August 26, 2019 / 11:30 PM / 2 months ago

UPDATE 1-Caltex Australia reports drop in half-year profit, to cut costs

(Adds details on cost-cutting programme, CEO quote, other metrics)

Aug 27 (Reuters) - Caltex Australia reported a 54% fall in half-year profit on Tuesday and said it would cut costs as it struggles with weakness in refining margins amid higher crude prices.

Net profit on a “replacement cost” basis came in at A$135 million ($91.2 million) for the six months to June 30, at the upper end of its own forecast of profit between A$120 million and A$140 million.

The result is less than half of the A$296 million the petrol station and convenience store owner reported in the previous year.

Caltex had warned in June that slowing economic growth, margin pressure and weak demand from sectors such as transport, agriculture and construction would impact its half-year performance.

The company also cut its interim dividend to 32 Australian cents per share, down from 57 cents a year ago.

The refiner on Tuesday announced a programme to reduce its operating costs by A$100 million per year by the end of fiscal 2020, and also lowered its capital spending for the year to A$300 million from A$320 million to A$385 million.

“We are responding to tough conditions through a focus on capital discipline and by sustainably reducing our cost base,” outgoing Chief Executive Julian Segal said in a statement.

Viva Energy Group also flagged tough market conditions due to lower margins and weak consumer spending on Monday when it posted a 43% drop in first-half profit.

Back-to-back rate cuts and encouraging signs of a pick-up in the property sector could be a boon for Australia’s slowing economy and help to lift consumer confidence.

$1 = 1.4806 Australian dollars Reporting by Shriya Ramakrishnan in Bengaluru; Editing by Chris Reese and Stephen Coates

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