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Caltex profits forecast to plummet 50% in 2010

Caltex has forecast profits to plummet by 50 percent in the first half 2010 as a result of continued volatility in Australia’s exchange rates.

Caltex TrafficCaltex is forcasting an after-tax profit for the first half of 2010 of between $140 and $160 million, verses an after-tax profit for the first half of 2009 of $298 million.

After significant items are taken into account for Caltex, the expected after tax profic on a replacement cost of sales operating profit (RCOP)^1 basis, is expected to be between $130 and $150 million for the first six months of the 2010 calender year.

Caltex attributes the disparity between the company’s performance in 2010 and 2009 to exchange rate volatility, with Caltex expected to hedge 50 percent of the price of future oil purchases in US dollars to minimize the effect of predicted continued exchange rate volatility for Australia.

Singapore refiner margins were stronger than expected due to the weakness in the Tapis crude price relative to other crudes. However, the higher average Australian dollar during the period, compared with the same period in 2009, negatively impacted the Caltex Refiner Margin.

Given the significant ongoing exchange rate volatility, the Caltex Board has decided to implement a policy of foreign exchange hedging of 50 percent of Caltex’s $US crude and product payables exposure (after applying natural hedges), which is the neutral position.

1) The replacement cost of sales operating profit (RCOP) excludes the impact of the fall or rise in oil prices (a key external factor) and resents a clearer picture of the company’s underlying business performance. 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 lag.