Caltex’s Share Price Continues Downtrend following CRM Update

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.

Related: See the top 10 Aussie mining stocks to watch in 2019. 

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.

Regards,

Ryan Clarkson-Ledward,
For Money Morning

PS: With petroleum-based stocks like Caltex facing new hurdles every day, perhaps it’s time to look into the ‘Battery Boom’, which is creating interest for lithium stocks. Download this free report on the lithium frenzy set to hit Australia now.


Ryan Clarkson-Ledward is one of Money Morning’s junior analysts. Ryan holds degrees in both communication and international business. He helps bring Money Morning readers the latest market updates, both locally and abroad. Ryan tackles all the issues investors need to know about that the mainstream media neglects. Ryan’s primary focus is assisting Sam Volkering with background research and insight for readers by dissecting the latest events affecting the world. Working closely with Sam, they explore the latest in small-cap and technology stocks as well as cryptocurrency opportunities. You can find Ryan’s contributing research, developments, and supporting information across several e-letters, including:


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