party sales.
All three ventures exceeded their RoAFE gateway set out in the applicable business case for the venture; or, where there was
no explicit business case, they exceeded the Board’s RoAFE target of 15%. This performance will result in 53.05% of this tranche
vesting (between threshold and target level of performance) and 21.22% of the overall 2016 LTI award vesting.
3e. Clawback Policy
Caltex has a Clawback Policy which allows the Company to recoup incentives which may have been awarded and/or vested
to Senior Executives in certain circumstances. The specific triggers which allow Caltex to recoup the incentives include Senior
Executives acting fraudulently or dishonestly; acting in a manner which has brought a Group company into disrepute; where
there has been a material misstatement or omission in the financial statements in relation to a Group company in any of the
previous three financial years; or any other circumstances the Board determines in good faith to have resulted in an ‘unfair
benefit’ to the Senior Executive.
Upon the occurrence of any of the triggers, the Board may then take such actions it deems necessary or appropriate to address
the events that gave rise to an ‘unfair benefit’. Such actions may include:
1. requiring the Senior Executive to repay some or all of any cash or equity incentive remuneration paid in any of the previous
three financial years;
2. requiring the Senior Executive to repay any gains realised in any of the previous three financial years through the CEIP
or on the open-market sale of vested shares;
3. cancelling or requiring the forfeiture of some or all of the Senior Executive’s unvested performance rights, restricted shares
or shares;
4. reissuing any number of performance rights or restricted shares to the participant subject to new vesting conditions in
place of the forfeited performance rights, restricted shares or shares;
5. adjusting the Senior Executive’s future incentive remuneration; and/or
6. initiating legal action against the Senior Executive.
3f. Hedging and margin lending policies
The Caltex Securities Trading Policy prohibits Designated Caltex Personnel, which includes Senior Executives, from entering
into any arrangements that would have the effect of limiting their exposure relating to Caltex securities, including vested Caltex
securities or unvested entitlements to Caltex securities under Caltex employee incentive schemes.
Designated Caltex Personnel are prohibited from entering into any margin lending arrangements and other secured financing
arrangements in respect of Caltex securities.
Designated Caltex Personnel are required to undertake training to ensure that they are aware of and understand their obligations
and responsibilities under the Securities Trading Policy. A contravention is a serious matter and may lead to disciplinary action,
including termination of employment.
60
Remuneration Report continued
3. Senior Executive remuneration continued
3g. Senior Executive remuneration and service agreements
MD and CEO
The MD and CEO’s remuneration is determined by the Board following receipt of a recommendation from the Human Resources
Committee. In making its remuneration recommendation, the Human Resources Committee considered the performance of
the MD and CEO and advice provided by Aon Hewitt, which took into account remuneration levels provided by companies of
a similar size and complexity.
The split between the MD and CEO’s 2018 total target and maximum stretch remuneration is outlined below.
Total target and maximum stretch remuneration
Fixed remuneration
including
superannuation
‘At risk’ – performance based remuneration
STI(ii)
LTI(iii)
‘At target’
$2,248,500(i)
$1,503,950 (70% of base salary)
‘Stretch’
‘At target’– when TSR is at the 75th percentile of peer
companies, and the strategic growth measure has been
met at target.
$2,148,500 (100% of base salary)
‘Stretch’ – when TSR is at the 90th percentile of peer
companies and the strategic growth measure has been
met at stretch.
$3,007,900 (140% of base salary)
$3,222,750 (150% of base salary)
Notes:
(i) The MD and CEO’s fixed remuneration was unchanged during the 2018 remuneration review.
(ii) In 2018 the MD and CEO’s STI target increased from 60% of base salary to 70% of base salary.
(iii) Share retention arrangements have been implemented to encourage share retention and promote alignment with shareholders over the longer term.
Table 1. Summary of MD and CEO’s Service Agreement
Term
Duration
Conditions
Ongoing until notice is given by either party
Termination by MD and CEO
Six months’ notice
Termination by Company for cause
No notice requirement or termination benefits (other than accrued entitlements)
Termination by Company (other)
12 months’ notice
Company may elect to make payment in lieu of notice
Termination payment of 12 months’ base salary (reduced by any payment in lieu
of notice)
Treatment of unvested STI and LTI in accordance with plan terms
Post-employment restraints
Restraint applies for 12 months if employed in the same industry within Australia
Other Senior Executives
The remuneration and terms of employment for the other Senior Executives are formalised in Service Agreements (contracts
of employment). The material terms of the Service Agreements are set out below.
The other Senior Executives of Caltex are appointed as permanent Caltex employees. Their employment contracts require both
Caltex and the Executive to give a notice period within a range of three and six months as stipulated by their individual contracts
should they resign or have their service terminated by Caltex. The terms and conditions of the Executive contracts reflect market
conditions at the time of the contract negotiation and appointment.
The details of the contracts of the current Senior Executives of Caltex are set out below. The durations of the contracts are
open-ended (i.e. ongoing until notice is given by either party).
CALTEX AUSTRALIA 2018 Annual ReportDirectors’ ReportCONTINUED 61
Table 2. Summary of Service Agreements for other Senior Executives
Simon Hepworth
Richard Pearson
Louise Warner
Termination on notice
(by the Company)
Resignation
(by the Senior Executive)
3 months
6 months
6 months
3 months
6 months
6 months
If a Senior Executive was to resign, their entitlement to unvested shares payable through the LTI would generally be forfeited and,
if resignation was on or before 31 December of the year, generally their payment from the Rewarding Results Plan would also be
forfeited, subject to the discretion of the Board. If a Senior Executive is made redundant, their redundancy payment is determined
by the Caltex Redundancy Policy, with the payment calculated based on years of service and the applicable notice period.
Other than prescribed notice periods, there is no special termination benefit payable under the contracts of employment.
Statutory benefits (such as long service leave) are paid in accordance with the legislative requirements at the time the Senior
Executive ceases employment.
3h. Link between Company performance and Executive remuneration
The link between Executive remuneration and Company performance is outlined in various parts of this report. This includes
section 1 where the 2018 remuneration outcomes are provided, and section 3 where the STI and LTI performance measures are
explained, including why the measures have been chosen and how they relate to the performance of the Company.
Table 3 below outlines Caltex’s TSR, dividend, share price, earnings per share, RCOP NPAT results and safety performance each
year from 2014 to 2018 together with the linkage to actual STI and LTI outcomes.
Table 3. Link between Company performance and Executive remuneration (unaudited)
2015
2014
Summary of performance over 2014-18
12 month TSR %(i)
Dividends (cents per share)
Share price(ii)
RCOP excluding significant items earnings per share
RCOP NPAT excluding significant items (million)(iii)
Caltex Safety – TRIFR(iv)
Caltex Safety – DAFWIFR(v)
Link to remuneration
2018
-21.7
118c
$25.48
$2.06
$538
8.29
1.95
2017
11.8
121c
34.05
$2.38
$621
5.2
1.36
2016
-16.4
102c
30.46
$2.01
$524
5.57
1.73
13.6
117c
$37.70
$2.33
$628
5.95
2.85
STI – percentage of business plan RCOP NPAT target achieved
STI – funding of STI pool (relative to target)
LTI – percentage vesting three years after grant date
Year of grant
Percentage of grant vesting
89%
101%
119%
128%
87%
100%
134%
141%
2016
21.22%
2015
22.38%
2014
84.78%
2013
80.49%
74.1
70c
$34.21
$1.83
$493
5.6
4.61
125%
127%
2012
88.9%
Notes:
(i) TSR is calculated as the change in share price for the year, plus dividends announced for the year, divided by the opening share price. TSR is a
measure of the return to shareholders in respect of each financial year.
(ii) The price quoted is the trading price for the last day of trading (31 December) in each calendar year.
(iii) Measured using the RCOP method which excludes the impact of the rise or fall in oil and product prices (a key external factor) and excludes significant
items as determined by the Board. For 2018, this RCOP NPAT figure has been adjusted for incentive purposes and is different from the RCOP NPAT
figure reported in the financial statements.
(iv) Total Recordable Injury Frequency Rate. Caltex changed its safety definitions in 2017 in line with Industry Standards (IOGP) and other ASX companies.
Historic figures have been updated to provide comparative performance based on the new definitions.
(v) Days Away from Work Injury Frequency Rate (DAFWIFR). The total number of occupational injuries resulting in ‘Days Away From Work’ as certified
by a physician during a nominated reporting period per 1,000,000 hours worked for a nominated reporting period. Caltex changed its definitions
in 2017 in line with Industry Standards (IOGP) and other ASX companies. Historic figures have been updated to provide comparative performance
based on the new definitions.
62
Remuneration Report continued
3. Senior Executive remuneration continued
3h. Link between Company performance and Executive remuneration continued
The strong alignment between STI outcomes and Company profitability as measured by RCOP NPAT is shown below.
Alignment between STI pool and RCOP NPAT
%
160
140
120
100
80
60
40
20
0
2014
2015
2016
2017
2018
% of business plan
RCOP NPAT achieved
Size of STI pool
(relative to target)
2016 LTI vesting outcomes and the link to Company performance
The vesting outcomes for the 2016 awards are set out above in section 3d.
3i. Remuneration tables
Table 4a. Total remuneration earned by Senior Executives in 2018 (unaudited, non-statutory disclosures)
The following table sets out the actual remuneration earned by Senior Executives in 2018. The value of remuneration includes
the equity grants where the Senior Executive received control of the shares in 2018.
The purpose of this table is to provide a summary of the “past” and “present” remuneration outcomes received in either cash
or equity. Due to this, the values in this table will not reconcile with those provided in the statutory disclosures in table 4b. For
example, table 4b discloses the value of LTI grants which may or may not vest in future years, whereas this table discloses the
value of LTI grants from previous years which vested in 2018.
Salary and
fees(i)
Other
remuneration(ii)
Bonus
(short-term
incentive)
LTI vested
during the
Remuneration
‘earned’ for
year(iii)
2018(iv)
Executive Director
Julian Segal (Managing Director and CEO)(v)
2018
2,223,500
185,069
1,237,751
712,260
4,358,580
Senior Executives
Simon Hepworth (Chief Financial Officer)
2018
874,891
160,715
429,840
165,803
1,631,249
Richard Pearson (Executive General Manager, Convenience Retail)(v)
2018
928,507
151,200
495,023
–
1,574,730
Louise Warner (Executive General Manager, Fuels and Infrastructure)(v)
92,966
2018
901,937
472,725
45,810
1,513,438
Total remuneration: Senior Executives
2018
4,928,835
589,950
2,635,339
923,873
9,077,997
Notes:
(i) Salary and fees comprise base salary and cash payments in lieu of employer superannuation (on 2018 base salary and/or on STI payments made in
respect of the 2017 performance year paid in 2018).
(ii) Other remuneration includes the cash value of non-monetary benefits, superannuation, annual leave and long service leave entitlements, and any fringe
benefits tax payable on non-monetary benefits.
(iii) This refers to cash and equity-based plans from prior years that have vested in the current year. The value is calculated using the closing share price of
Company shares on the first trading day after the vesting date. The 2018 LTI figures reflect that no portion of the relative TSR tranche rights granted in
2015 vested. Ms Warner’s 2015 LTI award was cash-based as it was granted while she led Caltex’s Ampol Singapore business.
(iv) This refers to the total value of remuneration earned during 2018, being the sum of the prior columns.
(v) These Senior Executives elect to receive an equivalent cash payment in lieu of employer superannuation that is in excess of the quarterly
Superannuation Guarantee Maximum.
CALTEX AUSTRALIA 2018 Annual ReportDirectors’ ReportCONTINUED 63
Table 4b. Total remuneration for Senior Executives in 2018 (statutory disclosures)
The following table sets out the audited total remuneration for Senior Executives in 2017 and 2018, calculated in accordance
with statutory accounting requirements:
Primary
Post
employment
Other
long term
Equity
Total
Salary
and fees(i)
Bonus
(short-term
incentive)
Non-
monetary
benefits(ii)
Super-
annuation
Share
benefits
(long-term
incentive)
Rights
benefits
(long-term
incentive)(iv)
Other(iii)
Julian Segal (Managing Director and CEO)(v)
2018
2017
2,314,380
2,363,951
1,237,751
1,516,575
15,487
14,975
25,000
25,000
53,702
53,702
Simon Hepworth (Chief Financial Officer)
2018
2017
857,586
833,339
429,840
520,848
20,542
26,272
134,981
129,177
22,496
22,530
Louise Warner (Executive General Manager, Fuels and Infrastructure)(v)
2018
2017
936,834
818,202
472,725
444,796
17,158
15,885
20,290
19,832
20,621
17,322
Richard Pearson (Executive General Manager, Convenience Retail) (v),(vi)
2018
2017
975,882
381,212
495,023
226,392
59,749
24,035
22,205
34,635
21,871
9,152
Total remuneration: Senior Executives
2018
2017
5,084,682
4,396,704
2,635,339
2,708,611
112,936
81,167
202,476
208,644
118,690
102,706
–
–
–
–
–
–
–
–
–
–
1,566,899
2,207,345
5,213,219
6,181,548
352,339
497,478
1,817,784
2,029,644
240,603
220,022
1,708,231
1,536,059
262,775
119,964
1,837,505
795,390
2,422,616 10,576,739
10,542,641
3,044,809
Notes:
(i) Salary and fees include base salary and cash payments in lieu of employer superannuation. For 2018, the cash payments in lieu of employer
superannuation are on 2018 base salary and/or on STI payments made in respect of the 2017 performance year paid in 2018. These figures also
include any leave accruals for Senior Executives.
(ii) The non-monetary benefits received by Senior Executives include car parking benefits, employee StarCard benefits, the payment of the default
premiums for death and total and permanent disability insurance cover and related fringe benefits tax payments made by Caltex.
(iii) Other long-term remuneration represents the long service leave for all Senior Executives.
(iv) These values have been calculated under accounting standards. The values may not represent the future value that the Senior Executive will receive,
as the vesting of the performance rights is subject to Caltex achieving pre-defined performance measures.
(v) These Senior Executives elect to receive an equivalent cash payment in lieu of employer superannuation that is in excess of the quarterly
Superannuation Guarantee Maximum.
(vi) Mr Pearson commenced employment on 1 August 2017 and his 2017 remuneration is disclosed from this date.
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Remuneration Report continued
3. Senior Executive remuneration continued
3i. Remuneration tables continued
Table 5. 2018 Senior Executive performance rights
Long term incentives for Senior Executives are awarded as performance rights under the CEIP as explained in section 3d.
The following table sets out details of movements in performance rights held by Senior Executives during the year, including
details of the performance rights that vested.
Julian Segal
Simon Hepworth
Louise Warner
Richard Pearson
Performance
rights at
1 Jan 2018(i)
Granted in
2018(ii)
Vested in
2018(iii)
Lapsed in
2018(iv)
Balance at
31 December
2018
324,017
103,890
(22,669)
78,344
37,951
26,325
26,110
23,935
25,385
(5,277)
(1,458)
–
(78,643)
(18,307)
(5,058)
–
326,595
80,870
55,370
51,710
Notes:
(i) This relates to the 2015, 2016 and 2017 performance rights. If the service-based and performance-based vesting conditions are achieved, the 2016
and 2017 performance rights will vest in 2019 and 2020 respectively.
(ii) This relates to the 2018 performance rights. If the service-based and performance-based vesting conditions are achieved, these performance rights
will vest in 2021.
(iii) This relates to the 2015 performance rights of which 22.38% vested. Senior Executives received one Caltex share for each right that vested (aside from
Ms Warner as her 2015 LTI award was cash-based as it was granted while she led Caltex’s Ampol Singapore business).
(iv) This relates to the 2015 performance rights of which 77.62% lapsed.
Table 6. Valuation assumptions of performance rights granted
The fair value of performance rights granted under the CEIP is determined independently by Ernst & Young and Deloitte
(from 2018) using an appropriate numerical pricing model. The model takes into account a range of assumptions and the fair
values for each year of grant have been calculated incorporating the assumptions below.
2018 grant(i),(ii)
2017 grant(i)
2016 grant(i)
Relative
TSR against
S&P/ASX 100
Strategic
measures
Relative
TSR against
S&P/ASX 100
Strategic
measure
Relative
TSR against
S&P/ASX 100
FCF and
strategic
measure
Grant date
Vesting date
Exercise price
Volatility
4 April 2018/
18 May 2018
4 April 2018/
18 May 2018
4 April 2017/
12 May 2017
4 April 2017/
12 May 2017
4 April 2016/
13 May 2016
4 April 2016/
13 May 2016
1 April 2021
1 April 2021
1 April 2020
1 April 2020
1 April 2019
1 April 2019
Nil
Nil
23%/22%
23%/22%
Nil
23%
Nil
23%
Nil
26%
Nil
26%
Risk-free interest rate
2.18%/2.27%
2.18%/2.27%
1.87%/1.82%
1.87%/1.82%
1.88%/1.58%
1.88%/1.58%
Dividend yield
3.6%/3.9%
3.6%/3.9%
3.6%
3.6%
3.3%/2.8%
3.3%/2.8%
Expected life (years)
3.0/2.9 years
3.0/2.9 years
3.0/2.9 years
3.0/2.9 years
3.0/2.9 years
3.0/2.9 years
Share price at
grant date
$31.42/$30.81 $31.42/$30.81
$29.39/$32.68 $29.39/$32.68 $33.86/$34.20 $33.86/$34.20
Valuation per right
$11.88/$9.74 $28.24/$27.53
$10.76/$14.50 $26.39/$29.45 $13.34/$12.43 $30.68/$31.55
Notes:
(i) Market performance measures, such as relative TSR, must be incorporated into the option-pricing model valuation used for the CEIP performance
rights, which is reflected in the valuation per performance right. Non-market vesting conditions such as free cash flow and strategic measures
are not taken into account when determining the value of the performance right. This explains the higher valuation for these performance rights.
However, the value of the free cash flow and strategic measures may be discounted during the performance period to reflect the Board’s assessment
of the probability of the number of equity instruments that will vest based on progress against the performance measures. These values will be
reflected in table 4b.
(ii) In 2018, two separate major awards of CEIP performance grants were made. Executive awards, excluding the MD & CEO, were made on 4 April 2018.
The MD and CEO’s award was made on 18 May 2018 after shareholder approval for the award was obtained at the 2018 AGM held on 10 May 2018.
The terms of all 2018 awards, including all performance hurdles and vesting conditions are the same.
CALTEX AUSTRALIA 2018 Annual ReportDirectors’ ReportCONTINUED 65
Table 7. Mix of fixed and variable remuneration based on 2018 statutory remuneration table
The proportion of each Senior Executive’s remuneration for 2018 that was fixed, and the proportion that was subject to a
performance measure, are outlined below. The percentages are based on the 2018 statutory remuneration disclosures in table
4b (including the LTI values which are determined in accordance with accounting standards), and do not correspond to the
target remuneration percentages outlined earlier in this report in section 3b.
Julian Segal
Simon Hepworth
Richard Pearson
Louise Warner
Variable
(including short-
term and long-term
incentive payments)
54%
43%
41%
42%
Fixed
46%
57%
59%
58%
Table 8. FY18 STI outcomes
The table below sets out the actual STI outcome for each Senior Executive as a percentage of their maximum STI opportunity.
Senior Executives
Julian Segal
Simon Hepworth
Richard Pearson
Louise Warner
Average(i)
2018
41%
40%
47%
48%
44%
2017
59%
58%
62%
63%
60%
Notes:
(i) This is the average for those KMP who were eligible to receive an STI payment in this year.
4. Non-executive Director fees
4a. Our approach to Non-executive Director fees
Caltex’s business and corporate operations are managed under the direction of the Board. The Board oversees the performance
of Caltex management in seeking to deliver superior business and operational performance and long-term growth in shareholder
value. The Board recognises that providing strong leadership and strategic guidance to management is important to achieve our
goals and objectives.
Under the Caltex Constitution and the ASX Listing Rules, the total annual fee pool for Non-executive Directors is determined
by shareholders. Within this aggregate amount, Non-executive Director fees are reviewed by the Human Resources Committee,
taking into account recommendations from an independent remuneration consultant, and set by the Board.
Fees for Non-executive Directors are set at a level to attract and retain Directors with the necessary skills and experience
to allow the Board to have a proper understanding of, and competence to deal with, current and emerging issues for Caltex’s
business. The Board seeks to attract Directors with different skills, experience expertise and diversity. Additionally, when
setting Non-executive Director fees, the Board takes into account factors such as external market data on fees and the size
and complexity of Caltex’s operations.
The Non-executive Directors’ fees are fixed, and Non-executive Directors do not participate in any Caltex incentive or
retirement plan.
66
Remuneration Report continued
4. Non-executive Director fees continued
4b. Board and Committee fees for 2018
The current maximum annual fee pool for Non-executive Directors is $2.5 million, including statutory entitlements. This amount
was approved by shareholders at the 2016 Annual General Meeting.
Table 9. 2018 Non-executive Director fees
The table below outlines the 2018 Non-executive Director fees.
2018 fee(ii)
Board
Committees(i)
Chairman
Member
$502,207
$167,402
Committee
Chairman(iii)
$46,000/
$40,000
Member
$20,000
Notes:
(i) Comprising the Audit Committee, Human Resources Committee, and Safety and Sustainability Committee. No fees are paid to the Chairman or
Members of the Nomination Committee.
(ii) Caltex paid superannuation of 9.5% for Non-executive Directors in addition to the above fees in 2018.
(iii) The Audit Committee Chairman and Human Resources Committee Chairman receive $46,000 and the Safety and Sustainability Committee Chairman
received $40,000.
4c. Remuneration table
Table 10. Non-executive Director fees in 2018 (statutory disclosures)
The following table sets out the audited Non-executive Director fees in 2017 and 2018 calculated in accordance with statutory
accounting requirements and which reflect the actual remuneration received during the financial year. Non-executive Directors
are not eligible to receive any cash-based or equity-based incentives.
Primary
Post
employment
Other
Long-Term
Total
Salary
and fees
Non-monetary
benefits
Super-
annuation(i)
Other
Current Non-executive Directors
Steven Gregg (Chairman)
2018
2017
Trevor Bourne
2018
2017
Mark Chellew
2018
Melinda Conrad
2018
2017
Bruce Morgan
2018
2017
Barbara Ward AM
2018
2017
Penny Winn
2018
2017
502,207
299,774
227,403
218,120
125,552
207,403
158,354
233,403
218,120
233,403
218,120
207,403
188,707
247
–
487
1,061
–
96
90
1,041
899
215
181
–
–
47,710
28,479
21,603
20,721
11,927
19,703
15,044
22,173
20,721
22,173
20,721
19,703
17,927
–
–
–
–
–
–
–
–
–
–
–
–
–
550,164
328,253
249,493
239,902
137,479
227,202
173,488
256,617
239,740
255,791
239,022
227,106
206,634
Note:
(i) Superannuation contributions are made on behalf of Non-executive Directors to satisfy Caltex’s obligations under the Superannuation Guarantee
legislation. Fees paid to Non-executive Directors may be subject to fee sacrifice arrangements for superannuation. Non-executive Directors may direct
Caltex to pay superannuation contributions referable to fees in excess of the maximum earnings base as cash.
CALTEX AUSTRALIA 2018 Annual ReportDirectors’ ReportCONTINUED 67
5. Shareholdings of Key Management Personnel
Table 11: Shareholdings of Key Management Personnel
The movement during the reporting period in the number of shares of Caltex Australia Limited held directly or indirectly by each
KMP, including their personally related entities, is below.
Directors
Steven Gregg
Trevor Bourne
Mark Chellew
Melinda Conrad
Bruce Morgan
Barbara Ward AM
Penny Winn
Senior Executives
Julian Segal
Simon Hepworth
Richard Pearson
Louise Warner
Directors
Steven Gregg
Trevor Bourne
Melinda Conrad
Bruce Morgan
Barbara Ward AM
Penny Winn
Senior Executives
Julian Segal
Simon Hepworth
Richard Pearson
Louise Warner
Held at
31 Dec 2017
Purchased
Vested
Sold
Held at
31 Dec 2018
–
5,395
–
5,000
10,500
5,000
5,911
302,916
25,484
–
469
6,000
1,000
1,400
3,000
–
1,500
–
–
–
–
–
–
–
–
–
–
–
–
22,669
5,277
–
–
–
–
–
–
–
–
–
–
–
–
–
6,000
6,395
1,400
8,000
10,500
6,500
5,911
325,585
30,761
–
469
Held at
31 Dec 2016
Purchased
Vested
Sold
Held at
31 Dec 2017
–
5,395
–
10,500
5,000
4,911
222,930
17,193
–
469
–
–
5,000
–
–
1,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
137,186
30,791
–
(57,200)
(22,500)
–
–
5,395
5,000
10,500
5,000
5,911
302,916
25,484
–
469
6. Other Key Management Personnel transactions
Apart from as disclosed in the indemnity section of the Directors’ Report, no KMP have entered into a material contract, loan or
other transaction with any entity in the Caltex Group during the year ended 31 December 2018 (2017: nil).
Directors’ interests
The Directors’ relevant interests in the shares of Caltex Australia Limited at 31 December 2018 are set out in the following table.
Director
Steven Gregg
Julian Segal
Shareholding
6,000 shares
325,585 shares
Nature of interest
Indirect interest
Direct interest (253,212 shares)
326,595 performance rights
Indirect interest (72,373 shares)
Trevor Bourne
6,395 shares
Mark Chellew
Melinda Conrad
Bruce Morgan
Barbara Ward AM
Penny Winn
1,400 shares
8,000 shares
10,500 shares
6,500 shares
5,911 shares
Mr Segal also has a direct interest in 326,595 performance rights
Direct interest (3,395 shares)
Indirect interest (3,000 shares)
Indirect interest
Indirect interest
Indirect interest
Direct interest
Indirect interest
Note:
No Director has acquired or disposed of any relevant interests in the Company’s shares in the period from 1 January 2019 to the date of this Annual Report.
68
Board and Committee meetings
The Caltex Board met 15 times during the year ended 31 December 2018. In addition, Directors attended Board strategy
sessions and workshops, site visits and special purpose committee meetings during the year.
The numbers of Board and Committee meetings attended by each Director during 2018 are set out in the following table:
Director
Board(i)
Audit Committee
Human Resources
Committee
Nomination
Committee
Safety and
Sustainability
Committee(v)
Current Directors
Held
Attended Held
Attended Held
Attended Held
Attended Held
Attended
Steven Gregg
Julian Segal
Trevor Bourne
Mark Chellew(iv)
Melinda Conrad
Bruce Morgan
Barbara Ward AM
Penny Winn
15
15
15
10
15
15
15
15
15
15
15
10
15
15
15
15
–
–
–
–
4
4
4
–
–
–
–
–
4
4
4
–
–
–
3
–
–
–
3
3
–
–
3
–
–
–
3
3
2
–
2
1
2
2
2
2
2
–
2
1
2
2
2
2
–
–
4
–
4
4
–
4
–
–
4
–
4
4
–
4
Notes:
(i)
(ii) All Directors are invited to (and regularly attend) Committee meetings; this table lists attendance only where a Director is a member of the
Includes out of session meetings. Excludes strategy workshops, briefings.
relevant Committee.
(iii) A number of Directors also participated in Board Committees convened for special purposes.
(iv) Mark Chellew was appointed 2 April 2018.
(v)
The OHS and Environmental Risk Committee changed its name effective 22 February 2019.
The Directors are satisfied that:
• the provision of non-audit services to the Caltex Group
during the year ended 31 December 2018 by KPMG is
compatible with the general standard of independence for
auditors imposed by the Corporations Act 2001 (Cth); and
• the provision of non-audit services during the year ended
31 December 2018 by KPMG did not compromise the
auditor independence requirements of the Corporations
Act 2001 (Cth) for the following reasons:
– the provision of non-audit services in 2018 was
consistent with the Board’s policy on the provision
of services by the external auditor;
– the non-audit services provided in 2018 are not
considered to be in conflict with the role of external
auditor; and
– the Directors are not aware of any matter relating to the
provision of the non-audit services in 2018 that would
impair the impartial and objective judgement of KPMG
as external auditor.
Shares and interests
The total number of ordinary shares on issue at the
date of this report and during 2018 is 261 million shares
(2017: 261 million shares). The total number of performance
rights on issue at the date of this report is 1,326,933 (2017:
1,178,816). 535,065 performance rights were issued during
2018 (2017: 582,965). 358,978 performance rights vested or
lapsed during the year (2017: 369,653). On vesting, Caltex is
required to allocate one ordinary share for each performance
right. For each right that vests, Caltex intends to purchase a
share on market following vesting. No new shares were issued
as a result of the vesting of performance rights during 2018.
Non-audit services
KPMG is the external auditor.
In 2018, KPMG performed non-audit services for Caltex in
addition to its statutory audit and review engagements for
the full year and half year.
KPMG received or was due to receive the following amounts
for services performed for Caltex during the year ended
31 December 2018:
• for non-audit services – total fees of $92,810 (2017:
$265,100); these services included taxation services
of $73,610; and other assurance services $19,200
• for audit services – total fees of $1,354,800 (2017:
$1,079,200).
The Board has received a written advice from the Audit
Committee in relation to the independence of KPMG, as
external auditor, for 2018. The advice was made in accordance
with a resolution of the Audit Committee.
CALTEX AUSTRALIA 2018 Annual ReportDirectors’ ReportCONTINUED 69
Rounding of amounts
Caltex is an entity to which Australian Securities and
Investments Commission (ASIC) Class Order 2016/191
applies. Amounts in the 2018 Directors’ Report and the
2018 Financial Report have been rounded off to the nearest
thousand dollars (unless otherwise stated) in accordance
with CO2016/191.
The Directors’ Report is made in accordance with a resolution
of the Board.
Steven Gregg
Chairman
Julian Segal
Managing Director & CEO
Sydney, 26 February 2019
Company Secretaries
The following persons are current and former Company
Secretaries of Caltex and the Caltex Group as at the date
of this report.
Lyndall Stoyles
Ms Stoyles was appointed to this position in October 2016
when she joined Caltex. Ms Stoyles manages Caltex’s legal,
secretariat, risk, internal audit, compliance and corporate
affairs teams. As EGM Legal and Corporate Affairs, she is
responsible for providing legal advice to Caltex’s Board,
its CEO and broader leadership team.
Ms Stoyles has more than 20 years’ experience in advising
on competition, commercial and corporate head office legal
issues. Prior to joining Caltex, Ms Stoyles was Group General
Counsel and Company Secretary for former logistics business
Asciano and spent more than a decade with Clayton Utz
advising on competition, commercial and corporate law issues
in a broad range of industries. Lyndall holds a Diploma of
Law/Masters of Law from the University of Sydney and is a
member of the Australian Institute of Company Directors.
Kara Nicholls
Ms Nicholls was appointed as Company Secretary in August
2016. Ms Nicholls has over 20 years’ experience across global
equity capital markets including wide-ranging commercial
and corporate compliance involvement. She brings extensive
knowledge of the Australian Securities Exchange listing
rules, corporate governance and company compliance and
administration to the Board. Prior to joining Caltex, she held
roles with Woolworths Limited, Arrium Limited, Macquarie
Group Limited and the Australian Securities Exchange Limited.
She is Chairman of the Gidget Foundation Australia and a
member of the Governance Institute of Australia’s Legislative
Review Committee.
She is a Chartered Secretary, JP, Fellow of the Governance
Institute of Australia, Member of the Australian Institute of
Company Directors and holds a Bachelor of Business and Master
of Legal Studies from the University of Technology Sydney.
Ms Nicholls resigned as Company Secretary in
November 2018.
Indemnity and insurance
Caltex has paid insurance premiums for Directors’ and
officers’ liability for current and former directors and officers
of the Company, its subsidiaries and related entities.
The insurance policies prohibit disclosure of the nature of the
liabilities insured against and the amount of the premiums.
The Constitution provides that each officer of the Company
and, if the Board considers it appropriate, any officer of a
subsidiary of the Company out of the assets of the Company
to the relevant extent against any liability incurred by the
officer in or arising out of the conduct of the business of
the company or the subsidiary (as the case may be) or in or
arising out of the discharge of the duties of the officer, unless
incurred in circumstances that the Board resolves do not justify
indemnification. Where the Board considers it appropriate, the
Company may execute a documentary indemnity in any form
in favour of any officer of the Company or a subsidiary of the
Company, provided that such terms are not inconsistent with
the Constitution. For more information, refer to the Constitution
which is located on the Caltex website.
70
Lead Auditor’s Independence Declaration
UNDER SECTION 307C OF THE CORPORATIONS ACT 2001
To the Directors of Caltex Australia Limited
I declare that, to the best of my knowledge and belief, in relation to the audit of Caltex Australia Limited for the financial year
ended 31 December 2018 there have been:
(i) no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit;
and
(ii) no contraventions of any applicable code of professional conduct in relation to the audit.
KPMG
Julian McPherson
Partner
Sydney
26 February 2019
KPMG, an Australian partnership and a member firm of the
KPMG network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity.
Liability limited by a scheme approved under Professional
Standards Legislation.
CALTEX AUSTRALIA 2018 Annual Report
Directors’ Declaration
71
In the opinion of the Directors of Caltex Australia Limited (the Company):
a. the financial statements and notes that are contained in pages 75 to 119 and the Remuneration Report set out on
pages 51 to 67 are in accordance with the Corporations Act 2001 (Cth), including
i. giving a true and fair view of the Group’s financial position as at 31 December 2018 and of its performance for the
financial year ended on that date; and
ii. complying with Australian Accounting Standards, and the Corporations Regulations 2001;
b. there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due
and payable;
c. at the date of this declaration, there are reasonable grounds to believe that the companies in the Caltex Australia Group that
are parties to the Deed of Cross Guarantee as identified in Note F1 will be able to meet any obligations or liabilities to which
they are, or may become, subject by virtue of the Deed of Cross Guarantee described in Note F1, and
d. a statement of compliance with International Financial Reporting Standards has been included in Note A to the financial
statements for the year ended 31 December 2018.
The Directors have been given the declarations required by section 295A of the Corporations Act 2001 (Cth) from the Managing
Director and CEO and the Chief Financial Officer for the financial year ended 31 December 2018.
Signed in accordance with a resolution of the Directors:
Steven Gregg
Chairman
Julian Segal
Managing Director & CEO
Sydney, 26 February 2019
72
Independent Auditor’s Report
TO THE SHAREHOLDERS OF CALTEX AUSTRALIA LIMITED
Report on the audit of the Financial Report
Opinion
We have audited the Financial Report of Caltex Australia Limited
(the Company)
In our opinion, the accompanying Financial Report of Caltex
Australia Limited is in accordance with the Corporations Act
2001, including
• giving a true and fair view of the Group’s financial position as
at 31 December 2018 and of its financial performance for the
year ended on that date; and
• complying with Australian Accounting Standards and the
Corporations Regulations 2001.
The Financial Report comprises the:
• consolidated balance sheet as at 31 December 2018;
• consolidated statement of comprehensive income,
consolidated statement of changes in equity, and
consolidated cash flow statement for the year then ended;
• notes, including a summary of significant accounting
policies; and
• Directors’ Declaration.
The Group consists of the Company and the entities it
controlled at the year end and from time to time during the
financial year.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. We believe that the audit evidence we have obtained
is sufficient and appropriate to provide a basis for our opinion.
Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the Financial
Report section of our report.
We are independent of the Group in accordance with the Corporations Act 2001 and the ethical requirements of the Accounting
Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant
to our audit of the Financial Report in Australia. We have fulfilled our other ethical responsibilities in accordance with the Code.
Key Audit Matters
The Key Audit Matters we identified are:
• Site remediation and dismantling provisions, and
• Taxation of Singaporean entities.
Key Audit Matters are those matters that, in our professional
judgment, were of most significance in our audit of the Financial
Report of the current period.
These matters were addressed in the context of our audit of the
Financial Report as a whole, and in forming our opinion thereon,
and we do not provide a separate opinion on these matters.
KPMG, an Australian partnership and a member firm of the
KPMG network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity.
Liability limited by a scheme approved under Professional
Standards Legislation.
CALTEX AUSTRALIA 2018 Annual Report 73
Site remediation and dismantling provisions (A$301,136k)
Refer to Note C6 to the Financial Report
The key audit matter
How the matter was addressed in our audit
The determination of site remediation and dismantling
provisions relating to oil refining, distribution and marketing
sites, including the Kurnell refinery, following its conversion to
an import terminal is considered a key audit matter. This is due
to the inherent complexity in estimating future environmental
remediation costs, particularly those that are forecast to be
incurred several years in the future.
Our audit procedures to critically appraise management’s
determination of site remediation and dismantling
provisions included:
• Comparing the basis for recognition and measurement of
remediation provisions for consistency with environmental
and regulatory requirements;
• Obtaining third party expert reports as well as internal
This is influenced by:
• Current environmental and regulatory requirements, and the
impact to the completeness of environmental remediation
activities incorporated into the provision estimate;
• The expected environmental management strategy, and the
nature of costs incorporated into the provision estimate;
• Third party expert advice sought by management regarding
their obligations and estimates of future costs;
• Historical experience, and whether this is a reasonable
predictor when evaluating forecast costs; and
• The expected timing of the expenditure.
and external underlying documentation for management’s
determination of future required activities, their timing, and
associated cost estimations and comparing them to the nature
and quantum of costs contained in the provision balance;
• Assessing the competence, capability and objectivity
of the Group’s internal and external experts used in the
determination of the provision estimate;
• Testing the accuracy of historical remediation provisions
by comparing to actual expenditure. We used this knowledge
to challenge management’s current cost estimations; and
• Evaluating the completeness of the provisions through
examination of the Group’s operating locations, regulatory
correspondence and responses from our independent
request of the Group’s external lawyers for confirmation
of relevant matters.
Taxation of Singaporean entities (A$65,000k)
Refer to Note E1 to the Financial Report
The key audit matter
How the matter was addressed in our audit
The determination as to whether the earnings from the
Group’s Singaporean entities are subject to income tax in
Australia under the regime for the taxation of controlled
foreign company income is considered a key audit
matter. This is due to the judgment required in assessing
management’s current estimate of taxation, which required
senior audit team member and tax specialist involvement.
The critical elements of this were:
• The significant uncertainty surrounding the timing of
resolution of the matter with the Australian Taxation Office
(ATO) and the final tax rate that will be levied in respect of
the Group’s Singaporean entities’ earnings; and
• The judgment in management’s current estimate of taxation
by applying the Australian income tax rate of 30% to the
Singaporean entities’ earnings, which may exceed the
actual tax that applies if the income is deemed to be
non-assessable or only partially assessable in Australia.
Our audit procedures included:
• Working with our tax specialists to evaluate documentation
prepared by the Group’s internal and external advisors based
on our specialists’ experience and our understanding of the
issue, including the current status of discussions with the
ATO, expected timing for resolution and the extent of any
potential changes to the estimate; and
• Evaluating the disclosures of the Group by comparing
them to our understanding of the matter and potential
adjustments to future period income tax expense.
74
Independent Auditor’s Report continued
TO THE SHAREHOLDERS OF CALTEX AUSTRALIA LIMITED
Other Information
Other Information is financial and non-financial information in Caltex Australia Limited’s annual reporting which is provided in
addition to the Financial Report and the Auditor’s Report. The Directors are responsible for the Other Information.
Our opinion on the Financial Report does not cover the Other Information and, accordingly, we do not express an audit opinion
or any form of assurance conclusion thereon, with the exception of the Remuneration Report and our related assurance opinion.
In connection with our audit of the Financial Report, our responsibility is to read the Other Information. In doing so, we consider
whether the Other Information is materially inconsistent with the Financial Report or our knowledge obtained in the audit, or
otherwise appears to be materially misstated.
We are required to report if we conclude that there is a material misstatement of this Other Information, and based on the work we
have performed on the Other Information that we obtained prior to the date of this Auditor’s Report we have nothing to report.
Responsibilities of Directors for the Financial Report
The Directors are responsible for:
• preparing the Financial Report that gives a true and fair view in accordance with Australian Accounting Standards and the
•
Corporations Act 2001;
implementing necessary internal control to enable the preparation of a Financial Report that gives a true and fair view and
is free from material misstatement, whether due to fraud or error; and
• assessing the Group’s ability to continue as a going concern and whether the use of the going concern basis of accounting
is appropriate. This includes disclosing, as applicable, matters related to going concern and using the going concern basis of
accounting unless they either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the Financial Report
Our objective is:
• to obtain reasonable assurance about whether the Financial Report as a whole is free from material misstatement, whether
due to fraud or error; and
• to issue an Auditor’s Report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Australian
Auditing Standards will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error. They are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on the basis of this Financial Report.
A further description of our responsibilities for the Audit of the Financial Report is located at the Auditing and Assurance Standards
Board website at: http://www.auasb.gov.au/auditors_files/ar1.pdf. This description forms part of our Auditor’s Report.
Report on the Remuneration Report
Opinion
In our opinion, the Remuneration Report of Caltex Australia
Limited for the year ended 31 December 2018, complies with
Section 300A of the Corporations Act 2001.
Directors’ responsibilities
The Directors of the Company are responsible for the
preparation and presentation of the Remuneration Report in
accordance with Section 300A of the Corporations Act 2001.
Our responsibilities
We have audited the Remuneration Report included in
pages 51 to 67 of the Directors’ report for the year ended
31 December 2018.
Our responsibility is to express an opinion on the
Remuneration Report, based on our audit conducted in
accordance with Australian Auditing Standards.
KPMG
Julian McPherson
Partner
Sydney
26 February 2019
CALTEX AUSTRALIA 2018 Annual Report
75
Financial
Statements
Contents
Primary statements
Consolidated Income Statement
Consolidated Statement of Comprehensive Income
Consolidated Balance Sheet
Consolidated Statement of Changes In Equity
Consolidated Cash Flow Statement
Notes to the Financial Statements
A Overview
B Results for the year
B1 Revenue and other income
B2 Costs and expenses
B3 Segment reporting
B4 Earnings per share
B5 Dividends
C Operating assets and liabilities
C1 Receivables
C2 Inventories
C3 Intangibles
C4 Property, plant and equipment
C5 Payables
C6 Provisions
C7 Employee benefits
D Capital, funding and risk management
D1 Interest-bearing liabilities
D2 Risk management
D3 Capital management
D4 Fair value of financial assets and liabilities
D5 Issued capital
E Taxation
E1 Income tax expense
E2 Deferred tax
F Group structure
F1 Controlled entities
F2 Business combinations
F3 Equity-accounted investees
F4 Joint venture operations
F5 Parent entity disclosures
G Other information
G1 Commitments
G2 Contingent liabilities
G3 Related party disclosures
G4 Key management personnel
G5 Notes to the cash flow statement
G6 Auditor remuneration
G7 Net tangible assets per share
G8 New standards and interpretations not yet adopted
G9 Events subsequent to the end of the year
76
Consolidated Income Statement
FOR THE YEAR ENDED 31 DECEMBER 2018
Thousands of dollars
Revenue
Cost of goods sold – historical cost
Gross profit
Other income
Other expense
Net foreign exchange losses
Selling and distribution expenses
General and administration expenses
Results from operating activities
Finance costs
Finance income
Net finance costs
Share of net profit/(loss) of entities accounted for using the equity method
Profit before income tax expense
Income tax expense
Net profit
Profit attributable to:
Equity holders of the parent entity
Non-controlling interest
Net profit
Basic and diluted earnings per share:
Historical cost – cents per share
Note
B1
B1
B2
B2
F3.4
E1
2018
2017
(restated)1
21,731,342
(19,606,994)
16,285,810
(14,125,384)
2,124,348
2,160,426
12,555
(17,291)
(14,173)
(1,061,236)
(224,234)
819,969
(51,872)
2,670
(49,202)
10,133
780,900
(219,310)
561,590
560,416
1,174
561,590
2,073
(43,000)
(39,071)
(929,784)
(220,147)
930,497
(70,102)
3,202
(66,900)
(151)
863,446
(242,694)
620,752
619,085
1,667
620,752
B4
214.9
237.4
The consolidated income statement for the year ended 31 December 2018 includes significant items net loss of $12 million after
tax (2017: $14 million loss after tax). Details of these items are disclosed in Note B1.
The consolidated income statement is to be read in conjunction with the Notes to the financial statements.
1 Refer to Note A5 for further information.
CALTEX AUSTRALIA 2018 Annual Report Consolidated Statement of Comprehensive Income
FOR THE YEAR ENDED 31 DECEMBER 2018
Thousands of dollars
Profit for the period
Other comprehensive income
Items that will not be reclassified to profit or loss:
Actuarial gain/(loss) on defined benefit plans
Tax on items that will not be reclassified to profit or loss
Total items that will not be reclassified to profit or loss
Items that may be reclassified subsequently to profit or loss:
Foreign operations – foreign currency translation differences
Net change in fair value of net investment hedges
Effective portion of changes in fair value of cash flow hedges
Net change in fair value of cash flow hedges reclassified to profit or loss
Tax on items that may be reclassified subsequently to profit or loss
Total items that may be reclassified subsequently to profit or loss
Other comprehensive income for the period, net of income tax
Total comprehensive income for the period
Attributable to:
Equity holders of the parent entity
Non-controlling interest
Total comprehensive income for the period
77
2018
2017
561,590
620,752
(2,793)
838
(1,955)
52,618
(6,612)
10,442
(12,337)
2,026
46,137
44,182
605,772
604,598
1,174
605,772
3,519
(1,056)
2,463
(29,577)
1,045
(45,221)
45,294
(2)
(28,461)
(25,998)
594,754
593,087
1,667
594,754
The consolidated statement of comprehensive income is to be read in conjunction with the Notes to the financial statements.
78
Consolidated Balance Sheet
AS AT 31 DECEMBER 2018
Thousands of dollars
Current assets
Cash and cash equivalents
Receivables
Inventories
Other
Total current assets
Non-current assets
Receivables
Investments accounted for using the equity method
Intangibles
Property, plant and equipment
Deferred tax assets
Employee benefits
Other
Total non-current assets
Total assets
Current liabilities
Payables
Interest bearing liabilities
Current tax liabilities
Employee benefits
Provisions
Total current liabilities
Non-current liabilities
Payables
Interest bearing liabilities
Employee benefits
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Treasury stock
Reserves
Retained earnings
Total parent entity interest
Non-controlling interest
Total equity
Note
2018
2017
C1
C2
C1
F3
C3
C4
E2
C7
C5
D1
C7
C6
C5
D1
C7
C6
D5
6,142
1,184,025
1,616,125
65,293
2,871,585
8,081
147,442
554,219
2,889,863
184,160
1,721
70,552
3,856,038
6,727,623
1,827,169
150,421
65,708
85,639
65,257
44,521
922,420
1,694,915
65,767
2,727,623
10,887
11,360
516,866
2,818,353
244,073
3,233
22,825
3,627,597
6,355,220
1,735,254
270,269
151,948
93,677
107,521
2,194,194
2,358,669
41,686
810,914
39,667
252,098
1,144,365
3,338,559
3,389,064
524,944
(2,462)
11,168
2,842,357
3,376,007
13,057
3,389,064
10,855
588,652
37,318
251,825
888,650
3,247,319
3,107,901
524,944
(1,210)
(39,511)
2,610,195
3,094,418
13,483
3,107,901
The consolidated balance sheet is to be read in conjunction with the Notes to the financial statements.
CALTEX AUSTRALIA 2018 Annual Report Consolidated Statement of Changes in Equity
FOR THE YEAR ENDED 31 DECEMBER 2018
79
Thousands of dollars
Balance at
1 January 2017
Total comprehensive
income for the year
Profit for the year
Total other
comprehensive
income
Total comprehensive
income for the year
Own shares acquired,
net of tax
Shares vested to
employees
Expense on equity
settled transactions
Dividends to
shareholders
Balance at
31 December 2017
Balance at
1 January 2018
Adjustment*
Restated balance
at 1 January 2018
Total comprehensive
income for the year
Profit for the year
Total other
comprehensive
income
Total comprehensive
income for the year
Own shares
acquired net of tax
Shares vested to
employees
Expense on equity
settled transactions
Dividends to
shareholders
Balance at
31 December 2018
Issued
capital
Treasury
stock
Foreign
currency
translation
reserve
Equity
compen-
sation
reserve
Hedging
reserve
Retained
earnings
Non-
controlling
interest
Total
Total
equity
524,944
(344)
15,620
(1,267)
(22,308) 2,280,754 2,797,399
12,816 2,810,215
–
–
–
–
–
–
–
(28,532)
(28,532)
– (10,540)
–
–
–
9,674
–
–
–
–
–
–
–
71
71
–
–
–
–
–
–
–
3,122
(9,674)
3,457
619,085
619,085
1,667
620,752
2,463
(25,998)
–
(25,998)
621,548
593,087
1,667
594,754
–
–
–
(7,418)
–
3,457
–
–
–
(7,418)
–
3,457
–
(292,107)
(292,107)
(1,000)
(293,107)
524,944
(1,210)
(12,912)
(1,196)
(25,403) 2,610,195 3,094,418
13,483 3,107,901
524,944
–
(1,210)
–
(12,912)
–
(1,196) (25,403) 2,610,195 3,094,418
(18,542)
(18,542)
–
–
13,483 3,107,901
(18,542)
–
524,944
(1,210)
(12,912)
(1,196) (25,403) 2,591,653 3,075,876
13,483 3,089,359
–
–
–
–
–
–
–
–
–
–
–
–
46,006
46,006
131
131
(1,586)
334
–
–
–
–
–
–
–
–
–
–
–
–
–
476
(334)
4,400
560,416
560,416
1,174 561,590
(1,955)
44,182
–
44,182
558,461
604,598
1,174
605,772
–
–
–
(1,110)
–
4,400
–
–
–
(1,110)
–
4,400
–
(307,757)
(307,757)
(1,600) (309,357)
524,944
(2,462)
33,094
(1,065)
(20,861) 2,842,357 3,376,007
13,057 3,389,064
* Refer to Note A4 for further information.
The consolidated statement of changes in equity is to be read in conjunction with the Notes to the financial statements.
80
Consolidated Cash Flow Statement
FOR THE YEAR ENDED 31 DECEMBER 2018
Thousands of dollars
Note
2018
2017
Cash flows from operating activities
Receipts from customers
Payments to suppliers, employees and governments
Shares acquired for vesting employee benefits
Dividends and disbursements received
Interest received
Interest and other finance costs paid
Income taxes paid
Net operating cash inflows
Cash flows from investing activities
Purchase of investment in associate
Purchases of businesses, net of cash acquired
Purchases of property, plant and equipment
Major cyclical maintenance
Purchases of intangibles
Net proceeds from sale of property, plant and equipment
Net investing cash outflows
Cash flows from financing activities
Proceeds from borrowings
Repayments of borrowings
Repayment of finance lease principal
Dividends paid to non-controlling interest
Dividends paid
Net financing cash outflows
Effect of exchange rate changes on cash and cash equivalents
Decrease in cash and cash equivalents
Net decrease in cash and cash equivalents
Cash and cash equivalents at the beginning of the period
Cash and cash equivalents at the end of the year
29,832,846
(28,949,935)
(1,586)
400
2,622
(52,000)
(235,843)
23,693,457
(22,654,228)
(10,540)
300
3,125
(57,693)
(239,389)
G5.2
596,504
735,032
F2
(115,353)
(1,174)
(253,954)
(38,516)
(60,350)
43,774
(425,573)
7,465,193
(7,378,557)
(212)
(1,600)
(307,757)
(222,933)
(13,623)
(38,379)
(52,002)
44,521
6,142
–
(425,902)
(324,077)
(38,820)
(49,004)
37,455
(800,348)
5,001,095
(4,842,447)
(561)
(1,000)
(292,107)
(135,020)
–
(200,336)
(200,336)
244,857
44,521
The consolidated cash flow statement is to be read in conjunction with the Notes to the financial statements.
CALTEX AUSTRALIA 2018 Annual Report 81
Notes to the Financial Statements
A Overview
FOR THE YEAR ENDED 31 DECEMBER 2018
A1 Reporting entity
Caltex Australia Limited (Caltex or Company) is a company limited by shares, incorporated and domiciled in Australia. The
shares of Caltex are publicly traded on the Australian Securities Exchange (ASX: CTX). The consolidated financial statements for
the year ended 31 December 2018 comprise the Company and its controlled entities (together referred to as the Caltex Group)
and the Caltex Group’s interest in associates and jointly controlled entities. Caltex is a for-profit entity and is primarily involved
in the purchase, refining, distribution and marketing of petroleum products and the operation of convenience stores.
A2 Basis of preparation
The consolidated financial statements were approved by the Caltex Board on 26 February 2019.
The financial report has been prepared as a general purpose financial report and complies with the requirements of the
Corporations Act (Cth) and Australian Accounting Standards (AASBs). The consolidated financial report also complies with
International Financial Reporting Standards (IFRSs) adopted by the International Accounting Standards Board (IASB).
The consolidated financial report is prepared on the historical cost basis, except for derivative financial instruments which are
measured at fair value, and the defined benefit liability which is recognised as the net total of the plan assets, plus unrecognised
past service cost less the present value of the defined benefit obligation.
The consolidated financial report is presented in Australian dollars, which is the Caltex Group’s functional currency.
The Company is of a kind referred to in ASIC Class Order 2016/191 dated 24 March 2016. In accordance with that Class Order,
amounts in the consolidated financial report and Directors’ Report have been rounded to the nearest thousand dollars, unless
otherwise stated.
The Caltex Group has adopted all the mandatory amended Accounting Standards issued that are relevant to its operations and
effective for the current reporting period.
A number of new standards, amendments to standards and interpretations effective for annual periods beginning after
1 January 2019 have not been applied in preparing these consolidated financial statements. Refer to Note G8.
A3 Use of judgement and estimates
The preparation of a consolidated financial report in conformity with AASBs requires management to make judgements,
estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and
expenses. The estimates and associated assumptions are based on historical experience and various other factors that are
believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about
carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these
estimates. These accounting policies have been consistently applied by each entity in the Caltex Group.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised
in the period in which the estimate is revised and future periods if the revision affects both current and future periods.
Judgements made by management in the application of AASBs that have a significant effect on the consolidated financial report
and estimates with a significant risk of material adjustment in the future financial years are found in the following notes:
•
information about the assumptions and the risk factors relating to impairment is described in notes C1 (receivables),
C3 (intangibles) and C4 (property, plant and equipment);
• Note D2 provides an explanation of the foreign exchange, interest rate and commodity price exposures of the Group and the
risk in relation to foreign exchange, interest rate and commodity price movements;
• Note C6 provides key sources of estimation, uncertainty and assumptions used in regard to estimation of provisions; and
• Note E1 provides information around the extent to which earnings from the Group’s Singaporean entities would be subject
to income tax in Australia.
82
Notes to the Financial Statements
A Overview continued
FOR THE YEAR ENDED 31 DECEMBER 2018
A4 Changes in significant accounting policies
AASB 15 Revenue from contracts with customers
AASB 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognised.
It replaced AASB 118 Revenue and related interpretations.
The Group has performed a review of all revenue and income streams including assessment of sales contracts across different
major customers to identify any potential pricing or performance obligations which are impacted by the new standard. Based
on this review, the Group did not identify any material difference in the timing or amount of revenue recognition.
Under Caltex’s previous accounting policy up front initial franchising fees were recognised on receipt. Under AASB 15,
franchisees’ fees will be deferred on balance sheet and recognised in the income statement over the term of the franchise
agreement. This adjustment resulted in an increase to deferred revenue of $26.5 million at 1 January 2018 and a corresponding
reduction in retained earnings of $18.5 million and increase in deferred tax asset of $7.9 million. The corresponding impact of
the adjustment if this treatment was applied in 2017 would have resulted in a $1 million increase to profit after tax.
The Group has adopted AASB 15 using the cumulative effect method (using practical expedients in paragraphs C7 and C7A),
with the effect of initially applying this standard recognised at the date of initial application (i.e. 1 January 2018). Accordingly,
the information presented for 2017 has not been restated as a result of the application of AASB 15.
AASB 9 Financial Instruments
AASB 9 sets out requirements for recognising and measuring financial assets, financial liabilities and some contracts to buy
or sell non-financial items. This standard replaces AASB 139 Financial Instruments: Recognition and Measurement.
The Group performed a review of its current classification and measurement of financial assets and liabilities as well as hedge
transactions for compliance with the requirements of the new standard. Based on this review, the Group did not identify any
material change to the classification or measurement of financial instruments.
The Group has elected to adopt the new general hedge accounting model in AASB 9. This requires the Group to ensure that
hedge accounting relationships are aligned with its risk management objectives and strategy and to apply a more qualitative
and forward-looking approach to assessing hedge effectiveness. Existing hedge relationships have continued to qualify as
continuing hedge relationships following adoption of the new standard.
AASB 9 introduces an expected credit loss model for impairment of financial assets. The Group has reviewed the requirements
of the ‘expected credit loss’ model and did not identify any material difference in the level of the required provision.
Caltex has adopted AASB 9 retrospectively to items that existed at the date of initial application – 1 January 2018. The overall
impact of adopting AASB 9 is not material and as such, no opening balance adjustment is required.
A5 Reclassifications
Certain comparative amounts in the Consolidated income statement have been reclassified for consistency with the current
period’s presentation. These include:
• a decrease of $5,112,441,000 in Revenue and Cost of goods sold – historical cost to present product duties and taxes on
a net basis. This classification change is to better reflect that Caltex acts as an agent to charge and collect product duties
and taxes and remit them to the relevant tax authority. There is no impact on net profit or the balance sheet for this change;
a decrease in Selling and Distribution expenses of $94,923,000 and an increase in General and Administration expenses to
better reflect the nature of these costs; and
• a decrease in Selling and Distribution expenses of $43,000,000 and an increase in Other expenses as described in B2.
CALTEX AUSTRALIA 2018 Annual Report 83
Notes to the Financial Statements
B Results for the year
FOR THE YEAR ENDED 31 DECEMBER 2018
This section highlights the performance of the Caltex Group for the year, including revenue and other income, costs and
expenses, results by operating segment, earnings per share and dividends.
B1 Revenue and other income
Revenue
Sale of goods
Revenue from the sale of goods in the ordinary course of activities is measured at the fair value of consideration received or
receivable, net of product duties and taxes, rebates, discounts and allowances.
Gross sales revenue excludes amounts collected on behalf of third parties such as goods and services tax (GST). Sales revenue
is recognised when customers gain control, which is the date products are delivered to the customer.
Contract assets
On 5 July 2018, Caltex expanded its partnership with Woolworths, including a new supply agreement. In connection with
this 15 year agreement, Caltex made a one-off payment of $50 million in July 2018. This will be amortised over the life of
the agreement.
The closing balance as at 31 December 2018 in relation to this contract asset is $48,611,110.
Other revenue
Rental income from leased sites is recognised in the Consolidated income statement on a straight-line basis over the term
of the lease. Franchise fee income is deferred and recognised in accordance with the substance of the agreement. Royalties
are recognised in line with franchise agreements. Transaction and merchant fees are generated from Starcard and credit card
transactions processed across the network.
Dividend income is recognised at the date the right to receive payment is established.
Other income
Net profit on disposal of property, plant and equipment
The profit on disposal of property, plant and equipment is brought to account at the date a contract of sale is settled, because
it is at this time that:
• the costs incurred or to be incurred in respect of the sale can be measured reliably, and
• the control of ownership of the property, plant and equipment have been transferred to the buyer.
Assets that are held for sale are carried at the lower of the net book value and fair value less cost to sell.
Thousands of dollars
Revenue
Sale of goods
Other revenue
Rental income
Royalties and franchise income
Transaction and merchant fees
Other
Total other revenue
Total revenue
Other income
Net gain on sale of property, plant and equipment
2018
2017
(restated)
21,467,991
15,959,699
42,191
74,146
109,297
37,717
263,351
73,315
104,131
101,142
47,523
326,111
21,731,342
16,285,810
12,555
2,073
Significant items
During 2017, there were net significant items of $19 million in relation to the profit on sale of Caltex’s fuel oil business and the
utilisation of prior period capital losses to partially offset tax expense on the profit on sale.
84
Notes to the Financial Statements
B Results for the year continued
FOR THE YEAR ENDED 31 DECEMBER 2018
B2 Costs and expenses
Finance costs are recognised as incurred unless they relate to qualifying assets. Qualifying assets are assets which take more
than 12 months to get ready for their intended use or sale. In these circumstances, finance costs are capitalised to the cost
of the assets. Where borrowings are not specific to an asset, finance costs are capitalised using an average rate based on the
general borrowings of the Group.
Thousands of dollars
Finance costs
Interest expense
Finance charges on capitalised leases
Unwinding of discount on provisions
Less: capitalised finance costs
Finance costs
Finance income
Net finance costs
Depreciation and amortisation
Depreciation of:
Buildings
Plant and equipment
Amortisation of:
Leasehold property
Intangibles
Total depreciation and amortisation
Personnel expenses
Other expenses
Other expenses
2018
2017
52,753
27
(621)
(287)
51,872
(2,670)
49,202
15,444
194,314
209,758
14,218
31,439
45,657
255,415
487,426
55,883
–
16,686
(2,467)
70,102
(3,202)
66,900
7,680
188,874
196,554
8,392
24,217
32,609
229,163
375,111
17,291
43,000
Significant items
During 2018, significant item expense consists of the loss on exit from Caltex’s 49% interest in Kitchen Food Company of
$27 million, offset in relation to the partial writeback of the Franchisee Employee Assistance Fund ($10 million) resulting in a net
impact of $17 million ($12 million after tax). In 2017, the significant item loss was a result of the announced establishment of the
Franchisee Employee Assistance Fund ($20 million) and restructuring and redundancy costs associated with the capability and
competitiveness project Quantum Leap ($23 million).
CALTEX AUSTRALIA 2018 Annual Report
85
B3 Segment reporting
B3.1 Segment disclosures
An operating segment is a component of the Group that engages in business activities from which it may earn revenues
and incur expenses, including revenues and expenses that relate to transactions with any of the Group’s other components.
All operating segments’ operating results are regularly reviewed by the Group’s chief operating decision maker to make
decisions about resources to be allocated to the segment and assess its performance and for which discrete financial
information is available.
Segment results that are reported to the chief operating decision maker include items directly attributable to a segment as well
as those that can be allocated on a reasonable basis.
Inter-entity sales are recognised based on an internally set transfer price. Sales between segments are based on arm’s length
principles appropriate to reflect prevailing market pricing structures at that time. Where possible, relevant import parity pricing is
used to determine arm’s length pricing between the two segments. Revenue from external parties reported to the chief operating
decision maker is measured in a manner consistent with that in the consolidated income statement. For the purposes of reporting
to the chief operating decision maker, non-fuel income is included on a net basis and is not presented in gross revenue.
Income taxes and net financial costs are dealt with at a Group level and not within the reportable segments.
The performance of each reportable segment is measured based on segment replacement cost of sales operating profit
before interest and income tax excluding significant items. This measurement base excludes the impact of the rise or fall in
oil or product prices (key external factors) and presents a clearer picture of the reportable segments’ underlying business
performance. Segment replacement cost of sales operating profit before interest and income tax excluding significant items is
measured as management believes that such information is most useful in evaluating the performance of the differing internal
business units relative to each other, and other like business units in the industry. Segment replacement cost operating profit
excluding significant items, interest and income tax is also used to assess the performance of each business unit against internal
performance measures.
Cost of goods sold measured on a replacement cost basis
Cost of goods sold measured on a replacement cost basis excludes the effect of inventory gains and losses, including the impact
of exchange rate movements. Inventory gains or losses arise due to movements in the landed price of crude oil and product prices,
and represent the difference between the actual historic cost of sales and the current replacement value of that inventory.
The net inventory gain or loss is adjusted to reflect the impact of contractual revenue lags.
Types of products and services
The following summary describes the operations in each of the Group’s reportable segments:
Convenience Retail
The Convenience Retail segment includes revenues and costs associated with Fuels and Shop offerings at Caltex’s network
of stores, including royalties and franchise fees on remaining franchise stores.
Fuels and Infrastructure
The Fuels and Infrastructure segments includes revenues and costs associated with the integrated wholesale fuels and
lubricants supply for Caltex, including the Company’s international businesses. This includes Lytton refinery, Supply including
Ampol Trading and Shipping, B2B sales including the Woolworths supply agreement, Infrastructure, and the Gull and
SEAOIL businesses.
86
Notes to the Financial Statements
B Results for the year continued
FOR THE YEAR ENDED 31 DECEMBER 2018
B3 Segment reporting continued
B3.2 Information about reportable segments
Convenience Retail
Fuels and Infrastructure
Total operating segments
Thousands of dollars
2018
2017
(restated)
2018
2017
(restated)
2018
2017
(restated)
External segment revenue
4,967,625
4,081,299
16,763,717
12,204,511
21,731,342
16,285,810
Inter-segment revenue
–
–
3,695,162
3,141,205
3,695,162
3,141,205
Total segment revenue
Share of profit of associates
and joint ventures
Depreciation and
amortisation
Replacement Cost of
sales Operating Profit
(RCOP) before interest and
income tax*
Other material items:
Inventory gains/(loss)
Capital expenditure
(including acquisitions)
4,967,625
4,081,299
20,458,879
15,345,716
25,426,504
19,427,015
–
(151)
10,133
–
10,133
(151)
(97,134)
(85,160)
(150,576)
(138,266)
(247,710)
(223,426)
307,319
333,699
569,954
666,383
877,273
1,000,082
–
–
20,293
(6,232)
20,293
(6,232)
(194,090)
(310,320)
(248,589)
(496,633)
(442,679)
(806,953)
B3.3 Reconciliation of reportable segment revenues, profit or loss and other material items
Thousands of dollars
Revenues
Total revenue for reportable segments
Elimination of inter-segment revenue
Consolidated revenue
Profit or loss
Segment RCOP before interest and income tax, excluding significant items
Other expenses
RCOP before interest and income tax, excluding significant items
2018
2017
(restated)
25,426,504
(3,695,162)
19,392,091
(3,141,205)
21,731,342
16,250,886
877,273
(51,347)
825,926
1,018,829
(59,968)
958,861
* Replacement Cost Operating Profit (RCOP) (on a pre- and post-tax basis) is a non-International Financial Reporting Standards (IFRS) measure.
It is derived from the statutory profit adjusted for inventory (losses)/gains as management believes this presents a clearer picture of the Company’s
underlying business performance as it is consistent with the basis of reporting commonly used within the global downstream oil industry. This is
un-audited. RCOP excludes the unintended impact of the fall or rise in oil and product prices (key external factors). It is calculated by restating the
cost of sales using the replacement cost of goods sold rather than the historical cost, including the effect of contract-based revenue lags.
CALTEX AUSTRALIA 2018 Annual Report 87
Significant items excluded from profit or loss reported to the chief operating decision maker:
Thousands of dollars
Loss on exit from Kitchen Food Company
Partial writeback of Franchisee Employee Assistance Fund
Sale of Fuel Oil business
Establishment of Franchisee Employee Assistance Fund
Quantum Leap restructuring costs
RCOP before interest and income tax
Inventory gains/(loss)
Consolidated historical cost profit before interest and income tax
Net financing costs
Net profit attributable to non-controlling interest
Consolidated profit before income tax
Thousands of dollars
Other material items 2018
Depreciation and amortisation
Inventory gains
Capital expenditure
Other material items 2017 (restated)
Depreciation and amortisation
Inventory loss
Capital expenditure
2018
(27,291)
10,000
–
–
–
808,635
20,293
828,928
(49,202)
1,174
780,900
2017
(restated)
–
–
19,050
(20,000)
(23,000)
934,911
(6,232)
928,679
(66,900)
1,667
863,446
Reportable
segment
totals
Other
Consolidated
totals
(247,710)
20,293
(442,966)
(7,705)
–
(26,668)
(255,415)
20,293
(469,634)
(223,426)
(6,232)
(806,953)
(5,737)
–
(4,207)
(229,163)
(6,232)
(811,160)
B3.4 Geographical segments
The Group operates in Australia, New Zealand and Singapore. External revenue is predominantly generated in Australia and the
Group’s non-financial non-current assets are predominantly located in the Group’s country of domicile, Australia. Following
the acquisition of Gull New Zealand in 2017, the Group in 2018 has generated A$559,143,000 revenue (2017: A$203,500,000)
and holds A$335,292,000 of non-current assets (2017: A$304,800,000) in New Zealand. In 2018, the Group has generated
A$1,877,480,000 external revenue in Singapore (2017: A$1,223,236,000).
B3.5 Major customer
Revenues from one customer of the Group’s Fuels and Infrastructure segment represent approximately $3,700,000,000
(2017: $3,400,000,000) of the Group’s total gross sales revenue (excluding product duties and taxes).
B3.6 Revenue from products and services
Thousands of dollars
Petrol
Diesel
Jet
Lubricants
Specialty and other products
Crude
Non-fuel income and rebates
Other revenue
2018
7,082,125
10,064,001
2,613,749
240,486
222,258
674,993
570,379
263,351
2017
(restated)
6,010,412
6,806,049
1,789,023
231,592
120,310
719,218
283,095
326,111
21,731,342
16,285,810
88
Notes to the Financial Statements
B Results for the year continued
FOR THE YEAR ENDED 31 DECEMBER 2018
B4 Earnings per share
Cents per share
Historical cost net profit attributable to ordinary shareholders
RCOP after tax and excluding significant items
2018
214.9
214.1
2017
237.4
238.0
The calculation of historical cost basic earnings per share for the year ended 31 December 2018 was based on the net
profit attributable to ordinary shareholders of the parent entity of $560,416,000 (2017: $619,085,000) and a weighted
average number of ordinary shares outstanding during the year ended 31 December 2018 of 261 million shares
(2017: 261 million shares).
The calculation of RCOP excluding significant items basic earnings per share for the year ended 31 December 2018 was based
on the net RCOP profit attributable to ordinary shareholders of the parent entity of $558,314,000 (2017: $620,816,000) and a
weighted average number of ordinary shares outstanding as disclosed during the year ended 31 December 2018 of 261 million
shares (2017: 261 million shares). RCOP is calculated by adjusting the statutory profit for significant items and inventory gains
and losses as follows:
Thousands of dollars
Net profit after tax attributable to equity holders of the parent entity
Add: significant items losses after tax
Less: inventory (gains)/loss after tax
RCOP excluding significant items after tax
2018
560,416
12,104
(14,206)
558,314
2017
619,085
14,126
4,362
637,573
The impact of dilutive potential ordinary shares is not material and equates to less than $0.01 per share. Therefore diluted
earnings per share equals basic earnings per share.
B5 Dividends
B5.1 Dividends declared or paid
Dividends recognised in the current year by the Company are:
2018
Interim 2018
Final 2017
Total amount
2017
Interim 2017
Final 2016
Total amount
Date of payment
Franked/
unfranked
Cents per
share
Total amount
$’000
11 September 2018
6 April 2018
Franked
Franked
6 October 2017
31 March 2017
Franked
Franked
57
61
118
60
52
112
148,663
159,094
307,757
156,486
135,621
292,107
Subsequent events
Since 31 December 2018, the Directors declared the following dividend. The dividend has not been provided for and there are
no income tax consequences for the Group in relation to 2018.
Final 2018
5 April 2019
Franked
61
159,094
B5.2 Dividend franking account
Thousands of dollars
2018
2017
30% franking credits available to shareholders of Caltex Australia Limited for subsequent
financial years
1,007,281
936,078
The ability to utilise the franking credits is dependent upon there being sufficient available profits to declare dividends.
The impact on the dividend franking account of dividends proposed after the balance sheet date but not recognised as a
liability, is to reduce the balance by $68,183,321 (2017: $68,183,321).
CALTEX AUSTRALIA 2018 Annual Report Notes to the Financial Statements
C Operating assets and liabilities
FOR THE YEAR ENDED 31 DECEMBER 2018
This section provides information on the assets used to generate the Group’s trading performance and the liabilities incurred
as a result.
C1 Receivables
The following balances are amounts due from the Group’s customers and others.
89
Thousands of dollars
Current
Trade debtors
Allowance for impairment
Associated entities
Other related entities
Derivative assets
Other debtors
Non-current
Other loans
2018
2017
923,468
(7,044)
916,424
10,426
88,222
65,073
103,880
1,184,025
736,644
(6,255)
730,389
10,398
2,054
1,167
178,412
922,420
8,081
10,887
Receivables are initially recognised at fair value plus any directly attributable transaction costs and subsequently measured
at amortised cost less impairment losses.
Impairment testing is performed at reporting date. A provision for impairment losses is raised based on a risk matrix for
expected credit losses across customer categories.
Impaired receivables
As at 31 December 2018, current trade receivables of the Group with a nominal value of $7,044,000 (2017: $6,255,000) were
provided for as impaired based on the expected credit loss model. No collateral is held over these impaired receivables.
As at 31 December 2018, trade receivables of $44,755,000 (2017: $27,922,000) were overdue. The ageing analysis of
receivables is as follows:
Thousands of dollars
Past due 0 to 30 days
Past due 31 to 60 days
Past due greater than 60 days
Movements in the allowance for impairment of receivables are as follows:
Thousands of dollars
At 1 January
Provision for impairment recognised during the year
Receivables written off during the year as uncollectible
At 31 December
2018
34,513
5,147
5,095
44,755
2018
6,255
2,874
(2,085)
7,044
2017
25,735
2,187
–
27,922
2017
6,550
2,216
(2,511)
6,255
The creation and release of the provision for impaired receivables has been included in general and administration expenses
in the income statement. Amounts charged to the allowance account are written off when there is no expectation of recovering
additional cash.
The other classes within trade and other receivables do not contain impaired assets and are not past due. Based on the credit
history of these other classes, it is expected that these amounts will be received when due.
90
Notes to the Financial Statements
C Operating assets and liabilities continued
FOR THE YEAR ENDED 31 DECEMBER 2018
C2 Inventories
Thousands of dollars
Crude oil and raw materials
Inventory in process
Finished goods
Materials and supplies
At 31 December
2018
2017
325,494
49,503
1,221,713
19,415
1,616,125
409,910
51,882
1,216,592
16,531
1,694,915
Inventories are measured at the lower of cost and net realisable value. Cost is based on the first in first out (FIFO) principle and
includes direct materials, direct labour and an appropriate proportion of variable and fixed overhead expenditure incurred in
acquiring the inventories and bringing them into the existing location and condition.
The amount of any write-down or loss of inventory is recognised as an expense in the period it is incurred. Inventory
write-downs may be reversed when net realisable value increases subsequent to initial write-down. The reversal is limited
to the original write-down amount.
There was no inventory written down to net realisable value at 31 December 2018 and 31 December 2017.
C3 Intangibles
Thousands of dollars
Note
Goodwill
Rights and
licences
Software
Total
Cost
At 1 January 2018
Acquisitions through business combinations
Additions and transfers
Disposals
Foreign currency translation
Balance at 31 December 2018
Cost
At 1 January 2017
Acquisitions through business combinations
Additions and transfers
Disposals
F2
F2
Foreign currency translation
Balance at 31 December 2017
Amortisation and impairment
At 1 January 2018
Amortisation for the year
Impairment
Disposals
Foreign currency translation
Balance at 31 December 2018
Amortisation and impairment
At 1 January 2017
Amortisation for the year
Disposals
Reclassification
Balance at 31 December 2017
415,748
912
–
–
10,234
426,894
146,460
284,600
–
(4,659)
(10,653)
415,748
(16,391)
–
(3,067)
–
–
(19,458)
(16,391)
–
–
–
(16,391)
67,637
–
9,455
–
–
77,092
32,878
37,896
31
(1,348)
(1,820)
67,637
(24,535)
(12,113)
–
–
–
(36,648)
(19,501)
(6,094)
1,060
–
(24,535)
184,923
–
52,069
(20,003)
744
217,733
164,477
–
48,973
(28,152)
(375)
184,923
(110,516)
(19,326)
–
18,783
(335)
(111,394)
(112,588)
(18,123)
20,032
163
(110,516)
668,308
912
61,524
(20,003)
10,978
721,719
343,815
322,496
49,004
(34,159)
(12,848)
668,308
(151,442)
(31,439)
(3,067)
18,783
(335)
(167,500)
(148,480)
(24,217)
21,092
163
(151,442)
CALTEX AUSTRALIA 2018 Annual Report 91
Thousands of dollars
Carrying amount
At 1 January 2018
Balance at 31 December 2018
Carrying amount
At 1 January 2017
Balance at 31 December 2017
Goodwill
Rights and
licences
Software
Total
399,357
407,436
130,069
399,357
43,102
40,444
13,377
43,102
74,407
106,339
516,866
554,219
51,889
74,407
195,335
516,866
The amortisation charge of $31,439,000 (2017: $24,217,000) is recognised in selling and distribution expenses and general and
administration expenses in the income statement.
Goodwill
Goodwill arising on the acquisition of subsidiaries is stated at cost less any accumulated impairment losses. Goodwill is
allocated to cash-generating units and is tested annually for impairment. In respect of equity accounted investees, the carrying
amount of goodwill is included in the carrying amount of the investment in the associate.
Negative goodwill arising on an acquisition is recognised directly in the consolidated income statement.
Other intangible assets
Other intangible assets that are acquired by the Group are stated at cost less accumulated amortisation and impairment losses.
Amortisation
Amortisation is charged to the consolidated income statement on a straight-line basis over the estimated useful lives of
intangible assets. Other intangible assets are amortised from the date they are available for use. The estimated useful lives in
the current and comparative periods are reflected by the following amortisation percentages:
Software development
Software not integrated with hardware
Rights and licences
7% to 17%
7% to 18%
4% to 33%
Impairment
The carrying amounts of intangible assets are reviewed to determine if there is any indication of impairment. If any such indication
exists, the assets’ recoverable amounts are estimated and, if required, an impairment is recognised in the income statement.
Impairment tests for cash-generating units containing goodwill and indefinite life intangibles
Total goodwill and indefinite life intangibles at 31 December 2018 was $407,436,000 and $21,264,000 respectively. This
was allocated to each group of cash-generating units as follows. Goodwill: Gull NZ $222,728,000, Fuels and Infrastructure:
$68,272,000, Convenience Retail: $116,436,000, Indefinite life intangibles: Gull NZ $20,485,000, Fuels and Infrastructure:
$779,000. Goodwill and indefinite life intangibles have been allocated to the group of cash-generating units containing all the
assets in the integrated value chain (inclusive of retail sites, depots, pipelines and terminals).
The recoverable amount of the group of cash-generating units including goodwill and indefinite life intangibles has been
determined based on a value in use calculation. This calculation uses pre-tax cash flow projections based on an extrapolation
of the year end cash flows and available budget information. Pre-tax discount rates used vary depending on the nature of the
business and the country of operation. The cash flows have been discounted using pre-tax discount rates of 11.6% to 15.6% p.a.
The cash flows have been extrapolated using a constant growth rate of 0% to 2.5%. The growth rates used do not exceed the
long-term growth rate for the industry.
There were no goodwill impairment losses recognised during the year ended 31 December 2017 (2016: nil).
92
Notes to the Financial Statements
C Operating assets and liabilities continued
FOR THE YEAR ENDED 31 DECEMBER 2018
C3 Intangibles continued
Key assumptions used in value in use calculations
Key assumption
Cash flow
Basis for determining value in use assigned to key assumption
Estimated future cash flows are based on the Group’s most recent
board approved business plan covering a period not exceeding three
years. Cash flows beyond the approved business plan period are
extrapolated using estimated long-term growth rates.
Estimated long-term average growth rate
0% to 2.5%
Discount rate
The discount rate is disclosed above
The values assigned to the key assumptions represent management’s assessment of future trends in the petroleum industry and
are based on both external sources and internal sources (historic data).
Management believes that any reasonably possible change in the key assumptions on which the recoverable amount is based
would not cause the carrying amount of goodwill recorded to exceed its recoverable amount.
C4 Property, plant and equipment
Thousands of dollars
Freehold land
At cost
Accumulated impairment losses
Net carrying amount
Buildings
At cost
Accumulated depreciation and impairment losses
Net carrying amount
Leasehold property
At cost
Accumulated amortisation
Net carrying amount
Plant and equipment
At cost
Accumulated depreciation and impairment losses
Net carrying amount
Capital projects in progress
At cost
Accumulated impairment losses
Net carrying amount
Total net carrying amount
2018
2017
465,454
(37,284)
428,170
785,740
(276,714)
509,026
240,406
(123,839)
116,567
440,289
(37,284)
403,005
693,770
(261,270)
432,500
209,112
(109,620)
99,492
5,863,522
(4,301,860)
5,581,002
(4,107,544)
1,561,662
1,473,458
274,438
–
274,438
410,389
(491)
409,898
2,889,863
2,818,353
Owned assets
Items of property, plant and equipment are measured at cost less accumulated depreciation and impairment losses. Cost
includes expenditure that is directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the
cost of materials, direct labour and an appropriate proportion of production overheads.
The cost of property, plant and equipment includes the cost of decommissioning and restoration costs at the end of their
economic lives if a present legal or constructive obligation exists. More details of how this cost is estimated and recognised
is contained in Note C6.
Assessment of impairment is evaluated as set out below.
Leased assets
Leases of property, plant and equipment under which the Group assumes substantially all the risks and rewards of ownership
are classified as finance leases. Other leases are classified as operating leases.
CALTEX AUSTRALIA 2018 Annual Report 93
Subsequent expenditure
Expenditure incurred to replace a component of an item of property, plant and equipment that is accounted for separately,
including cyclical maintenance, is capitalised. Other subsequent expenditure is capitalised only when it is probable that the
future economic benefits embodied within the item will flow to the Caltex Group and the cost of the item can be reliably
measured. All other expenditure is recognised in the consolidated income statement as an expense as incurred.
Major cyclical maintenance
Major cyclical maintenance expenditure is separately capitalised as an asset component to the extent that it is probable that
future economic benefits, in excess of the originally assessed standard of performance, will eventuate. All other such costs are
expensed as incurred. Capitalised cyclical maintenance expenditure is depreciated over the lesser of the additional useful life
of the asset or the period until the next major cyclical maintenance is scheduled to occur.
Depreciation
Items of property, plant and equipment, including buildings and leasehold property but excluding freehold land, are depreciated
using the straight-line method over their expected useful lives. Leasehold improvements are amortised over the shorter of the
lease term or useful life.
The depreciation rates used, in the current and prior year, for each class of asset are as follows:
Freehold buildings
Leasehold property
Plant and equipment
Leased plant and equipment
2%
2% to 10%
3% to 25%
3% to 25%
Assets are depreciated from the date of acquisition or, in respect of internally constructed assets, from the time an asset
is completed and held ready for use.
Impairment
The carrying amounts of assets are reviewed to determine if there is any indication of impairment. If any such indication
exists, these assets’ recoverable amounts are estimated and, if required, an impairment is recognised in the income statement.
An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount.
In assessing the carrying value of property, plant and equipment, management considers long-term assumptions relating to
key external factors including Singapore refiner margins, foreign exchange rates and crude oil prices. Any changes in these
assumptions can have a material impact on the carrying value.
94
Notes to the Financial Statements
C Operating assets and liabilities continued
FOR THE YEAR ENDED 31 DECEMBER 2018
C4 Property, plant and equipment continued
Reconciliations of the carrying amounts for each class of property, plant and equipment are set out below:
Thousands of dollars
Freehold land
Carrying amount at the beginning of the year
Additions
Acquisition through business combination
Disposals
Foreign currency translation
Carrying amount at the end of the year
Buildings
Carrying amount at the beginning of the year
Additions
Disposals
Transfers from capital projects in progress
Depreciation
Reclassification
Foreign currency translation
Carrying amount at the end of the year
Leasehold property
Carrying amount at the beginning of the year
Additions
Acquisition through business combination
Disposals
Transfers from capital projects in progress
Amortisation
Foreign currency translation
Carrying amount at the end of the year
Plant and equipment
Carrying amount at the beginning of the year
Additions
Acquisition through business combination
Disposals
Transfers from capital projects in progress
Depreciation
Foreign currency translation
Carrying amount at the end of the year
Capital projects in progress
Carrying amount at the beginning of the year
Additions
Borrowing costs capitalised
Transfers to buildings, leased property, plant and equipment
Reclassification
Carrying amount at the end of the year
2018
2017
403,005
31,505
–
(7,023)
683
428,170
432,500
933
(4,121)
95,147
(15,444)
–
11
509,026
99,492
8,355
–
(2,154)
23,227
(14,218)
1,865
116,567
1,473,458
26,400
–
(27,102)
281,384
(194,314)
1,836
1,561,662
409,898
225,277
287
(399,758)
38,734
274,438
338,795
54,777
14,077
(4,644)
–
403,005
408,000
9,986
(12,796)
34,230
(7,680)
760
–
432,500
85,749
5,089
20,929
(4,097)
788
(8,392)
(574)
99,492
1,545,424
47,434
39,290
(90,311)
116,059
(188,874)
4,436
1,473,458
312,897
245,611
2,467
(151,077)
–
409,898
CALTEX AUSTRALIA 2018 Annual Report C5 Payables
Thousands of dollars
Current
Trade creditors – unsecured
– Related entities
– Other corporations and persons
Other creditors and accrued expenses
Derivative liabilities
Non-current
Other creditors and accrued expenses
95
2018
2017
–
1,456,442
366,874
3,853
1,827,169
–
1,361,704
331,826
41,724
1,735,254
41,686
10,855
Payables are recognised for amounts to be paid in the future for goods and services received, whether or not billed to the
Group. Trade accounts payable are normally settled on between 30-day and 60-day terms.
Payables are initially recognised at fair value plus any directly attributable transaction costs and subsequently measured at
amortised cost.
C6 Provisions
Thousands of dollars
Balance at 1 January 2018
Provisions made during the year
Provisions used during the year
Discounting movement
Balance at 31 December 2018
Current
Non-current
Site remediation
and dismantling
345,097
2,770
(45,982)
(749)
301,136
52,308
248,828
301,136
Other
14,249
8,950
(6,980)
–
16,219
12,949
3,270
16,219
Total
359,346
11,720
(52,962)
(749)
317,355
65,257
252,098
317,355
A provision is recognised when there is a present legal or constructive obligation as a result of a past event that can be
measured reliably and it is probable that a future sacrifice of economic benefits will be required to settle the obligation, the
timing or amount of which is uncertain.
A provision is determined by discounting the expected future cash flows (adjusted for expected future risks) required to settle the
obligation at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability.
Subsequent accretion to the amount of a provision due to unwinding of the discount is recognised as a financing cost.
Estimates of the amount of an obligation are based on current legal and constructive obligations, technology and price levels.
Actual outflows can differ from estimates due to changes in laws, regulations, public expectations, technology, prices and
conditions and can take place many years in the future. The carrying amounts of provisions and liabilities are regularly reviewed
and adjusted to take account of such changes.
In general, the further in the future that a cash outflow for a liability is expected to occur, the greater the degree of uncertainty
around the amount and timing of that cash outflow. Examples of cash outflows that are expected to occur a number of years
in the future and, as a result, about which there is uncertainty of the amounts involved, include asset decommissioning and
restoration obligations and employee pension obligations.
A change in the estimate of a recognised provision or liability would impact the consolidated income statement; with the
exception of decommissioning and certain restoration costs that relate to the initial construction of an asset, which would be
accounted for on a prospective basis.
96
Notes to the Financial Statements
C Operating assets and liabilities continued
FOR THE YEAR ENDED 31 DECEMBER 2018
C6 Provisions continued
Site remediation and dismantling
Provisions relating to current and future remediation activities are recognised as liabilities when a legal or constructive
obligation arises.
The provision is the best estimate of the present value of the expenditure to settle the obligation at the reporting date.
These costs are reviewed annually and any changes are reflected in the provision at the end of the reporting period through
the consolidated income statement.
The ultimate cost of remediation is uncertain and cost estimates can vary in response to many factors, including changes to the
relevant legal and environmental requirements, the emergence of new techniques or experience at other sites and uncertainty
as to the remaining life of existing sites.
Costs for the future dismantling and removal of assets, and restoration of the site on which the assets are located, are provided
for and capitalised upon initial construction of the asset, where an obligation to incur such costs arises. The present value of the
expected future cash flows required to settle these obligations is capitalised and depreciated over the useful life of the asset.
Subsequent accretion to the amount of a provision due to unwinding of the discount is recognised as a finance cost. A change
in estimate of the provision is added to or deducted from the cost of the related asset in the period of the change, to the extent
that any amount of deduction does not exceed the carrying amount of the asset. Any deduction in excess of the carrying amount
is recognised in the consolidated income statement immediately. If an adjustment results in an addition to the cost of the related
asset, consideration will be given to whether an indication of impairment exists and the impairment policy will be applied.
Dividends
A provision for dividends payable is recognised in the reporting period in which the dividends are declared, for the entire
undistributed amount.
Other
Other includes legal, insurance and other provisions.
C7 Employee benefits
Thousands of dollars
Non-current assets
Defined benefit superannuation asset
Total asset for employee benefits
Current liabilities
Liability for annual leave
Liability for long service leave
Liability for termination benefits
Bonus accrued
Total current liability for employee benefits
Non-current liabilities
Liability for long service leave
Defined benefit superannuation obligation
Total non-current liability for employee benefits
Total net liability for employee benefits
2018
2017
1,721
1,721
33,357
3,910
9,801
38,571
85,639
36,433
3,234
39,667
123,585
3,233
3,233
29,570
4,823
13,864
45,420
93,677
35,198
2,120
37,318
127,762
CALTEX AUSTRALIA 2018 Annual Report Notes to the Financial Statements
D Capital, funding and risk management
FOR THE YEAR ENDED 31 DECEMBER 2018
D Capital, funding and risk management
This section focuses on the Group’s capital structure and related financing costs. This section also describes how the Group
manages the capital and the financial risks it is exposed to as a result of its operating and financing activities.
97
D1 Interest-bearing liabilities
Thousands of dollars
Current
Bank facilities
Capital market borrowings
Lease liabilities
Non-current
Bank facilities
Capital market borrowings
Lease liabilities
Note
2018
2017
G1
G1
150,257
–
164
150,421
510,339
300,575
–
810,914
120,154
149,923
192
270,269
588,495
–
157
588,652
Interest-bearing liabilities are initially recorded at fair value, less transaction costs. Subsequently, interest-bearing liabilities are
measured at amortised cost, using the effective interest method. Any difference between proceeds received net of transaction
costs and the amount payable at maturity is recognised over the term of the borrowing using the effective interest method.
Significant funding transactions
During 2018, the Group issued a seven-year $300 million Australian dollar Medium Term Note. The Group also extended the
tenor on $1,626 million (AUD equivalent) of its existing bilateral bank facilities and upsized its bank facilities by $320 million.
D2 Risk management
The Group currently finances its operations through a variety of financial instruments including bank facilities, capital markets
borrowings and finance leases. Surplus funds are invested in cash and short-term deposits. The Group has various other
financial instruments such as trade debtors and trade creditors, which arise directly from its operations.
The Group’s activities expose it to a variety of financial risks: market risk (including foreign exchange risk, interest rate risk and
commodity price risk), as well as credit and liquidity risk.
Group Treasury centrally manages foreign exchange risk, interest rate risk, liquidity risk, financial institutional credit risk, funding
and capital management. Risk management activities in respect to customer credit risk are carried out by the Group’s Credit
Risk department and risk management activities in respect to commodity price risk are carried out by Ampol Singapore. The
Group operates under policies approved by the Board of Directors. Group Treasury, Credit Risk and Ampol Singapore evaluate
and monitor the financial risks in close co-operation with the Group’s operating units.
The Group’s overall risk management program focuses on the unpredictability of financial markets and seeks to reduce potential
adverse effects on financial performance. The Group uses a range of derivative financial instruments to hedge market exposures.
The Group enters into derivative transactions; principally interest rate swaps, foreign exchange contracts (forwards, swaps and
options) and crude and finished product swap and futures contracts. The purpose is to manage the market risks arising from the
Group’s operations and its sources of finance.
Derivative financial instruments are recognised at fair value. The gain or loss on subsequent remeasurement is recognised
immediately in the consolidated income statement. However, where derivatives qualify for hedge accounting, recognition of any
resultant gain or loss depends on the nature of the item being hedged.
The magnitude of each type of financial risk that has arisen over the year is discussed in Notes D2.1 to D2.5 below.
98
Notes to the Financial Statements
D Capital, funding and risk management continued
FOR THE YEAR ENDED 31 DECEMBER 2018
D2 Risk management continued
Hedge accounting
There are three types of hedge accounting relationships the Group utilises:
Type of Hedge
Objective
Hedging Instruments Accounting Treatment
Cash flow hedges
To hedge the Group’s
exposure to variability
in cash flows of an
asset, liability or
forecast transaction
caused by interest rate
or foreign currency
movements.
Foreign exchange
contracts (forwards,
swaps and options).
Interest rate swap
contracts (floating-
to-fixed).
Fair value hedges
Net investment
hedges
Interest rate swap
contracts (fixed-to-
floating).
Foreign currency
borrowings.
To hedge the Group’s
exposure to changes
to the fair value of an
asset or liability arising
from interest rate
movements.
To hedge the Group’s
exposure to exchange
rate differences arising
from the translation
of our foreign
operations from their
functional currency to
Australian dollars.
The effective portion of changes in fair value of these
financial instruments is recognised in equity. The gain
or loss relating to the ineffective portion is recognised
immediately in the consolidated income statement.
The cumulative gain or loss in equity is transferred
to the consolidated income statement in the period
when the hedged item affects profit or loss. When a
hedging instrument expires or is sold, or when a hedge
no longer meets the criteria for hedge accounting,
the cumulative gain or loss existing in equity at the
time remains in equity and is recognised when the
forecast transaction ultimately affects profit or loss.
When a forecast transaction is no longer expected to
occur, the cumulative gain or loss that was reported in
equity is immediately transferred to the consolidated
income statement.
Changes in the fair value of derivative financial
instruments that are designated and qualify as fair
value hedges are recorded in the consolidated income
statement, together with any changes in the fair value
of the hedged asset or liability or firm commitment
attributable to the hedged risk.
Foreign exchange differences arising from the
translation of the net investment in foreign operations,
and of related hedges that are effective, are recognised
in other comprehensive income and presented in the
foreign currency translation reserve within equity. They
may be released to the consolidated income statement
upon disposal of the foreign operation.
D2.1 Interest rate risk
Interest rate risk is the risk that fluctuations in interest rates adversely impact the Group’s results. Borrowings issued at variable
interest rates expose the Group to cash flow interest rate risk. Borrowings issued at fixed rates expose the Group to fair value
interest rate risk.
Interest rate risk exposure
The Group’s exposure to interest rate risk (after hedging) for classes of financial assets and liabilities is set out as follows:
Thousands of dollars
Financial assets
Cash at bank and on hand
Financial liabilities
Variable rate borrowings
Bank facilities
Fixed interest rate – repricing dates:
12 months or less
One to five years
Over five years
2018
2017
6,142
6,142
44,521
44,521
D1
D1
D1
D1
490,596
428,649
164
320,000
150,575
961,335
150,115
280,157
–
858,921
CALTEX AUSTRALIA 2018 Annual Report 99
Management of interest rate risk
The Group manages interest rate risk by using a floating versus fixed rate debt framework. The relative mix of fixed and floating
interest rate funding is managed by using interest rate swap contracts. Maturities of swap contracts are principally between
three and seven years.
The Group manages its cash flow interest rate risk by entering into floating-to-fixed interest rate swap contracts.
At 31 December 2018, the fixed rates under these swap contracts varied from 2.3% to 2.5% per annum, at a weighted average
rate of 2.4% per annum (2017: 2.3% to 2.5% per annum, at a weighted average rate of 2.4% per annum).
The Group manages its fair value interest rate risk by using fixed-to-floating interest rate swap contracts.
The net fair value of interest rate swap contracts at 31 December 2018 was a $550,000 loss (2017: $1,000,000 loss).
Interest rate sensitivity analysis
At 31 December 2018, if interest rates had changed by -/+1% from the year-end rates, with all other variables held constant, the
impact on post-tax profit for the year for the Group and equity would have been:
Thousands of dollars
Interest rates decrease by 1%
Interest rates increase by 1%
2018
2017
Post-tax
profit
5,000
(5,000)
Hedge
reserve
(8,000)
7,700
Post-tax
profit
4,600
(4,600)
Hedge
reserve
(10,900)
10,400
D2.2 Foreign exchange risk
Foreign exchange risk is the risk that fluctuations in exchange rates will adversely impact the Group’s results.
Foreign currency transactions are recorded, on initial recognition, in Australian dollars by applying the exchange rate at the date
of the transaction.
Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated to Australian dollars
at the foreign exchange rate applicable for that date. Foreign exchange differences arising on translation are recognised in the
consolidated income statement.
Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the
exchange rate at the date of the transaction. Non-monetary assets and liabilities denominated in foreign currencies that are
stated at fair value are translated to Australian dollars at foreign exchange rates at the dates the fair value was determined.
The Group is exposed to the effect of changes in exchange rates on its operations and investments.
Foreign exchange risk exposure
Thousands of dollars
(Australian dollar equivalent amounts)
US
Dollar
NZ
Dollar
Philippine
Peso
Australian
Dollar
2018
Bank facilities
Cash and cash equivalents
Trade receivables
Trade payables
Forward exchange contracts (forwards,
swaps and options)
Crude and finished product swap and
futures contracts
–
(6,139)
125,767
(1,352,972)
(280,596)
6,437
3,670
(46,558)
5,762
55,983
25
–
–
–
–
–
–
–
2017
(380,000)
5,844
1,000,677
(469,101)
Total
(660,596)
6,142
1,130,114
(1,868,631)
–
–
5,787
55,983
Thousands of dollars
(Australian dollar equivalent amounts)
US
Dollar
NZ
Dollar
Philippine
Peso
Australian
Dollar
Bank facilities
Cash and cash equivalents
Trade receivables
Trade payables
Forward exchange contracts (forwards,
swaps and options)
Crude and finished product swap and
futures contracts
–
21,909
186,358
(1,316,461)
(9,888)
(30,644)
(302,149)
8,854
8,928
(22,824)
–
–
–
–
–
–
975
–
(406,500)
13,758
738,021
(367,267)
–
–
Total
(708,649)
44,521
933,307
(1,706,552)
(8,913)
(30,644)
100
Notes to the Financial Statements
D Capital, funding and risk management continued
FOR THE YEAR ENDED 31 DECEMBER 2018
D2 Risk management continued
D2.2 Foreign exchange risk continued
Management of foreign exchange risk
Foreign exchange contracts (forwards, swaps and options) are used to economically hedge foreign currency exposure
in accordance with Group Treasury Policy. The Group also enters into foreign exchange contracts to cover major capital
expenditure items. As at 31 December 2018, the total fair value of all outstanding foreign exchange contracts (forwards, swaps
and options) amounted to a $5,787,000 gain (2017: $8,913,000 loss).
Foreign exchange rate sensitivity analysis
At 31 December 2018, had the Australian dollar strengthened/weakened by 10% against the following currencies respectively
(with all other variables held constant), the impact on post-tax profit for the year for the Group and equity would have been:
2018
2017
Thousands of dollars
Post–tax profit
Equity Post–tax profit
Equity
AUD strengthens against US Dollar 10%
AUD weakens against US Dollar 10%
AUD strengthens against NZ Dollar 10%
AUD weakens against NZ Dollar 10%
AUD strengthens against Philippine Peso 10%
AUD weakens against Philippine Peso 10%
7,800
(9,600)
–
–
–
–
–
–
12,500
(15,200)
(12,300)
15,000
(8,000)
9,700
–
–
–
–
(100)
200
13,200
(16,200)
(1,000)
8,600
D2.3 Commodity price risk
Commodity price risk is the risk that fluctuations in commodity prices will adversely impact the Group’s results. The Group
is exposed to the effect of changes in commodity price on its operations.
The Group utilises crude and finished product swap and futures contracts to manage the risk of price movements. The
enterprise commodity risk management policy seeks to minimise adverse price timing risks and basis exposures brought about
by purchase and sales transactions.
In 2018 and 2017, Caltex’s policy has been not to hedge refiner margins. As at 31 December 2018, the total fair value of all
outstanding crude and finished product swap and futures contracts amounted to a $55,983,000 gain (2017: $30,644,000 loss).
Commodity price sensitivity analysis
At 31 December 2018, if commodity prices had changed by -/+10% from the year-end prices, with all other variables held
constant, the impact on post-tax profit for the year for the Group and equity would have been:
2018
2017
Thousands of dollars
Post-tax profit Hedge reserve Post-tax profit Hedge reserve
Commodity prices decrease 10%
Commodity prices increase 10%
32,400
(26,200)
–
–
35,200
(35,200)
–
–
D2.4 Credit risk
Customer credit risk
Credit risk represents the loss that would be recognised if counterparties failed to perform as contracted.
The credit risk on financial assets of the Group which have been recognised on the consolidated balance sheet is the carrying
amount of trade debtors, net of allowances for impairment (see Note C1).
Caltex has a Board approved Credit Policy and manual which provide the guidelines for the management and diversification
of the credit risk to Caltex. The guidelines provide for the manner in which the credit risk of customers is assessed and the use
of credit rating and other information in order to set appropriate limits of trade with customers. The credit quality of customers
is consistently monitored in order to identify any potential adverse changes in the credit risk of the customers.
Caltex has reviewed the historic bad debt provision balances and write-offs in accordance with the changes in AASB 9 and has
determined that there is no material adjustment upon adoption. Expected customer credit losses are assessed on a portfolio
basis between small business individuals and bulk fuel customers.
Caltex also minimises concentrations of credit risk by undertaking transactions with a large number of customers across
a variety of industries and networks.
Security is required to be supplied by certain groups of Caltex customers to minimise risk. The security could be in the form
of a registered personal property security interest over the customer’s business and mortgages over the business property.
Bank guarantees, other contingent instruments or insurance bonds are also provided in some cases.
CALTEX AUSTRALIA 2018 Annual Report 101
Financial institution credit risk
Credit risk on cash, short-term deposits and derivative contracts is reduced by transacting with relationship banks which have
acceptable credit ratings determined by a recognised ratings agency.
Interest rate swaps, foreign exchange contracts (forwards, swaps and options), crude and finished product swap and futures
contracts, bank guarantees and other contingent instruments are subject to credit risk in relation to the relevant counterparties,
which are principally large relationship banks.
The maximum credit risk exposure on foreign exchange contracts, crude and finished product swap and futures contracts, bank
guarantees and other contingent instruments is the fair value amount that Caltex receives when settlement occurs, should the
counterparty fail to pay the amount which it is committed to pay the Group.
The credit risk on interest rate swaps is limited to the positive mark to market amount to be received from counterparties over
the life of contracts that are favourable to the Group.
D2.5 Liquidity risk management
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due.
Due to the dynamic nature of the underlying business, the liquidity risk policy requires maintaining sufficient cash and an
adequate amount of committed credit facilities to be held above the forecast requirements of the business.
The Group manages liquidity risk centrally by monitoring cash flow forecasts, and maintaining adequate cash reserves and debt
facilities. The debt portfolio is periodically reviewed to ensure there is funding flexibility across an appropriate maturity profile.
The tables below set out the contractual timing of cash flows on derivative and non-derivative financial assets and liabilities at
the reporting date, including drawn borrowings and interest.
2018
2017
Derivative
financial
liabilities
Derivative
financial
assets
Net derivative
financial
(liabilities)
/assets
Derivative
financial
liabilities
Derivative
financial
assets
Net derivative
financial
(liabilities)
/assets
(858,268)
(12,943)
(4,617)
863,835
13,356
4,362
5,567
412
(255)
5,724
(799,166)
(559)
–
787,728
1,106
–
(11,438)
547
–
(10,891)
Thousands of dollars
Derivative financial
instruments
Less than one year
One to five years
Over five years
Thousands of dollars
Non-derivative
financial instruments
Less than one year
One to five years
Over five years
The Group has the following committed undrawn floating rate borrowing facilities:
Thousands of dollars
Financing arrangements
Expiring within one year
Expiring beyond one year
2018
2017
Net other
financial
liabilities
Net other
financial
liabilities
(1,983,389)
(525,025)
(393,000)
(2,041,587)
(599,514)
–
(2,901,413)
(2,641,101)
2018
2017
–
1,390,262
1,390,262
–
953,664
953,664
102
Notes to the Financial Statements
D Capital, funding and risk management continued
FOR THE YEAR ENDED 31 DECEMBER 2018
D3 Capital management
The Group’s primary objective when managing capital is to safeguard the ability to continue as a going concern, while delivering
on strategic objectives.
The Group’s Financial Framework is designed to support the overarching objective of top quartile Total Shareholder Return,
relative to the S&P/ASX 100. The Framework’s key elements are to:
• maintain an optimal capital structure that delivers a competitive cost of capital, by holding a level of net debt (including lease
liabilities) relative to EBITDA, that is consistent with investment grade credit metrics;
• deliver Return on Capital Employed (ROCE) that exceeds the weighted average cost of capital; and
• make disciplined capital allocation decisions between investments, debt reduction and distribution of surplus capital
to shareholders.
The Group’s gearing ratio is calculated as Net Debt/Total Capital. Net Debt is calculated as total interest-bearing liabilities less
cash and cash equivalents. Total Capital is calculated as equity as shown in the balance sheet plus net debt.
Thousands of dollars
Total interest-bearing liabilities
Less: cash and cash equivalents
Net debt
Total equity
Total capital
Gearing ratio
2018
2017
961,335
(6,142)
955,193
3,389,064
4,344,257
22.0%
858,921
(44,521)
814,400
3,107,901
3,922,301
20.8%
D4 Fair value of financial assets and liabilities
The Group’s accounting policies and disclosures may require the measurement of fair values for both financial and non-financial
assets and liabilities. The Group has an established framework for fair value measurement. When measuring the fair value of an
asset or a liability, the Group uses market observable data where available.
Fair values are categorised into different levels in a fair value hierarchy based on the following valuation techniques:
• Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
• Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly
(i.e. as prices) or indirectly (i.e. derived from prices).
• Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
If the inputs used to measure the fair value of an asset or a liability are categorised in different levels of the fair value hierarchy,
then the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy as the lowest level input
that is significant to the entire measurement.
The fair value of cash, cash equivalents and non-interest-bearing financial assets and liabilities approximates their carrying value
due to their short maturity.
Fair values of recognised financial assets and liabilities with their carrying amounts shown in the balance sheet are as follows:
Thousands of dollars
Asset/(Liability)
31 December 2018
Interest-bearing liabilities
Bank facilities(i)
Capital market borrowings(ii)
Lease liabilities(iii)
Derivatives
Interest rate swaps(iv)
Foreign exchange contracts
(forwards, swaps and options)(iv)
Crude and finished product swap and
futures contracts(iv)
Total
Carrying
amount
Fair value
total
Quoted
market price
(Level 1)
Observable
inputs
(Level 2)
Non-market
observable
inputs
(Level 3)
(660,596)
(300,575)
(164)
(657,282)
(304,589)
(161)
(550)
(550)
5,787
5,787
–
–
–
–
–
(657,282)
(304,589)
(161)
(550)
5,787
55,983
55,983
(900,115)
(900,812)
12,229
12,229
43,754
(913,041)
–
–
–
–
–
–
–
CALTEX AUSTRALIA 2018 Annual Report
103
Thousands of dollars
Asset/(Liability)
31 December 2017
Interest-bearing liabilities
Bank facilities(i)
Capital market borrowings(ii)
Lease liabilities(iii)
Derivatives
Interest rate swaps(iv)
Foreign exchange contracts
(forwards, swaps and options)(iv)
Crude and finished product swap and
futures contracts(iv)
Total
Estimation of fair values
(i) Bank facilities
Carrying
amount
Fair value
total
Quoted
market price
(Level 1)
Observable
inputs
(Level 2)
Non-market
observable
inputs
(Level 3)
(708,649)
(149,923)
(349)
(707,948)
(156,107)
(372)
(1,000)
(1,000)
(8,913)
(8,913)
(30,644)
(899,478)
(30,644)
(904,984)
–
–
–
–
–
–
–
(707,948)
(156,107)
(372)
(1,000)
(8,913)
(30,644)
(904,984)
–
–
–
–
–
–
–
The fair value of bank facilities is estimated as the present value of future cash flows using the applicable market rate.
(ii) Capital market borrowings
The fair value of capital market borrowings is determined by quoted market prices or dealer quotes for similar instruments.
(iii) Lease liabilities
The fair value is estimated as the present value of future cash flows using the Group’s risk free rate.
(iv) Derivatives
Interest rate swaps
The fair value of interest rate swap contracts is the estimated amount that the Group would receive or pay to terminate the
swap at balance date taking into account current interest rates and credit adjustments.
Foreign exchange contracts (forwards, swaps and options)
The fair value of forward exchange contracts (forwards and swaps) is calculated by reference to current forward exchange
rates for contracts with similar maturity profiles as at reporting date. The fair value of foreign exchange options is
determined using standard valuation techniques.
Crude and finished product swap and futures contracts
The fair value of crude and product swap contracts is calculated by reference to market prices for contracts with similar
maturity profiles at reporting date. The fair value of crude and product futures contracts is determined by quoted
market prices.
104
Notes to the Financial Statements
D Capital, funding and risk management continued
FOR THE YEAR ENDED 31 DECEMBER 2018
D4 Fair value of financial assets and liabilities continued
D4.1 Master netting or similar agreements
The Group enters into derivative transactions under International Swaps and Derivatives Association (ISDA) master netting
agreements. In general, under such agreements the amounts owed by each counterparty on a single day in respect of all
transactions outstanding in the same currency are aggregated into a net amount payable by one party to the other.
The Group purchases and sells petroleum products with a number of counterparties with contractual offsetting arrangements,
referred to as “Buy Sell arrangements”.
The following table presents the recognised amounts that are netted, or subject to master netting arrangements but not offset,
as at reporting date. The column ‘net amount’ shows the impact on the Group’s balance sheet if all set-off rights were exercised.
Thousands of dollars
(Australian dollar equivalent amounts)
Gross
Amount
Amount
offset in the
balance sheet
Amount
in the
balance sheet
Related
amount not
offset
2018
317,788
294,076
611,864
(256,568)
(288,718)
(545,286)
(252,715)
(274,784)
(527,499)
252,715
274,784
527,499
(3,237)
–
(3,237)
3,237
–
3,237
65,073
19,292
84,365
(3,853)
(13,934)
(17,787)
2017
Gross
Amount
40,562
281,580
322,142
(81,119)
(308,487)
(389,606)
Amount
offset in the
balance sheet
Amount
in the
balance sheet
Related
amount not
offset
(39,395)
(270,675)
(310,070)
39,395
270,675
310,070
1,167
10,905
12,072
(41,724)
(37,812)
(79,536)
(1,167)
–
(1,167)
1,167
–
1,167
Net
Amount
61,836
19,292
81,128
(616)
(13,934)
(14,550)
Net
Amount
–
10,905
10,905
(40,557)
(37,812)
(78,369)
Derivative financial assets
Buy sell arrangements
Total financial assets
Derivative financial liabilities
Buy sell arrangements
Total financial liabilities
Thousands of dollars
(Australian dollar equivalent amounts)
Derivative financial assets
Buy sell arrangements
Total financial assets
Derivative financial liabilities
Buy sell arrangements
Total financial liabilities
D5 Issued capital
Thousands of dollars
Ordinary shares
Shares on issue at beginning of period – fully paid
Shares on issue at end of period – fully paid
2018
2017
524,944
524,944
524,944
524,944
Holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share
at meetings of shareholders.
In the event of the winding up of Caltex, ordinary shareholders rank after all creditors and are fully entitled to any proceeds of
liquidation. Caltex grants performance rights to senior executives (refer to the Remuneration Report for further detail). For each
right that vests, Caltex intends to purchase a share on market following vesting.
CALTEX AUSTRALIA 2018 Annual Report Notes to the Financial Statements
E Taxation
FOR THE YEAR ENDED 31 DECEMBER 2018
This section provides details of the Group’s income tax expense, current tax provision and deferred tax balances and the Group’s
tax accounting policies.
105
E1 Income tax expense
E1.1 Recognised in the income statement
Thousands of dollars
Current tax expense:
Current year
Adjustments for prior years
Deferred tax benefit:
Origination and reversal of temporary differences
Adjustments for prior years
2018
2017
154,918
(6,332)
148,586
61,712
9,012
70,724
226,065
2,958
229,023
21,325
(7,654)
13,671
Total income tax expense in the income statement
219,310
242,694
E1.2 Reconciliation between income tax expense and profit before income tax expense
Thousands of dollars
Profit before income tax expense
2018
2017
780,900
863,446
Income tax using the domestic corporate tax rate of 30% (2017: 30%)
234,270
259,034
Effect of tax rates in foreign jurisdictions
(Decrease) in income tax expense due to:
Share of net profit of associated entities
Capital tax losses utilised for which no deferred tax asset was recognised
Research and development allowances
Other
Income tax over-provided in prior years
(5,981)
(6,204)
(3,040)
(6,624)
(850)
(1,145)
2,680
45
(3,697)
(850)
(938)
(4,696)
Total income tax expense in the income statement
219,310
242,694
Income tax expense comprises current tax expense and deferred tax expense. Current tax is the expected tax payable on the
taxable income for the year, using tax rates enacted at the balance sheet date, and any adjustments to tax payable in respect of
previous years. Deferred tax expense represents the changes in temporary differences between the carrying amount of an asset
or liability in the statement of financial position and its tax base.
Taxation of Singaporean entities
At the date of this report, the Australian Taxation Office (ATO) had not determined the extent to which earnings from the
Group’s Singaporean entities would be subject to income tax in Australia under the regime for the taxation of controlled foreign
company income. Due to the uncertainty of the ATO’s determination, the Group has estimated and recognised tax liabilities for
2014 to date based on the income tax rate of 30%, being the Australian corporate income tax rate. The Singaporean corporate
income tax rate is 17%; however due to some of the Group’s Singaporean entities’ status as Global Trader Companies, specified
income of those entities is subject to a lower tax rate. The cumulative tax expense for the differential between the Australian and
Singapore tax rates recognised in the Financial Statements from 2014 to 31 December 2018 is $131m. Under an administrative
agreement made with the ATO 50% of the differential between the earnings taxable under the Australian and Singaporean
taxation rates has been paid pending resolution of the matter. As a result, as at 31 December 2018 50% of this amount
($65 million) is recognised in current tax payable in relation to this matter. If the outcome of the ATO’s decision is in Caltex’s
favour, an amount of income tax expense recognised to date could be written back in future periods. If the tax matter is resolved
such that the ATO’s position is sustained, there would be no impact on the Caltex income statement or net assets.
E2 Deferred tax
Deferred tax is recognised using the balance sheet liability method, providing for temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Subject to the
comments contained in Note F2, the following temporary differences are not provided for: goodwill; the initial recognition of
assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit; and
differences relating to investments in subsidiaries, associates and jointly controlled entities to the extent that the Group is able to
control the timing of the reversal of the temporary differences and it is probable that they will not reverse in the foreseeable future.
The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of
assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which
the asset can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit
will be realised.
106
Notes to the Financial Statements
E Taxation continued
FOR THE YEAR ENDED 31 DECEMBER 2018
E2 Deferred tax continued
E2.1 Movement in deferred tax
Thousands of dollars
Asset/(Liability)
Balance at
1 Jan 18*
Recognised
in income
Recognised
in equity
Acquired
in business
combination
Balance at
31 Dec 18
Receivables
Inventories
Property, plant and equipment and
intangibles
Payables
Interest-bearing liabilities
Provisions
Tax value of recognised tax losses
Other
Net deferred tax asset
Thousands of dollars
Asset/(Liability)
Receivables
Inventories
Property, plant and equipment and
intangibles
Payables
Interest-bearing liabilities
Provisions
Tax value of recognised tax losses
Other
Net deferred tax asset
* Refer to Note A4 for further information.
137
5,210
55,279
42,490
3,727
145,371
–
(194)
252,020
(17,984)
(13,470)
(4,240)
(3,032)
(1,416)
(14,548)
–
(16,034)
(70,724)
–
–
(215)
–
2,239
848
–
(8)
2,864
–
–
–
–
–
–
–
–
–
(17,847)
(8,260)
50,824
39,458
4,550
131,671
–
(16,236)
184,160
Balance at
1 Jan 17
Recognised
in income
Recognised
in equity
Acquired
in business
combination
Balance at
31 Dec 17
113
(1,281)
65,234
12,484
3,494
160,925
6
(2,892)
238,083
24
6,127
(30,110)
22,043
255
(14,636)
(6)
2,632
(13,671)
–
–
–
–
(22)
(1,056)
–
20
(1,058)
E2.2 Deferred tax recognised directly in equity
Thousands of dollars
Related to actuarial gains
Related to derivatives
Related to change in fair value of net investment hedges
Related to foreign operations – foreign currency translation differences
E2.3 Unrecognised deferred tax assets
Thousands of dollars
Capital tax losses
Deferred tax assets have not been recognised in respect of these items because it is not probable that future taxable profit will
be available against which these benefits can be utilised by the Group. These have not been tax effected.
E2.4 Tax consolidation
Caltex Australia Limited recognises all current tax balances relating to its wholly owned Australian resident entities included in
the tax consolidated group (TCG). Caltex Australia Limited, in conjunction with the other members of the TCG, has entered into
a tax funding arrangement which sets out the funding obligations of members of the TCG in respect of tax amounts.
–
364
20,155
16
–
138
–
46
20,719
2018
838
568
1,670
(212)
2,864
137
5,210
55,279
34,543
3,727
145,371
–
(194)
244,073
2017
(1,056)
(22)
–
20
(1,058)
2018
2017
89,982
108,990
CALTEX AUSTRALIA 2018 Annual Report 107
Notes to the Financial Statements
F Group structure
FOR THE YEAR ENDED 31 DECEMBER 2018
This section provides information on the Group’s structure and how this impacts the results of the Group as a whole, including
details of joint arrangements, controlled entities, transactions with non-controlling interests and changes made to the structure
during the year.
F1 Controlled entities
Controlled entities are those entities controlled by the Caltex Group. Control exists when the Caltex Group is exposed to, or has
rights to, variable returns from its involvement with the entity and has the ability to affect those returns from its involvement with
the entity and through its power over the entity.
The following entities were controlled during 2018:
Name
Companies
Ampol Bendigo Pty Ltd
Ampol International Holdings Pte Ltd.
Ampol Management Services Pte Ltd.
Ampol Procurement Services Pte. Ltd.
Ampol Property (Holdings) Pty Ltd
Ampol Refineries (Matraville) Pty Ltd
Ampol Road Pantry Pty. Limited
Ampol Singapore Trading Pte. Ltd.
Australian Petroleum Marine Pty Ltd
B & S Distributors Pty Ltd
Bowen Petroleum Services Pty. Limited
Brisbane Airport Fuel Services Pty Limited
CAL Group Holdings NZ Limited
Calgas Pty Ltd
Calstores Pty Ltd
Caltex Australia Custodians Pty Limited
Caltex Australia Management Pty Ltd
Caltex Australia Nominees Pty Ltd
Caltex Australia Petroleum Pty Ltd
Caltex Fuel Services Pty Ltd
Caltex Lubricating Oil Refinery Pty Ltd
Caltex Petroleum (Qld) Pty Ltd
Caltex Petroleum (Victoria) Pty Ltd
Caltex Petroleum Pty Ltd
Caltex Petroleum Services Pty Ltd
Caltex Refineries (NSW) Pty Ltd
Caltex Refineries (Qld) Pty Ltd
Centipede Holdings Pty Limited
Circle Petroleum (Q’land) Pty. Limited
Cocks Petroleum Pty Limited
Cooper & Dysart Pty Ltd
Graham Bailey Pty Ltd
Gull New Zealand Limited
Hanietee Pty. Limited
Hunter Pipe Line Company Pty Limited
% interest
Note
2018
2017
(iii)
(ii)
(ii)
(ii)
(iii)
(ii)
(iii)
(iv)
(v)
(iii)
(iii)
(iii)
(iii)
(iii)
(iii)
(iii)
(iii)
(iii)
(iii)
(iii)
(iii)
(iii)
(v)
(iii)
(iii)
100
100
100
100
100
100
100
100
100
50
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
50
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
108
Notes to the Financial Statements
F Group structure continued
FOR THE YEAR ENDED 31 DECEMBER 2018
F1 Controlled entities continued
Name
Jayvee Petroleum Pty Ltd
Jet Fuels Petroleum Distributors Pty. Ltd.
Link Energy Pty Ltd
Manworth Proprietary Limited
Newcastle Pipe Line Company Pty Limited
Northern Marketing Management Pty Ltd
Northern Marketing Pty Ltd
Octane Insurance Pte Ltd
Pilbara Fuels Pty Ltd
R & T Lubricants Pty Ltd
Real FF Pty Ltd
Ruzack Nominees Pty. Ltd.
Sky Consolidated Property Pty Ltd
Solo Oil Australia Proprietary Limited
Solo Oil Corporation Pty. Ltd.
Solo Oil Investments Pty. Ltd.
Solo Oil Pty Ltd
South Coast Oils Pty. Limited
South East Queensland Fuels Pty. Ltd.
Sydney Metropolitan Pipeline Pty Ltd
Teraco Pty Ltd
Terminals New Zealand Limited
Tulloch Petroleum Services Pty. Ltd.
Western Fuel Distributors Pty Ltd
Zeal Achiever Limited
Unit trusts
Caltex Real Estate Investment Trust
Eden Equity Unit Trust
Petroleum Leasing Unit Trust
Petroleum Properties Unit Trust
South East Queensland Fuels Unit Trust
% interest
Note
2018
2017
(iii)
(iii)
(iii)
(ii)
(iii)
(iii)
(ix)
(iii)
(iii)
(iv)
(iv)
(v)
(iii)
(iv)
(xi)
(x)
(vi)
(vii)
(vii)
(viii)
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
60
50
100
100
50
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
–
100
100
100
100
100
100
60
50
100
100
50
100
–
100
100
100
100
All companies are incorporated in Australia, except where noted otherwise.
Incorporated in Singapore.
(i)
(ii)
(iii) These companies are parties to a Deed of Cross Guarantee dated 22 December 1992 as amended, varied and restated
(iv)
(DOCG) with Caltex and each other. Caltex Australia Management Pty Ltd was acceded on 29 June 2018 and Caltex
Australia Custodians Pty Ltd was acceded on 26 October 2018.
Included as controlled entities in accordance with AASB 10 Consolidated Financial Statements. In each case, control exists
because a company within the Caltex Group has the ability to dominate the composition of the entity’s board of directors,
or enjoys the majority of the benefits and is exposed to the majority of the risks of the entity.
Incorporated in New Zealand.
(v)
(vi) Caltex Petroleum Services Pty Ltd is the sole unit holder.
(vii) Solo Oil Pty Ltd is the sole unit holder.
(viii) Caltex Australia Petroleum Pty Ltd and Caltex Petroleum Services Pty Ltd each own half of the units in this trust.
(ix)
(x) Australian Petroleum Marine Pty Ltd is the sole unit holder.
(xi)
Incorporated in the British Virgin Islands on 16 November 2017.
Incorporated on 23 October 2018.
CALTEX AUSTRALIA 2018 Annual Report F1.1 Deed of Cross Guarantee
Income statement for entities covered by the Deed of Cross Guarantee
Thousands of dollars
Revenue
Cost of goods sold – historical cost
Gross profit
Other income
Other expense
Operating expenses
Finance costs
Share of profit of equity-accounted investees
Profit before income tax expense
Income tax expense
Net profit
Other comprehensive income for the period, net of income tax
Total comprehensive income for the period
Retained earnings at the beginning of the year
Current year earnings
Movement in reserves
Dividends provided for or paid
Retained earnings at the end of the year
109
2018
2017
19,766,085
(17,978,686)
20,104,855
(18,189,919)
1,787,399
1,914,936
12,555
(17,291)
(1,024,009)
(49,202)
10,133
719,585
(138,153)
581,432
(3,300)
578,132
2,408,788
581,432
(1,955)
(307,757)
2,680,508
2,073
(43,000)
(1,122,313)
(66,900)
(151)
684,646
(211,810)
472,836
2,534
475,370
2,225,596
472,836
2,463
(292,107)
2,408,788
110
Notes to the Financial Statements
F Group structure continued
FOR THE YEAR ENDED 31 DECEMBER 2018
F1 Controlled entities continued
F1.1 Deed of Cross Guarantee continued
Balance sheet for entities covered by the Deed of Cross Guarantee
Thousands of dollars
Current assets
Cash and cash equivalents
Receivables
Inventories
Other
Total current assets
Non-current assets
Receivables
Investments accounted for using the equity method
Property, plant and equipment
Intangibles
Deferred tax assets
Employee benefits
Other
Total non-current assets
Total assets
Current liabilities
Bank overdraft
Payables
Interest bearing liabilities
Current tax liabilities
Employee benefits
Provisions
Total current liabilities
Non-current liabilities
Payables
Interest bearing liabilities
Employee benefits
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Treasury stock
Reserves
Retained earnings
Total equity
2018
2017
–
659,186
1,003,915
184,707
1,847,808
8,081
147,442
2,772,013
266,235
188,427
1,721
70,552
3,454,471
5,302,279
9,908
785,130
146,339
15,523
85,639
59,242
1,101,781
41,686
667,520
39,667
251,581
1,000,454
2,102,235
3,200,044
13,432
618,516
922,355
130,392
1,684,695
10,887
11,360
2,713,392
246,104
233,313
3,233
20,120
3,238,409
4,923,104
–
732,274
202,124
86,086
93,677
102,413
1,216,574
10,855
500,052
37,318
251,353
799,578
2,016,152
2,906,952
524,942
(2,462)
(2,944)
2,680,508
3,200,044
524,942
(1,210)
(25,568)
2,408,788
2,906,952
CALTEX AUSTRALIA 2018 Annual Report 111
F2 Business combinations
2018
There were no material business combinations during the year ended 31 December 2018.
2017
Gull New Zealand
On 22 December 2016, Caltex entered into an agreement to purchase Gull New Zealand for NZ$340 million (A$329 million).
The acquisition delivers on Caltex’s strategic plan as it optimises Caltex’s infrastructure position, builds trading and shipping
capability, grows the supply base and enhances Caltex’s retail fuel offering through low-risk entry into a new market.
The acquisition was completed on 3 July 2017 and had the following effect on the Group’s assets and liabilities:
Thousands of dollars
Intangibles
Property, plant and equipment
Inventories
Other assets
Liabilities
Net identifiable assets and liabilities
Goodwill on acquisition
Consideration transferred
Cash acquired
Net cash outflow
Recognised
values
37,896
67,098
30,987
8,190
(37,815)
106,356
222,728
(329,871)
787
(329,084)
Milemaker Petroleum
On 4 November 2016, Caltex entered into an agreement to purchase Milemaker Petroleum’s retail fuel business assets in Victoria
for $95 million. The acquisition secured Caltex’s existing network in Victoria and provides a stronger platform from which to
provide new and improved customer offerings in the convenience marketplace.
The acquisition was completed on 8 May 2017 and had the following effect on the Group’s assets and liabilities:
Thousands of dollars
Property, plant and equipment
Inventories
Deferred tax assets
Liabilities
Net identifiable assets and liabilities
Goodwill on acquisition
Consideration paid, satisfied in cash
Net cash outflow
Recognised
values
10,220
3,888
25,141
(3,621)
35,628
59,717
(95,345)
(95,345)
As part of the acquisition of Milemaker, a deferred tax asset was recognised in respect of future deductible amounts.
This deferred tax asset reduces the goodwill on acquisition.
112
Notes to the Financial Statements
F Group structure continued
FOR THE YEAR ENDED 31 DECEMBER 2018
F2 Business combinations continued
Nashi Sandwich and Coffee Bar
Caltex acquired Nashi Sandwich and Coffee Bar, a Melbourne-based high street retailer with nine outlets. The acquisition was
completed on 9 March 2017 and had the following effect on the Group’s assets and liabilities:
Thousands of dollars
Property, plant and equipment
Inventories
Liabilities
Net identifiable assets and liabilities
Goodwill on acquisition
Consideration paid, satisfied in cash
Cash acquired
Net cash outflow
Recognised
values
781
162
(1,363)
(420)
3,067
(2,658)
11
(2,647)
F3 Equity-accounted investees
Associates are those entities over whose financial and operating policies the Group has significant influence, but not control.
Joint ventures are those entities whose financial and operating policies the Group has joint control over, and where the Group
has rights to the net assets of the entity.
The consolidated financial statements include the Group’s share of the total recognised gains and losses of associates and joint
ventures on an equity accounted basis, from the date that significant influence or joint control commences until the date that
it ceases. When the Group’s share of losses exceeds the carrying amount of the associate or joint venture, the carrying amount
is reduced to nil and recognition of future losses is discontinued except to the extent that the Group has incurred legal or
constructive obligations or made payments on behalf of the associate or joint venture.
Other movements in reserves are recognised directly in the consolidated reserves.
Unrealised gains arising from transactions with associates and joint ventures are eliminated to the extent of the Group’s interest
in the entity. Unrealised losses arising from transactions with associates and joint ventures are eliminated in the same way as
unrealised gains, but only to the extent that there is no evidence of impairment.
F3.1 Investments accounted for using the equity method
Name
Investments in associates and joint ventures
Airport Fuel Services Pty. Limited
Australasian Lubricants Manufacturing Company Pty Ltd(i)
Cairns Airport Refuelling Service Pty Ltd(iii)
Car Next Door Australia Pty Ltd
Event Group Holdings Pty Limited(ii)
Event Group Holdings Unit Trust(ii)
Geraldton Fuel Company Pty Ltd
Kitchen Food Company Pty Limited(ii)
Kitchen Food Company Unit Trust(ii)
SEAOIL Philippines Inc.(iv)
% interest
2018
2017
40
50
33.33
20
–
–
50
–
–
20
40
50
33.33
20
49
49
50
49
49
–
(i)
(ii)
(iii)
(iv)
Australasian Lubricants Manufacturing Company Pty Ltd ceased joint venture operations on 17 April 2015.
Caltex divested on 14 November 2018.
Caltex increased interest to 33.33% with effect from 28 December 2017.
Caltex acquired interest on 1 March 2018.
The companies listed in the above table were incorporated in Australia and the Philippines, have a 31 December balance
date and are principally concerned with the sale, marketing and/or distribution of fuel products and the operation of
convenience stores.
CALTEX AUSTRALIA 2018 Annual Report 113
F3.2 Investments in associates
Thousands
of dollars
Revenue
(100%)
Profit
(100%)
Share of
associates
net profit
recognised
Total
assets
(100%)
Total
liabilities
(100%)
Net assets
as reported
by
associates
(100%)
Share of
associates
net assets
equity
accounted
Elimination
of
unrealised
loss in
inventories Goodwill
Total
Share of
associates
net assets
equity
accounted
2018
2017
1,447,427 46,488
65
150,167
10,133 486,919 279,625
43,127
56,526
(151)
207,294
13,399
48,258
10,478
(176)
(27)
98,591
140
146,673
10,591
Thousands of dollars
2018
2017
Results of associates
Share of associates’ profit before income tax expense
Share of associates’ income tax expense
Share of associates’ net profit
Unrealised loss in inventories
Share of associates’ net profit – equity accounted
Commitments
Share of associates’ operating lease commitments not provided for in the financial report
and payable:
Within one year
Between one and five years
Over five years
Share of associates’ finance lease commitments not provided for in the financial report
and payable:
Within one year
Between one and five years
Future finance charges
F3.3 Investments in joint ventures
Thousands
of dollars
Revenue
(100%)
Profit
(100%)
Share of
joint ventures’
net profit
recognised
2018
2017
9,829
9,426
–
–
–
–
Total
assets
(100%)
4,231
4,046
Total
liabilities
(100%)
2,308
2,123
Thousands of dollars
Joint ventures’ assets and liabilities
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Commitments
Share of joint ventures’ operating lease commitments not provided
for in the financial report and payable:
Within one year
Between one and five years
11,922
(1,613)
10,309
(176)
10,133
2,058
7,815
6,301
16,174
811
1,495
2,306
(152)
2,154
221
(345)
(124)
(27)
(151)
394
1,969
–
2,363
750
1,551
2,301
(173)
2,128
Net assets
as reported
by joint
venture
(100%)
Share of
joint ventures’
net assets
equity
accounted
1,923
1,923
769
769
2018
2017
2,233
1,998
4,231
2,308
–
2,308
–
–
–
1,660
2,386
4,046
2,123
–
2,123
–
–
–
114
Notes to the Financial Statements
F Group structure continued
FOR THE YEAR ENDED 31 DECEMBER 2018
F3 Equity-accounted investees continued
F3.4 Reconciliation to income statement
Thousands of dollars
Share of net profit/(loss) of associates accounted for using the equity method
Share of net profit of joint ventures accounted for using the equity method
F3.5 Reconciliation to balance sheet
Thousands of dollars
Investment in associates accounted for using the equity method
Investment in joint ventures accounted for using the equity method
2018
10,133
–
10,133
2018
146,673
769
147,442
2017
(151)
–
(151)
2017
10,591
769
11,360
F4 Joint venture operations
Joint venture operations are those entities whose financial and operating policies the Group has joint control over, and where
the Group has rights to the assets and obligations for the liabilities of the entity.
The interests of the Group in unincorporated joint operations are brought to account by recognising in its financial statements
the assets it controls and the liabilities that it incurs, and the expenses it incurs and its share of income that it earns from the
sale of goods or services by the joint operation.
The Group has joint interests in multiple Joint User Hydrant Installations (JUHIs), which are based at airports across Australia.
The Group’s interest in the JUHIs ranges from 20% to 50%. The principal activity of the JUHIs is refuelling aircraft at the airports.
For the year ended 31 December 2018, the contribution of the JUHIs to the operating profit of the Group was nil (2017: nil).
Included in the assets and liabilities of the Group are the Group’s interests in the assets and liabilities employed in the joint
venture operation:
Thousands of dollars
Non-current assets
Plant and equipment
Less: accumulated depreciation
Total non-current assets
Total assets
2018
2017
77,048
(40,557)
36,491
36,491
65,895
(38,645)
27,250
27,250
F5 Parent entity disclosures
As at, and throughout, the financial year ended 31 December 2018, the parent entity of the Group was Caltex Australia Limited.
Thousands of dollars
Result of the parent entity
Profit for the period
Other comprehensive (loss)/income
Total comprehensive income for the period
Financial position of parent entity at year end
Current assets
Total assets
Current liabilities
Total liabilities
Total equity of the parent entity comprising:
Issued capital
Treasury stock
Reserves
Retained earnings
Total equity
2018
2017
423,279
(7,629)
415,650
8,638
2,098,646
119,771
1,506,146
378,505
(2,462)
(16,880)
233,337
592,500
269,942
1,407
271,349
11,836
1,859,326
144,939
1,388,984
378,505
(1,210)
(25,339)
118,386
470,342
Parent entity guarantees in respect of the debts of its subsidiaries
The parent entity has entered into a Deed of Cross Guarantee with the effect that each company agrees to guarantee all of the
debts (in full) of all companies that are parties to the deed subject to, and in accordance with, the terms set out in the deed.
Further details of the Deed of Cross Guarantee and the subsidiaries subject to the deed are disclosed in Note F1.
CALTEX AUSTRALIA 2018 Annual Report 115
Notes to the Financial Statements
G Other information
FOR THE YEAR ENDED 31 DECEMBER 2018
This section includes other information to assist in understanding the financial performance and position of the Group, or items
to be disclosed to comply with accounting standards and other pronouncements.
G1 Commitments
G1.1 Capital expenditure
Thousands of dollars
Capital expenditure contracted but not provided for in the financial report and payable
2018
11,970
2017
16,645
G1.2 Leases
Finance leases
Assets of the Group acquired under finance leases are capitalised and included in property, plant and equipment at the lesser
of fair value or present value of the minimum lease payments with a corresponding finance lease liability. Contingent rentals are
written off as an expense of the period in which they are incurred. Capitalised lease assets are depreciated over the shorter of
the lease term and their useful life.
Minimum lease payments are apportioned between the finance charge and the reduction of the outstanding liability. The finance
charge components of lease payments are charged to the consolidated income statement to reflect a constant finance rate on
the remaining balance of the liability for each accounting period.
Thousands of dollars
Within one year
Between one and five years
2018
2017
Minimum
lease
payments
164
–
164
Interest
Principal
7
–
7
157
–
157
Minimum
lease
payments
219
164
383
Interest
Principal
27
7
34
192
157
349
The Group leases plant and equipment under finance leases expiring within one year. No contingent rentals were paid during
the year (2017: nil).
Operating leases
Payments made under operating leases are charged against net profit or loss in equal instalments over the accounting period
covered by the lease term, except where an alternative basis is more representative of the benefits to be derived from the leased
property. Contingent rentals are recognised as an expense in the period in which they are incurred. Lease incentives received
are recognised in the consolidated income statement as an integral part of the total lease expense on a straight-line basis over
the lease term.
Thousands of dollars
2018
2017
Non-cancellable operating leases – Group as lessee
Future minimum rentals payable:
Within one year
Between one and five years
After five years
167,327
446,727
596,108
1,210,162
158,685
418,624
581,671
1,158,980
The Group holds operating leases expiring from one to 34 years. Leases generally provide the Group with a right of renewal at
which time all terms are renegotiated. Lease payments comprise mainly a base amount; however, in a few cases, they include
a base amount and incremental contingent rental. Contingent rentals are based on operating performance criteria. Contingent
rentals of $680,839 were paid during the year (2017: $626,018).
The expense recognised in the income statement during the year in respect of operating leases is $184,631,000 (2017:
$193,594,000).
There are no restrictions placed upon the Group by entering into these leases. Renewals are at the option of the specific entity
that holds the lease.
116
Notes to the Financial Statements
G Other information continued
FOR THE YEAR ENDED 31 DECEMBER 2018
G1 Commitments continued
G1.2 Leases continued
Thousands of dollars
Non-cancellable operating leases – Group as lessor
Future minimum rentals receivable:
Within one year
Between one and five years
After five years
2018
2017
32,933
60,126
8,643
101,702
5,335
124,754
22,405
152,494
The Group has granted operating leases expiring from one to 12 years. Some of the leased properties have been sublet by the
Group. The leases and subleases expire between 2019 and 2030.
Note B1 shows the rental income recognised in the income statement in respect of operating leases.
G2 Contingent liabilities
Discussed below are items where either it is not probable that the Group will have to make future payments or the amounts
of the future payments are not able to be measured.
Legal and other claims
In the ordinary course of business, the Group is involved as a plaintiff or defendant in legal proceedings. Where appropriate,
Caltex takes legal advice. The Group does not consider that the outcome of any current proceedings is likely to have a material
effect on its operations or financial position.
A liability has been recognised for any known losses expected to be incurred where such losses are capable of reliable
measurement.
Bank guarantees
The Group has granted indemnities to banks to cover bank guarantees given on behalf of controlled entities to a maximum
exposure of $5,628,000 (2016: $5,744,000).
Deed of Cross Guarantee and class order relief
Details of the Deed of Cross Guarantee are disclosed in Note F1.
G3 Related party disclosures
Associates
On 1 March 2018, Caltex Australia Limited acquired a 20% equity interest in SEAOIL Philippines Inc. The strategic partnership
with SEAOIL offers Caltex Australia the ability to increase the scale and scope of its Singapore-based fuel sourcing and shipping
operations. Transactions with SEAOIL Philippines are summarised below.
The Group sold petroleum products to SEAOIL Philippines Inc. of $438,300,000. As at 31 December 2018, the Group had sales
receivables from SEAOIL Philippines Inc. of $86,541,000.
In 2018, the Group sold petroleum products to associates totalling $126,367,000 (2017: $117,716,000). The Group received
income from associates for rental income of $934,000 (2017: $593,000).
Details of associates are set out in Note F3. Amounts receivable from associates are set out in Note C1. Dividend and
disbursement income from associates is $400,000 (2017: $300,000).
Caltex has interests in associates primarily for the marketing, sale and distribution of fuel products. Details of Caltex’s interests
are set out in Note F3.
Joint ventures
Caltex has interests in joint ventures primarily for the marketing, sale and distribution of fuel products and the operation of
convenience stores. There were no material related party transactions with Caltex’s joint venture entities during 2018 (2017: nil).
Details of Caltex’s interests are set out in Notes F3 and F4.
CALTEX AUSTRALIA 2018 Annual Report 117
G4 Key management personnel
The key management personnel of the Caltex Group during 2018 and 2017 were:
Current Directors
• Steven Gregg, Chairman and Independent, Non-executive Director (from 18 August 2017)
• Julian Segal, Managing Director and CEO
• Trevor Bourne, Independent Non-executive Director
• Mark Chellew, Independent Non-executive Director (from 2 April 2018)
• Melinda Conrad, Independent Non-executive Director
• Bruce Morgan, Independent Non-executive Director
• Barbara Ward AM, Independent Non-executive Director
• Penny Winn, Independent Non-executive Director
Former Directors
• Greig Gailey, Chairman and Independent, Non-executive Director (to 18 August 2017)
Senior executives
• Julian Segal, Managing Director and CEO
• Simon Hepworth, Chief Financial Officer
• Richard Pearson, Executive General Manager, Convenience Retail (from 1 August 2017)
• Louise Warner, Executive General Manager, Fuels and Infrastructure
Former executives
• Bruce Rosengarten, Executive General Manager, Commercial (to 1 April 2017)
Key management personnel compensation
Dollars
Short term benefits
Other long term benefits
Post-employment benefits
Termination benefits
Share based payments
2018
2017
9,571,817
118,690
367,468
–
2,422,616
9,106,401
38,810
378,540
615,198
3,172,575
12,480,591
13,311,524
Information regarding Directors’ and executives’ compensation and some equity instruments disclosures is provided in the
Remuneration Report section of the Directors’ Report. The 2017 key management personnel compensation has been updated to
reflect the current key management personnel of the Caltex Group in 2018; refer to the Remuneration Report for further details.
Performance rights
Since 1 January 2008, Senior Executives may receive performance rights under Caltex’s Equity Incentive Plan, based on the
achievement of specific targets related to the performance of the Group. The measure of performance is Total Shareholder
Returns (TSR) over a three-year period relative to a comparator group.
Opening
balance
Number of
performance
rights
2018
Granted
Vested during the year
Lapsed during the year
Closing balance
Number
of perfor-
mance
rights
Fair
value of
perfor-
mance
rights ($)
Distribu-
tion
date
Number
of
perfor-
mance
rights
Weighted
average fair
value
per share
($)
Start
date
Lapsed
date
Number
of
perfor-
mance
rights
Weighted
average
fair value
per
share ($)
Number
of
perfor-
mance
rights
Fair value
aggregate
($)
555,859
4 Apr 18
421,720
22.79
4 Apr 18
(47,900)
31.42 Q1 2018 (271,945)
209,964
18 May 18
133,275
21.60
412,993
1,178,816
554,995
(47,900)
Q2 2018 (18,260)
Q3 2018
(16,118)
Q4 2018 (52,655)
(358,978)
2017
583,894
206,708
505,661
4 Apr 17
4 Apr 17
349,779
233,186
13.25
28.76
4 Apr 17
(330,759)
29.39 Q1 2017
(723)
Q2 2017 (225,947)
Q3 2017
(64,451)
Q4 2017
(78,532)
609,189 3,418,194
406,189 3,654,954
311,555 6,317,089
1,326,933 13,390,237
555,859
7,486,055
209,964
5,715,750
412,993
9,296,085
–
–
–
–
–
–
–
–
1,296,263
582,965
(330,759)
(369,653)
1,178,816 22,497,890
For information regarding the inputs used in the measurement of the fair values at each grant date, please refer to table 6 of the
Remuneration Report on page 64 of the Directors’ Report.
118
Notes to the Financial Statements
G Other information continued
FOR THE YEAR ENDED 31 DECEMBER 2018
G5 Notes to the cash flow statement
G5.1 Reconciliation of cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits with an original maturity of three months or less. Bank
overdrafts that are repayable on demand and form an integral part of the Group’s cash management are included as a component
of cash and cash equivalents for the purpose of the consolidated cash flow statement.
For the purposes of the cash flow statement, cash and cash equivalents includes:
Thousands of dollars
Cash at bank
Total cash and cash equivalents
G5.2 Reconciliation of net profit to net operating cash flows
Thousands of dollars
Net profit
Adjustments for:
Net gain on sale of property, plant and equipment
Impairment of Kitchen Food Co and related receivables
Finance charges on finance leases
Interest paid capitalised
Amortisation of finance costs
Depreciation/amortisation of property, plant and equipment
Amortisation and impairment of intangibles
Treasury stock movements net of expense
Share of associates’ and joint ventures’ net profit
Movements in assets and liabilities:
(Increase) in receivables
Decrease/(increase) in inventories
Decrease/(increase) in other assets
Increase in payables
(Decrease)/increase in current tax balances
Decrease in deferred tax assets
Decrease in provisions
Net operating cash inflows
G6 Auditor remuneration
Dollars
Audit services – KPMG Australia, Singapore and New Zealand
Non-audit services – KPMG Australia
Other assurance services
Taxation services and Advisory
G7 Net tangible assets per share
Dollars
Net tangible assets per share
2018
6,142
6,142
2017
44,521
44,521
2018
2017
561,590
620,752
(12,555)
13,060
27
(287)
1,641
223,976
28,372
2,814
(10,859)
(258,799)
78,790
(32,203)
66,431
(79,311)
62,778
(48,961)
596,504
(2,073)
–
–
(2,467)
2,359
204,946
24,217
(7,083)
(966)
(183,167)
(575,155)
26,843
671,191
(14,788)
18,093
(47,670)
735,032
2018
2017
1,354,800
1,079,200
19,200
73,610
5,100
260,000
1,447,610
1,344,300
2018
10.82
2017
9.88
Net tangible assets are net assets attributable to members of Caltex Australia Limited less intangible assets. The weighted
average number of ordinary shares used in the calculation of net tangible assets per share was 261 million (2017: 261 million).
CALTEX AUSTRALIA 2018 Annual Report
119
G8 New standards and interpretations not yet adopted
A number of new standards, amendments to standards and interpretations are effective for annual periods beginning after
1 January 2019, and have not been applied in preparing these consolidated financial statements. None of these are expected
to have a significant effect on the consolidated financial statements of the Group, except for:
• The Group is currently examining the impacts of AASB 16 Leases (‘AASB 16’) which applies from 1 January 2019. The
Group has selected and implemented a system solution to capture all leases in scope and perform the accounting entries
in compliance with all aspects of the new standard. The Group is in the final stages of its assessment determining the impact
on its consolidated financial statements.
Estimated impact on consolidated statement of financial position as at 1 Jan 2019:
Thousands of dollars
New lease liabilities
Right-of-use (ROU) assets
$850m to $950m
$850m to $950m
• The net effect of the new lease liabilities and right-of-use assets, adjusted for deferred tax will be recognised in retained
earnings. The impact predominantly relates to the Group’s property leases for service stations, terminals, pipelines and wharves.
• To date, the most significant impact identified is that the Group will recognise new ROU assets and lease liabilities for
its operating leases of service stations. The nature of the expenses related to those leases will change because AASB 16
replaces the straight-line operating lease expense with a depreciation charge for ROU assets and interest expense on lease
liabilities. No significant impact is expected for the Group’s finance leases.
• The Group plans to apply IFRS 16 initially on 1 January 2019, using the modified retrospective approach. Therefore the
cumulative effect of adopting IFRS 16 will be recognised as an adjustment to the opening balance of retained earnings at
1 January 2019, with no restatement of comparative information.
• The Group plans to apply the practical expedient to grandfather the definition of a lease on transition. This means that it will apply
IFRS 16 to all contracts entered into before 1 January 2019 and identified as leases in accordance with IAS 17 and IFRIC 4.
G9 Events subsequent to the end of the year
On 20 February 2019, the Group announced changes to its senior leadership team. Richard Pearson will leave the role of
Executive General Manager, Convenience Retail, in March 2019. Caltex announced that Joanne Taylor will then be appointed
as the Executive General Manager, Convenience Retail.
On 26 February 2019, the Group announced its intention to conduct an off-market share buy-back of approximately
$260 million, which is expected to be completed in the second quarter of 2019.
There were no other items, transactions or events of a material or unusual nature that, in the opinion of the Board, are likely
to significantly affect the operations of Caltex, the results of those operations or the state of affairs of the Group that have arisen
in the period from 31 December 2018 to the date of this report.
120
Comparative Financial Information
The additional information on pages 120 to 121 is provided for the information of shareholders.
The information is based on, but does not form part of, the 2018 Financial Report.
Caltex Australia Limited consolidated results
2018
2017
2016
2015
2014
Profit and loss ($million)
Historical cost operating profit before interest and
income tax expense
Interest income
Borrowing costs
Historical cost income tax expense
Historical cost operating profit after income tax
Dividends
Amount paid and payable ($/share)
Times covered HCOP
Dividend payout ratio – RCOP basis (excl. significant
items)(i)
Dividend franking percentage
Other data
Total revenue ($m)(ii)
Earnings per share – HCOP (cents per share)
Earnings per share – RCOP (cents per share)
(excl. significant items)(iii),(iv)
Earnings before interest and tax – replacement cost
basis ($m) (excl. sig items)(iii)
Operating cash flow per share ($/share)
Interest cover – HCOP basis
Interest cover – RCOP basis (excl. significant items)(iii)
Return on capital employed – HCOP basis (%)(v)
Return on capital employed – RCOP basis (excl.
significant items)(iii),(v)
Equity attributable to members of the company ($m)
Total equity ($m)
Total assets ($m)
Net tangible asset backing ($/share)
Debt ($m)
Net debt ($m)
Net debt to net debt plus equity (%)
829
3
(52)
(219)
560
1.18
1.82
55%
100%
21,731
215
214
826
2.3
16.9
16.8
12.9
12.5
3,376
3,389
6,728
10.82
961
955
22
929
3
(70)
(243)
619
1.21
1.96
51%
100%
936
7
(80)
(253)
610
1.02
2.29
51%
100%
815
5
(82)
(217)
522
1.17
1.65
50%
100%
139
8
(99)
(28)
20
0.70
0.11
38%
100%
16,286
13,027
15,009
18,970
237
238
959
2.8
13.9
14.3
15.8
15.6
3,094
3,108
6,355
9.88
859
814
21
232
199
813
3.6
12.9
11.2
18.7
16.1
2,797
2,810
5,303
9.88
698
454
14
193
233
977
3.3
10.6
12.7
16.2
20.5
2,776
2,788
5,105
9.60
695
432
13
7
183
795
2.5
1.3
8.7
0.6
11.1
2,521
2,533
5,129
8.64
1,176
639
20
i) Based on reported RCOP NPAT of the time.
ii) All prior periods revenue restated for consistency with current period (product duties and taxes shown on a net basis).
iii) 2017 RCOP NPAT basis restated for consistency with current period, 2016 and prior consistent with reported RCOP NPAT of the time.
iv) Dividend payout ratio – replacement cost of sales operating profit basis calculated as follows:
Dividends paid and payable in respect of financial year
RCOP after income tax (excl. significant items)
v) Return on capital employed is calculated as follows:
Net Profit After Tax
Net Debt + Equity
CALTEX AUSTRALIA 2018 Annual Report
121
Replacement Cost of Sales
Operating Profit Basis of Accounting
• To assist in understanding the Group’s operating performance, the directors have provided additional disclosure of the Group’s
results for the year on a replacement cost of sales operating profit basis(i), which excludes net inventory gains and losses.
• On a replacement cost of sales operating profit basis excluding significant items, the Group’s net profit after income tax for
the year was $558 million, compared to a profit of $638 million in 2017.
• 2018 net profit before interest, income tax and significant items on a replacement cost of sales operating profit basis was
$826 million, a decrease of $133 million over 2017.
RCOP Basis of Accounting
Five years*
2018
2017
2016
2015
2014
Historical cost operating profit before
interest and income tax expense
Add/(deduct) inventory losses/(gains)(ii)
Significant items expense/(income)
Replacement cost of sales operating net
profit before interest and income tax
expense
Net borrowing costs
Replacement cost income tax expense
Replacement cost of sales operating
profit after income tax(vii)
*Note: Totals may not sum due to rounding.
3,648
573
149
4,370
(356)
(1,172)
2,842
829
(20)
17(iii)
826
(49)
(218)
558
929
6
24(iv)
959
(67)
(254)
638
936
(122)
–
813
(73)
(217)
524
815
193
(32)(v)
977
(77)
(272)
628
139
516
140(vi)
795
(91)(vi)
(211)
493
(i) The replacement cost of sales operating profit basis (RCOP) removes the unintended impact of inventory gains and losses, giving a truer reflection
of underlying financial performance. Gains and losses in the value of inventory due to fluctuations in the USD price of crude oil and foreign exchange
impacts constitute a major external influence on company profits. RCOP restates profit to remove these impacts. The Caltex RCOP methodology is
consistent with the methods used by other refining and marketing companies for restatement of their financials.
As a general rule, an increase in crude prices on an Australian dollar basis will create an earnings gain for Caltex (but working capital requirements will
also increase). Conversely, a drop in crude prices on an Australian dollar basis will create an earnings loss. This is a direct consequence of the first in
first out (FIFO) costing process used by Caltex in adherence with accounting standards to produce the financial result on a historical cost basis. With
Caltex holding approximately 45 to 60 days of inventory, revenues reflect current prices in Singapore whereas FIFO costings reflect costs some 45 to
60 days earlier. The timing differences creates these inventory gains and losses. To remove the impact of this factor on earnings and to better reflect
the underlying performance of the business, the RCOP NPAT methodology calculates the cost of goods sold on the basis of theoretical new purchases
instead of actual costs form inventory. The cost of these theoretical new purchases is calculated as the average monthly cost of cargoes received
during the month of those sales.
(ii) Historical cost results include gross inventory gains or losses from the movement in crude oil prices. In 2018, the historical cost result includes
$20 million inventory gain (2017: $6 million inventory loss).
(iii) During 2018, significant item expense consists of the loss on exit from Caltex’s 49% interest in Kitchen Food Company of $27 million, offset in relation
to the partial writeback of the Franchisee Employee Assistance Fund ($10 million) resulting in a net impact of $17 million.
(iv) Includes net significant items before tax totalling a loss of $24 million, that have been recognised in the income statement. The significant items are a
result of the announced establishment of the Franchisee Employee Assistance Fund ($20 million), restructuring and redundancy costs associated with
the capability and competitiveness project Quantum Leap ($23 million), offset by the profit on sale of Caltex’s fuel oil business and the utilisation of
prior period capital losses to partially offset tax expense on the profit on sale.
(v) Includes significant items before tax totalling a gain of $31,924,000, that have been recognised in the income statement. This gain relates to the sale of
surplus property in Western Australia.
(vi) Includes significant items before tax totalling a loss of $160,163,000, that have been recognised in the income statement.
These items relate to the Group cost and efficiency review project and include consulting fees ($25,065,000), redundancy costs ($53,814,000),
contract cancellation costs ($12,000,000), interest expense ($20,311,000), foreign exchange gains ($4,755,000) and accelerated depreciation
($22,773,000) and environmental liabilities ($30,955,000).
(vii) Replacement cost profit after income tax is calculated before taking into account any significant items over the five years. The total effect of these
significant items in each year was: 2014: $160 million expenses before tax ($112 million after tax); 2015: $32 million gain before tax ($29 million
after tax); 2016: no significant items were recognised; 2017: $24 million expenses before tax ($14 million expenses after tax) and 2018: $17 million
expenses before tax ($12 million expenses after tax) were recognised.
122
Shareholder Information
AS AT 28 FEBRUARY 2019
Share capital
There are 260,810,519 fully paid ordinary shares on issue, held by 37,912 holders.
Holders with less than a marketable parcel
392 shareholders hold less than a marketable parcel of $500 based on a share price of $28.60 per share.
Buy-back
On 26 February 2019, Caltex Australia Ltd announced its intention to conduct an off-market share buy-back of approximately
$260 million, which is expected to be completed in the second quarter of 2019.
Shares purchased on-market
From 1 January 2018, 23,195 fully paid ordinary shares were purchased on-market at an average cost of $30.72 per share for
the purposes of the Caltex Australia Limited Employee Share Plan.
From 1 January 2018, 52,592 fully paid ordinary shares were purchased on-market at an average cost of $31.51 per share for
the purposes of the Caltex Australia Limited Equity Incentive Plan.
Substantial shareholders
Substantial Shareholder
BlackRock Group
The Vanguard Group, Inc
AustralianSuper Pty Ltd
Shareholder distribution
Range
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
Over 100,001
Rounding
Total
Number of
shares held
% of issued
capital
15,909,884
13,055,040
13,565,239
6.10%
5.01%
5.20%
Total Holders
Units
% of issued
capital
29,049
7,876
655
291
41
11,650,160
16,618,073
4,734,870
6,861,266
220,946,150
37,912
260,810,519
4.47
6.37
1.82
2.63
84.72
-0.01
100.00
CALTEX AUSTRALIA 2018 Annual Report 123
Top 20 shareholders
Details of the 20 largest shareholders of Caltex Australia Limited shares are listed in the table below.
Rank Shareholders
Number of
shares held
% of issued
shares
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
HSBC Custody Nominees (Australia) Limited
J P Morgan Nominees Australia Pty Limited
Citicorp Nominees Pty Limited
National Nominees Limited
BNP Paribas Nominees Pty Ltd
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