Caltex Entered 15-Year Fuel Supply Agreement with Woolworths

Continuing a Strong Relationship in Wholesale Fuel Supply: Caltex Australia Limited (ASX: CTX) has signed a new long-term wholesale fuel supply agreement with Woolworths (ASX: WOW), ensuring the safe and reliable supply of high-quality fuels to Woolworths for the next 15 years. This new agreement will essentially allow Caltex to continue to realize benefits from its integrated supply chain, including the value created by sourcing volumes through its Ampol Singapore business, higher utilization levels of infrastructure and distribution networks, and by serving customers through the largest site network in Australia region.

In light of this new wholesale fuel supply agreement, Caltex will make one-off payment of around $50 Mn in July 2018. The new fuel supply agreement is on terms and conditions that speak for an $80 Mn reduction in yearly EBIT to Caltex, with respect to present contract. Under the new convenience agreement, Caltex and Woolworths will co-create and rollout a co-branded market-leading comfort offering under the Metro banner across up to 250 Caltex sites, with 50 sites rolled out within the first two years. By partnering with Woolworths, CTX will draw on the scale and capabilities of the Woolworths’ fresh food business, while also capitalizing on the success to date of its Foodary rollout.

According to the management, this strategic alliance with WOW will allow Caltex to provide a very competitive convenience retail offering to its customers, along with an expanded redemption and new loyalty offering. With the following update, the stock price moderately moved up by 0.09 per cent on July 05, 2018 and was seen to trade at a reasonable P/E of 13.68x, before market close.


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