UPDATE: Caltex Forecasts 1st Half Profit Drop; Shares Plunge

Caltex Australia Ltd. (CTX.AU) on Monday disappointed investors by forecasting an up to 39% fall in first half profit, dragged down by high oil prices, a strong Australian dollar and refinery outages.

While trading conditions have recovered since the darkest days of the financial crisis, global refiners are still facing relatively high input costs as fuel demand in the U.S. and Europe remains fragile and cheap supply comes on line in Asia.

Caltex's refining business competes in a regional marketplace where product can be moved internationally, so its margins are affected by regional demand and supply dynamics.

Adding to its woes is a strong Australian dollar, which can lower offshore input costs but erode margins over time.

Caltex, 50%-owned by Chevron Corp. (CVX), forecast a replacement cost of sales operating profit--a closely watched measure that excludes the value of its stockpiles--for the six months to June 30 of A$100 million-A$115 million, down from A$163 million a year earlier.

The forecast missed broker expectations of around A$160 million, according to CLSA Analyst Mark Samter, who already had a more bearish view of A$140 million.

Consequently, Caltex shares took a hammering, falling 5.8% to A$10.72 by 0207 GMT.

"A combination of the anemic consumer and high pump prices has seen the U.S. driving season phenomenon subside greatly," Samter said. "Add to this China's oil products demand falling 4% in May and the foundation for a quick recovery in gasoline cracks hardly looks compelling."

Caltex said its refiner margin was squeezed by a jump in Brent crude prices driven by unrest in Libya and Japan's March 11 earthquake and tsunami.

Although the strong Australian dollar had a positive impact on product payables, it is expected to have a negative pretax impact on Caltex's refiner margin of about A$35 million compared to the first half of 2010.

On a more positive note, it said fuel sales in Australia are holding up amid ongoing demand from the country's booming resources sector.

"While the marketing outlook remains positive, the refiner margin environment remains uncertain due to the impact of the high Australian dollar," Caltex said.

It forecast a first-half historic cost profit, which includes the value of its stockpiles, of A$255 million-A$275 million, up from A$141 million.

Refinery output was hit by planned maintenance at Kurnell in Sydney and berth closures there in June due to bad weather. Bad weather also impacted the Lytton refinery, which experienced unplanned outages in January and May.

-By Ross Kelly, Dow Jones Newswires; 61-2-8272-4692; ross.kelly@dowjones.com

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