CALTEX AUSTRALIA LIMITED ANNUAL GENERAL MEETING 2018 ADDRESSES

Transcription

1 CALTEX AUSTRALIA LIMITED ANNUAL GENERAL MEETING 2018 ADDRESSES We would like to begin today by acknowledging the Gadigal people of the Eora Nation, the traditional custodians of this land, and we pay our respects to their Elders both past and present. Good morning and welcome to the 2018 Annual General Meeting of Caltex Australia Limited. We have a quorum of securityholders in attendance, so I declare this meeting open. My name is Steven Gregg and I have the honour of being your Chairman. I was elected to the role of Chairman in August last year, following the retirement of Greig Gailey. On behalf of the Board, I would like to take this opportunity to thank Greig for his considerable contribution as Chairman - since December and his nearly 10 years of service as a Director, prior to that. During Greig s time serving on the Board, the company transformed from a fuel refiner-marketer to a leading integrated transport fuels player, and has delivered significant value to shareholders over that period. Before the formal business of the meeting begins, I would like to advise you that the meeting is being webcast and also cover some introductory matters: If we need to evacuate, you can exit through the main door at the back through which you entered. Please follow the directions of the Wesley Centre staff. Please take a moment now to check that your mobile phone has been turned off, or is on silent. I would now like to introduce my colleagues on the stage. On my left is Julian Segal, Managing Director & CEO, next to him are Non-Executive Directors Bruce Morgan, Penny Winn and Melinda Conrad. On my right is Lyndall Stoyles, Executive General Manager, Legal and Corporate Affairs and our Company Secretary. Next to her are Non-Executive Directors Barbara Ward AM, Trevor Bourne and Mark Chellew. Today, both Barbara and Trevor are seeking re-election. Mark Chellew was appointed to the Board effective 2 nd April this year, and is seeking election today. Before I ask Barbara to speak to her re-election, I would like to confirm that the Board unanimously supports her re-election. CHECK AGAINST DELIVERY 1 of 9

2 Barbara is a valued and experienced member of the Board having extensive strategic, financial and executive leadership experience. I will now ask Barbara to speak to her re-election. Thank you Barbara. (Barbara Ward addresses the meeting) Prior to asking Trevor to speak, I would like to confirm that the Board also unanimously supports his re-election. Trevor is a highly experienced Non-Executive Director and has contributed significantly to the Board over the last decade. He has extensive industry and executive leadership experience. Trevor was planning to retire at the conclusion of this year s meeting having been a dedicated, long-serving Non-Executive Director for over ten years. However, the Board has asked him to remain a Non-Executive Director until the conclusion of next year s AGM. This is to ensure that we manage Board renewal and transition. I will now ask Trevor to speak to his re-election. Thank you Trevor. (Trevor Bourne addresses the meeting) Prior to asking Mark to speak, I would like to confirm that the Board unanimously supports his election. Mark was invited to join the Board this year following an external search as part of our Board renewal program. Mark has extensive executive, industry and listed company experience, coupled with strategic, large capital project and international expertise. I will now ask Mark to speak to his election. Thank you Mark. (Mark Chellew addresses the meeting) All of the members of the Caltex leadership team are here today. The leadership team will join us for refreshments at the conclusion of the meeting. I encourage you to take the opportunity to speak to them. Also joining us are representatives of our external auditor - KPMG. Greg Boydell is here to answer any questions related to the conduct of the audit of Caltex s Financial Report for the year ended 31 December 2017 or the Auditor s Report. CHECK AGAINST DELIVERY 2 of 9

3 I would also like to take this opportunity to thank Greg who retires by rotation as external audit partner and to welcome Julian McPherson who has been appointed as external audit partner. Before we open the floor to questions and ask you to vote on the resolutions proposed in the Notice of Meeting, I would like to give my review of our 2017 performance and strategy for growth, and seek to address questions with common themes raised by securityholders prior to the meeting was a successful year for Caltex for many reasons. We began the year expecting to lose the Woolworths business, which presented us with a 150 million dollar earnings gap to close. We rose to that challenge. The result was the second highest Replacement Cost of Sales Operating Profit NPAT we have ever delivered. We set about replacing the potential loss in profitability while progressing our Freedom of Convenience and Fuels & Infrastructure strategies, including a change in our business structure. We announced completion of the Milemaker and Gull New Zealand acquisitions in 2017 and the investment in SEAOIL in the Philippines in We also announced a significant change to the company s organisational structure in 2017, driven by our Freedom of Convenience strategy. We established two separate but inter connected businesses within the company comprising Fuels & Infrastructure and Convenience Retail. The separation of the businesses is a milestone in our evolution from the nation s leading provider of transport fuels to becoming a leader in complex supply chains. You will note that we have reported our 2017 results under our old operational structure of Supply & Marketing and Refining. We will report under our new structure at our Half Year results in August. I d like to make some remarks about our commitment to safety. While successful from many perspectives, last year was marked by tragedy. Each one of us at Caltex was saddened by the loss of a colleague who was fatally injured when he was struck by a third party vehicle during a routine delivery at a customer s site late in The health and safety of our people is our primary focus and this fatality has deeply affected everybody at Caltex. The Board has been fully briefed about the accident and how we are continuously enhancing personal and process safety. This tragic loss was against a backdrop of an otherwise strong improvement in personal safety measures, which show a trend of solid improvement over the past three years. CHECK AGAINST DELIVERY 3 of 9

4 As I mentioned, we had a strong financial result. I ll report the top line figures to you and Julian will provide more detail. On a replacement cost of sales operating profit basis, we delivered a profit after tax of $621 million, up by 18% on the 2016 result, and marginally above the profit guidance we released in December. The Lytton refinery had another good year. Sales from production were at near-record levels and the refinery delivered a 50% EBIT improvement on its 2016 contribution. Our response to the potential loss of the Woolworths business was to accelerate our growth strategy, including planned acquisitions in our core Fuels & Infrastructure business and the development of our Freedom of Convenience Strategy. The Milemaker and Gull New Zealand acquisitions and investment in SEAOIL in the Philippines demonstrate the benefit of our own trading and shipping business, Ampol. Owning our own trading and shipping business provides us with increased volume and scale, an opportunity for better buying power, and options to find efficiencies in timing or logistics. These can be applied when considering further acquisitions in the region. We continue to review opportunities for Fuels & Infrastructure given long term fuel decline in gasoline volumes as we look for adjacent step out opportunities which leverage our existing capabilities. Over the last 12 months, we have not only acquired well-performing businesses in Fuels & Infrastructure, we have also attracted key talent for our Convenience Retail business from specialists like Coles and Woolworths in Australia, as well international retail brands like Watsons, Tesco and Asda. We are impressed with the speed and agility of this Convenience Retail team, both in the roll-out of The Foodary and in its focus on its strategy to make life easier for customers, simplifying the supply chain and setting up for consistent, solid growth. At our recent full year results, we announced the outcome of the two year review of our Convenience Retail operating model to support the strategy. This review determined that controlling our core Convenience Retail business is the best way to deliver our retail growth objectives. We aim to transition our franchise-operated sites to company owned operations by mid Throughout 2017, we continued to audit our entire franchise network in response to the initial discovery of alleged wage underpayment of employees by certain Caltex franchisees. As the Board has previously stated, Caltex will not tolerate illegal and unfair practices and we are committed to stamping it out anywhere in the franchise network. CHECK AGAINST DELIVERY 4 of 9

5 The Board has taken positive steps with management to identify and eradicate this behaviour as soon as it became apparent it was taking place in the network, and continues to receive regular reports on the audit. With a view to Top Quartile Shareholder Returns we are currently reviewing options that will allow us to best optimise the available assets on our Balance Sheet including the real estate and infrastructure assets. The Board has asked management to evaluate all options. In this regard, we have engaged qualified advisors to assist with this process. We are well progressed and working through all the options for an outcome that delivers the most long-term value for shareholders. We intend to announce that decision in line with our Half Year Results in August. Total Shareholder Returns are our priority. Shareholders have received a fully franked total dividend of 121 cents per share for 2017, made up of a final dividend of 61 cents per share and an interim dividend of 60 cents per share. We remain committed to returning surplus funds to shareholders while taking into account Caltex s earnings for the period, future capital requirements, the outlook for the business and the maintenance of a strong investment grade credit rating. We regularly review the allocation of capital and seek to balance growing our existing business, positioning the company to overcome challenges and returning capital to shareholders was a year in which we faced considerable challenge and significant change, and yet delivered strong performance. This is a testament to the people who make Caltex what it is, a proud Australian employer. Caltex was recognised by the Workplace Gender Equality Agency as a 2017 Employer of Choice with a Gender Equality citation. This is the third consecutive year that we have received such recognition and reflects our commitment to gender equality. To guide our progress toward gender equality, we have set a goal of 40% female representation in senior leadership positions by the end of Women currently represent 37% of all senior leadership positions and achieved 48% of all promotions to senior leadership positions in The Caltex Board stands at 37% female representation, up from 29% in 2016, and the gains in female representation on the Caltex Leadership Team have been maintained at 37%. In 2017, we also formalised a flexible work structure, recognising the importance of flexibility to retaining key talent and making it easier to return to work following parental leave. CHECK AGAINST DELIVERY 5 of 9

6 83% of Caltex employees surveyed last year agreed that they have the flexibility to manage their work with their caring responsibilities. The Board is very pleased with this result and the well-deserved recognition of our team. We go forward in 2018 as two core businesses with emerging differences in cultures, capabilities and growth pathways. Freedom of Convenience will drive our Convenience Retail business by delivering the needs of our diverse customer base across Australia and setting us up for continued growth. Fuels & Infrastructure has expertise in supply chain, infrastructure operations and other considerable capabilities that can be leveraged to build the business for the future. As opportunities arise in this space, we will seek to take advantage of our natural capabilities and our market position. So, this is a great time to be a part of the Caltex story. On behalf of Caltex s Board and management, we wish to thank our employees and business partners for all that they do to support our company in being a proud Australian employer, delivering results for our customers and the communities in which we operate. We would also like to thank our shareholders for your continued support as we continue to deliver on our exciting plans for the future of Caltex. I will now hand over to Julian. Thank you Steven. As the Chairman has outlined, in 2017 we formalised and embedded the new structure of two separate but interconnected businesses within Caltex, bringing into focus our evolving Convenience Retail business and accelerating our growth strategy for Fuels & Infrastructure. Fuels & Infrastructure is our heritage and our expertise, and requires our focus to expand. Convenience Retail is a domain that is more recent for us, and requires our focus to grow talent and capability, and to execute on our strategy. Both businesses manage complex supply chains and diverse customer networks across the nation. The potential loss of our 3.5 Billion Litre fuel supply to Woolworths led us to identify and secure new revenue. We acted to accelerate a growth agenda that included targeted acquisitions and new overseas market investments. At the same time, we improved the efficiency of our operations by identifying annualised operating cost savings of $60 million. CHECK AGAINST DELIVERY 6 of 9

7 We acquired 46 Milemaker sites in Victoria, and our Fuels & Infrastructure business expanded with our first international acquisition Gull New Zealand. These acquisitions contributed $22 million to EBIT by year-end. Following these, we announced a new strategic partnership with SEAOIL in the Philippines, a deal which completed in March this year. As the Chairman mentioned, our refinery at Lytton had a very strong year its second best year in production volumes, and it continues to be a reliable source of revenue. Our accelerated Convenience Retail strategy also contributed to closing the potential earnings gap if we were to lose the Woolworths business. So, as at today, while we continue to supply Woolworths under the existing agreement, we have made significant progress in replacing the potential loss of revenue. I would like to add to the Chairman s comments about our colleague, fatally injured when he was struck by a third party vehicle during a routine delivery at a customer s site. It s our absolute priority that all our employees go home at the end of their work day in the same health in which they arrived. Safe and well. We carry the memory of our colleague with us every day, as we sharpen our attention on our personal and process safety. I d like to spend a moment detailing the progress in our safety measures for you. In 2017, we transitioned one of our key personal safety metrics from Total Treated Injury Frequency Rate (TTIFR) to Total Recordable Injury Frequency Rate (TRIFR) to align more closely with the reporting classification used by comparable companies and industries. The Caltex TRIFR for 2017 was 5.2, which represents an 8.6% improvement on the personal safety performance of Similar improvements were also seen in other key measures compared with There were 46 recordable injuries during of the recordable injuries involved employees, and 13 involved our contractors. Supply & Marketing delivered strong results with Earnings Before Interest and Tax of $733 million, up by 3.4% from This result includes unfavourable externalities of $43 million. Excluding the effect of these externalities, the underlying Supply and Marketing EBIT increased by 5.1% to $776 million. Commercial diesel volumes grew 9.2% due to retention of core B2B customers, and increased resource and commercial activities. Total Australian transport fuel volumes increased by 3.4%. Retail transport fuel volumes were flat. Jet volumes increased by 6.25%, reflecting stronger demand, particularly across the East Coast. CHECK AGAINST DELIVERY 7 of 9

8 Let me now turn to our strategy. Our Freedom of Convenience strategy means being the market leader in complex supply chains and the evolving convenience marketplace, by delivering the fuel and other everyday needs of our diverse customers through our networks. In 2017, the most visible aspect of the strategy has been The Foodary, whose first store, in Concord in Sydney, we talked to you about at last year s AGM. Since then the team has delivered 28 more Foodary stores across the country. From a concept on paper, to a pilot store in just a few months, and then from pilot to roll-out within a year is an impressive achievement. The early results are encouraging, with strong customer feedback and an average sales uplift of around 35%, in an average period of just four months. We intend to launch between 50 and 60 Foodary sites and 5 to 10 Nashi high street convenience sites in 2018 at a capital cost of up to $100 million, ahead of a further rollout in later years. As the Chairman mentioned, at our 2017 full year financial results in February, we announced the outcome of the two year review of our Convenience Retail operating model. This review determined that controlling our core Convenience Retail business is the best way to deliver our retail growth objectives. As a result of that decision, we will aim to transition our 433 franchise sites to company operations by mid Company operation is key to accelerating the changes required to provide a more consistent customer experience, roll out new platforms, standardise service and simplify supply arrangements. All of this makes us more agile and gives us the capacity to accelerate the implementation of our vision to be a market leader in Convenience Retail. We appreciate that this is a significant decision which will affect the lives of many of our franchisees and their families over the next two years. We are working with each franchisee to help manage the impact of this change of circumstance and to seek to mitigate any unintended consequences. We recognise that each franchisee s circumstances are different and we want to ensure we provide an opportunity for them to discuss their individual circumstances with us. Some franchisees may choose to exit our network. Others may choose to stay. So far we have agreed transition dates with about a quarter of our network. Other franchisees have decided to continue in CHECK AGAINST DELIVERY 8 of 9

9 our network until expiry of their tenure. We expect discussions with franchisees will continue until mid In 2017 we continued to investigate the alleged wage underpayment in the Caltex franchisee network. Throughout the year, we continued to audit our entire franchise network in response to the initial discovery of alleged wage underpayment of employees by certain Caltex franchisees. We ve appointed key people from within the company to manage the audit of the Caltex franchise network alongside the transformation, because the strength of our business and our project capability has allowed us to do that. Additionally, we established an assistance fund for those franchisee employees impacted by underpayment or wage fraud and supported those franchisee employees by offering them employment with Caltex. I echo the Chairman in stating that Caltex will not tolerate illegal and unfair practices and we are committed to stamping it out anywhere in the franchise network. The Caltex audit program is ongoing and we will continue to take all necessary action to stop underpayment or mistreatment of franchisee employees. In the Fuels & Infrastructure business, we have invested in the infrastructure that sets us up for expansion, such as our $70 million dollar investment in the Newport terminal. Our Ampol business has created a platform for regional geographic expansion, has removed some of the volatility experienced in trading and strengthened our Balance Sheet. Our acquisitions in New Zealand and the Philippines are exciting developments for us and will contribute to the future growth of our business. The SEAOIL acquisition in the Philippines provides access to one of the fastest growing import markets in Asia. Both acquisitions allow us to leverage our Ampol trading and shipping operations. We know the capability of our people is at the heart of the company s success. The evolution of the Caltex business is supported by agile, committed people with the expertise required to deliver sustainable returns and growth for our shareholders. As a result, the broader leadership team is poised to deliver on our strategic imperatives. I m excited about the results of Freedom of Convenience to date. Following the meeting today, I d like to invite you to stay for morning tea, supplied by our team from The Foodary. CHECK AGAINST DELIVERY 9 of 9

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11 Acknowledgement of Country

12 HOLDING SLIDE

13 Board of Directors and Company Secretary Steven Gregg Chairman Julian Segal Managing Director & CEO Trevor Bourne Non-executive Director Melinda Conrad Non-executive Director Bruce Morgan Non-executive Director Barbara Ward AM Non-executive Director Penny Winn Non-executive Director Mark Chellew Non-executive Director Lyndall Stoyles Company Secretary

14 Barbara Ward AM Experience and Qualifications Strategic and financial expertise in senior management roles, including as CEO of Ansett Worldwide Aviation Services and General Manager Finance at TNT Limited Served as a Senior Ministerial Adviser to the Honourable Paul Keating Currently a director of Qantas Airways Limited and various Brookfield companies Previously served on the boards of various public companies including the Commonwealth Bank of Australia, Lion Nathan Limited, Multiplex Limited, and public sector entities including Country Energy & Sydney Children s Hospital Foundation Member of the Australian Institute of Company Directors and holds a Bachelor of Economics and a Master of Political Economy from the University of Queensland The Board unanimously supports Barbara s re-election

15 Trevor Bourne Experience and Qualifications Extensive management experience in industrial and capital-intensive industries, and a background in engineering and supply chain 1999 to 2003, served as CEO of Tenix Investments. Prior to Tenix, spent 15 years at Brambles Industries, including six years as Managing Director of Brambles Australasia. Also previously worked for Incitec Pivot and BHP Currently Chairman of Senex Energy Limited, a director of Sydney Water Corporation and was recently appointed as a director of Virgin Australia Holdings Limited Previously a director of Origin Energy Limited 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 The Board unanimously supports Trevor s re-election

16 Mark Chellew Experience and Qualifications International expertise in industry, strategy, governance and large capital projects with a background in manufacturing, mining and process industries Was the CEO and MD of Adelaide Brighton. Prior to that, held executive positions at Blue Circle Industries and CSR Currently a Director of Virgin Australia Holdings Limited and Infigen Energy Limited. He is Chairman of Cleanaway Waste Management Limited and was until recently Chairman of the industry body Manufacturing Australia 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 The Board unanimously supports Mark s election

17 Caltex Leadership Team Simon Hepworth Chief Financial Officer Richard Pearson Executive General Manager, Convenience Retail Louise Warner Executive General Manager, Fuels & Infrastructure Andrew Brewer Executive General Manager, Transformation Viv Da Ros Chief Information Officer Lyndall Stoyles Executive General Manager, Legal and Corporate Affairs Alan Stuart-Grant Executive General Manager, Strategy and Corporate Development Joanne Taylor Executive General Manager, Human Resources

18 Chairman

19 Regional Strategy - Our Operations

20 We continue to demonstrate our track record in sound decision making in anticipation of the changing business environment 11

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22 $millions Replacement Cost of Sales Operating Profit (RCOP) The RCOP net profit after tax (NPAT) of $621m in 2017 is up 18% on the 2016 result RCOP is our preferred measure as it excludes net inventory gains and losses and better represents the underlying performance of the business.

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25 Caltex dividend history* Final dividend of 61 cents per share (2016: 52cps) fully franked; pay-out ratio 50.8% Caltex dividend history* Cents per share Payout Ratio** % % % % % % % Interim Dividend Final Dividend Payout % * Dividends declared relating to the operating financial year period; all dividends fully franked. Caltex dividend pay-out ratio (40% to 60% of RCOP NPAT, excluding significant items)

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27 Managing Director & CEO

28 19 Safe and well Total Recordable Injury Frequency Rate (TRIFR) for 2017 was 5.20 a 8.6% improvement on the personal safety performance of % improvement on TRIFR average for the previous three years Improvements in Days Away From Work Injury Frequency Rate (DAFWIFR) of 1.36 in 2017 a 21% improvement on 2016 (1.73) a 56% improvement on the average DAFWIFR of the prior three years

29 20 Good financial performance In 2017 Caltex had Strong results from Supply & Marketing EBIT up 3.4% to $733m Underlying EBIT increased 5.1% to $776m Transport Fuel volumes grew Commercial diesel volumes up 9.2% to 4.4BL Total Australian transport fuel volumes grew 3.4% to 16.2BL Jet volumes increased 6.25% to 2.8BL Retail transport fuel volumes were flat at 8.6BL

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33 Formal business

34 How to Cast Your Vote

35 Items of Business 26 Consider The Financial Report, Director s Report and Auditor s Report for the year ended 31 December 2017 Election of Directors 2a - Re-election of Barbara Ward AM as a Director 2b - Re-election of Trevor Bourne as a Director 2c - Election of Mark Chellew as a Director 3 - Adopt the Remuneration Report 4 - Grant of Performance Rights to the MD & CEO

36 Questions Join Queue John Smith

37 Proxy Votes Received Prior to the Meeting For % Against % Open % Abstain Resolution 2a Re-election of Barbara Ward AM as a Director 172,019, % 5,240, % 425, % 258,731 Resolution 2b Re-election of Trevor Bourne as a Director 172,331, % 4,921, % 427, % 262,908 Resolution 2c Election of Mark Chellew as a Director 175,249, % 1,625, % 423, % 645,159 Resolution 3 Resolution 4 Adopt the Remuneration Report Grant of Performance Rights to the Managing Director & CEO 170,989, % 5,432, % 425, % 1,096, ,940, % 4,162, % 410, % 355,794

38 VOTING RESULTS

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