Shares of petroleum refiner, distributor and convenience store operator Caltex Australia Limited [ASX:CTX] have seen a 7% drop in value over the past three days.
The trigger for the downtrend seems to be the update on the Caltex Refiner Margin (CRM) and the Convenience Retail sector of the company, released on the ASX on Tuesday.
Update shows a decrease in performance from 2018
According to the update, for the year to February 2019, CRM sits at US$7.00/bbl. This is significantly lower than the prior corresponding year, which saw a CRM of US$9.99/bbl.
Sales from production for February are up from January, but compared to the year ending February 2018, the year-to-date sales are down more than 83%.
The company have flagged the Lytton refinery FCCU unit — which experienced external electricity interruption in January — as a cause for this poor year.
As a result:
‘Caltex confirms that the FCCU unit at its Lytton refinery will undergo a shutdown to rectify performance issues caused by the external electricity interruption during January.
‘Caltex reaffirms 2019 production guidance of around 5.8BL as a result of this shutdown.’
As for their Convenience Retail sector, Caltex have had to lower their Total Fuel and Shop Margin range for Q1 2019 to around $160–170 million. This is around $35–45 million less than the range for the first quarter of 2018.
The future for Caltex
Despite these arguably concerning results, Caltex noted in the update that ‘short term trading conditions are not necessarily a reliable indicator of the full year result.’
They alluded to external factors such as competitor pricing strategies that can result in such variances between corresponding periods.
But according to Morgan Stanley analysts, the situation may not improve in the second quarter with companies like Viva Energy executing new pricing strategies and holding their underweight ratings.
A trading update for the quarter is set to be delivered at the General Meeting on May 9. This will form a clearer picture of Caltex for investors.
For Money Morning
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