Caltex Australia : 2016 Preliminary Final Report and 2016 Financial Report

CALTEX AUSTRALIA LIMITED‌‌‌

ACN 004 201 307

2016 PRELIMINARY FINAL REPORT

ANNUAL INFORMATION GIVEN TO THE ASX UNDER LISTING RULE 4.3A

CALTEX AUSTRALIA LIMITED LEVEL 24, 2 MARKET STREET SYDNEY NSW 2000 AUSTRALIA

Results for announcement to the market

Comments

• On an historic cost profit basis, Caltex recorded an after tax profit of $610 million for the 2016 full year (no significant items). This compares with the 2015 full year profit of $522 million, which included a gain relating to significant items of $29 million after tax. The 2016 result includes a product and crude oil inventory gain of $86 million after tax. This compares with the inventory loss of $135 million after tax in 2015.

• On an RCOP basis, Caltex recorded an after tax profit for the 2016 full year of $524 million, excluding significant items. This compares with an RCOP after tax profit of $628 million for the 2015 full year, excluding significant items.

• The overall result reflects a strong underlying Supply & Marketing result, offset by adverse foreign exchange and pricing lags of $29 million. A lower refiner margin than in 2015 has led to a lower Lytton refining EBIT, despite a continued strong operating performance. Lytton refinery sales volumes increased 14% and production by 15% compared to 2015 full year total, which was impacted by the (once every five years) major planned turnaround and inspection (T&I) maintenance program.

• Supply & Marketing delivered a headline EBIT of $709 million. This result includes a realised loss on US dollar denominated product payables of $4 million (2015 loss of $26 million) and a price timing lag loss of

  $25 million (versus a 2015 price timing lag gain of $23 million). Excluding these net externalities (net $29 million unfavourable), the underlying Supply & Marketing EBIT of $738 million is up 9.3% on the 2015 result.

• The underlying result reflects a strong and resilient retail business, continued growth in premium fuels and Ampol Singapore sourcing and supply benefits. The company continued to focus on operational efficiencies via the Tabula Rasa program, helping to offset the impact of highly competitive commercial and wholesale markets.

• 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, and is consistent with the basis of reporting commonly used within the global refineries industry. This is unaudited. RCOP excludes the unintended impact of the fall or rise in oil and product prices (a key external factor). 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.

• Additional Appendix 4E disclosure requirements can be found in the Directors' Report and the 31 December 2016 financial report.

• CALTEX AUSTRALIA LIMITED ACN 004 201 307

  Results for announcement to the market (continued) Comments (continued)

• Total sales volumes of transport fuels were 16.0 BL, broadly in line with prior year (2015:16.1 BL). From a product mix perspective, sales of premium fuels sales continue to grow, up 3% on 2015. Higher sales of premium grades of petrol (Vortex 98 in particular) and Vortex diesel continue to offset the long term decline in demand for unleaded petrol, including E10. Total petrol volumes declined 2% to 5.9 BL. This is in line with general market decline and consistent with our drive for increased penetration of premium Vortex products that has been underpinned by targeted investment in growth, including new retail service stations and increased marketing spend.

• Total diesel volumes are flat year on year at 7.2 BL. Double-digit volume growth in premium Vortex diesel product (sales up 16% to 2.5 BL) across Caltex's retail segment has largely offset lower commercial base grade diesel volumes (down 6.7%). This is a function of completed commodity sector infrastructure projects and subdued transport, industrial and small to medium-sized enterprises (SME) sectors. Pleasingly, Caltex is increasing sales volumes (albeit still small) of Caltex's differentiated diesel to mining and transport customers. Jet volumes grew by 5.0% to 2.6 BL.

• The Lytton Refinery delivered a solid 2016 EBIT contribution of $205 million. This compares with an EBIT contribution of $406 million for 2015 and a 2016 first half EBIT of $92 million. The operating performance continued to deliver outstanding production results. Record full year sales from production increased 14% to

  6.2 BL, including a record second half sales from production performance (3.3 BL). EBIT was primarily impacted by refiner margins being down on 2015 (but in line with the 10 year average).

• The realised Caltex Refiner Margin (CRM)3 averaged US$10.29/bbl for the 2016 full year. This compares to the first half 2016 average of US$10.10/bbl and the 2015 full year (US$16.46/bbl). Improved yield loss and higher quality premium was more than offset by a lower Singapore Weighted Average Margin (US$10.94/bbl, down US$4.01/bbl), higher crude premium and lower net freight differential, year on year.

• Corporate costs of $101 million are comparable to prior year ($102 million). Corporate costs include continued investment relating to on-going IT expenditures, major project costs (including M&A and franchisee review) and further building capabilities that will better position Caltex longer term.

• Net debt at 31 December 2016 was $454 million compared with $693 million at 30 June 2016 and $432 million at 31 December 2015. The net debt level includes the impact of the first half off-market buy-back, but does not include the cost of the two recently announced acquisitions (Milemaker $95 million and Gull New Zealand approx. A$325 million, which are to be debt funded). Both of these transactions are expected to complete in the first half of 2017 following regulatory approvals.

• The Board has declared a final fully franked dividend of 52 cents per share for the second half of 2016. Combined with the interim dividend of 50 cents per share for the first half, paid in October 2016, this equates to a total dividend of 102 cents per share for 2016, fully franked. This compares with a total dividend payout of 117 cents per share (fully franked) for 2015. Total dividends declared are in addition to the $270 million off-market share buy-back completed in April 2016.

• This is consistent with Caltex's dividend payout policy of 40% to 60% of the full year RCOP after tax (excluding significant items), after taking into account Caltex's earnings for the period, future capital requirements and other relevant factors, such as the outlook for the business.

3 The Caltex Refiner Margin (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: average Singapore refiner margin + product quality premium + crude discount/(premium) + product freight - crude freight - yield loss.

Key performance indicators

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15.7 16.0 16.4 15.7 15.7

16

14

12 10.7 10.6

10

9.6

8

6 5.3

6.2

4

2

0

2012 2013 2014 2015 2016

Production volume Sales volume

1. Historical cost basis excluding significant items (on a pre- and post-tax basis) is a non-IFRS measure. It is derived from the statutory profit/(loss) adjusted for significant items relating to the sale of property in 2015 (refer to note B1 of the Financial Report for details of these items). Significant items are events that management and the Board consider to be outside the scope of usual business. These are excluded to give a truer reflection of underlying financial performance from one period to the next. This is unaudited.

2. This is a non-IFRS unaudited measure that management and the Board consider key for users of the financial statements .

3. Net tangible asset backing per share is derived by dividing net tangible assets by the number of shares issued. Net tangible assets are net assets attributable to members of Caltex less intangible assets. The weighted average number of ordinary shares used in t he calculation of net tangible assets per share was 263 million (2015: 270 million).

4. Transport fuels comprise unleaded petrol, diesel and jet.