Caltex Australia Limited ACN 004 201 307 Annual Review 2001

Caltex Australia Limited ACN 004 201 307

Annual Review 2001

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Operating profit/(loss) after abnormal items and income tax

Reported result masks underlying strengthCaltex Australia in 2001 recorded a full year net loss after tax of $186.1 millioncompared with a profit after tax of $36.1 million in 2000. If the impact of the fallin crude oil prices – a key external factor – is excluded, the replacement cost ofsales operating profit (before significant items, interest and tax) in 2001 was$200.9 million, up from $115.7 million in 2000. Inventory losses totalled$186.1 million in 2001 (2000: $40.1 million gain).

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The price of regional benchmark Tapis

crude oil fell from US$27.38 a barrel in

December 2000 to US$18.64 a barrel in

December 2001, averaging US$24.99 for

the year (2000: US$29.45), reflecting a

global downturn in demand.

Crude oil price (US$)

A$m

Return to full

production

The Kurnell refinery

returned to full

operating capacity

in March with the

completion of a project

to replace a damaged

exhaust stack.

Negative refiner

margins

Refiners’ margins fell

sharply to negative

levels between May

and August.

Lytton shutdown

A planned

maintenance

shutdown was

successfully carried

out at the Lytton

refinery in

October/November.

Statutory profit and replacement cost of sales operating profit

200120001999

Replacement cost of sales operating profit after income tax

Regional oversupply of petrol led to sharp

falls in refiners’ margins to negative levels

between May and August, falling as low as

-US$2.08 a barrel in July. Singapore margins

averaged US$1.61 a barrel in 2001, down

from US$3.05 a barrel the previous year.

Refiners’ margin is the difference between

the price of the Tapis crude oil feedstock

and the quoted Singapore ex-refinery price

of petroleum products.

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Refiners’ margin (US$)

Note: The replacement cost of sales operating profit excludes losses

or gains from inventory, which are calculated with reference to the

underlying US dollar crude oil costs. A fall in crude prices results in a gap

between what the company paid for its crude inventory and the price at

which refined products can be sold in the marketplace. The impact is

approximately A$20 million less profit before tax for every US$1 a barrel

fall in crude price. The reverse situation applies in a rising crude market.

Improved earnings

Stronger marketing

earnings were

achieved by focusing

on profitable business

rather than volumes.

Network growth

The national

convenience store

network continued to

grow in size and

average store turnover

in 2001.

Premium fuel sales

The rollout of Vortex

and Ampol Gold,

Caltex’s premium

unleaded petrol was

completed in 2001.

1Caltex Annual Review 2001

3 Report by Chairman and Managing Director

6 Review of Operations Index

8 Manufacturing and Supply Review

12 Marketing Review

16 Corporate Review

20 Directors’ Report

26 Corporate Governance

30 Statement of Financial Performance

31 Discussion and Analysis of the Statement of Financial Performance

32 Statement of Financial Position

33 Discussion and Analysis of the Statement of Financial Position

34 Statement of Cash Flows

35 Discussion and Analysis of the Statement of Cash Flows

36 Notes to the Concise Financial Statements

40 Audit Report

40 Directors’ Declaration

41 Comparative Financial Information

42 Replacement Cost of Sales Basis of Accounting

43 Shareholder Information

46 Financial Calendar

47 Statistical Information

48 Directory

Contents

2 Caltex Annual Review 2001

Advice to shareholdersThe 2001 Annual Review for Caltex Australia

Limited and its controlled entities provides an

overview of Caltex Australia’s main operating

activities for the year ended 31 December 2001.

The 2001 Concise Financial Report for Caltex

Australia Limited and its controlled entities,

which is included at pages 30 to 40 of the 2001

Annual Review, provides a summary of Caltex

Australia’s financial performance, financial

position, and operating, investing and financing

activities during the year ended 31 December

2001. Detailed financial information for Caltex

Australia Limited and its controlled entities for

the year ended 31 December 2001 is set out in

the 2001 Full Financial Report.

The 2001 Full Financial Report is available free of

charge from Caltex Australia. To request a copy of

the 2001 Full Financial Report, please write to the

Company Secretary at Caltex Australia Limited.

Please note that financial information for Caltex

Australia, including the 2001 Annual Review and

the 2001 Full Financial Report, can be found at

Caltex Australia’s web site, www.caltex.com.au.


2001 was also a year in which the company improved its

underlying performance with a substantial increase in the

replacement cost of sales operating profit illustrated on the

previous pages.

If the impact of the fall in crude oil prices – a key external factor –

is excluded, the replacement cost of sales operating profit (before

significant items, interest and tax) in 2001 was $200.9 million,

up from $115.7 million in 2000. Inventory losses totalled

$186.1 million in 2001 (2000: $40.1 million gain).

There was improved refinery reliability and safety performance and

stronger marketing earnings achieved by focusing on profitable

business rather than volumes.

The focus on these will continue in 2002 and we are confident that

the improvements are sustainable.

The board remains very conscious of its stated objective of paying

consistent dividends. However, taking into account the company’s

level of earnings, available cash flows and taxation position – the

key factors upon which payment of a dividend is dependent – the

directors determined that no dividend will be paid for 2001.

This decision reflects the disappointing result for the year and the

need to reduce debt levels and improve gearing. In focusing on

improving these factors, the company is working to position itself

to better withstand the impact of external factors beyond its

control and return to profit and cash flow levels which will support

payment of a consistent dividend.

Working capital benefited from the fall in crude prices but this was

partially offset by the higher inventory volumes to accommodate the

planned major maintenance shutdown at the company’s Lytton

refinery in Brisbane in the final quarter. This was reflected in the net

debt of $1.26 billion at the end of 2001 ($1.28 billion at 30 June 2001).

Caltex refineries recorded a strong improvement in reliability and

safety performance in 2001 in line with the commitment by the

Caltex board and management to eliminating unplanned shutdowns.

In March, a team of independent international and local experts

commissioned by the board recommended improvements covering

technical actions, management systems and people systems. Work

commenced immediately on putting these recommendations

into practice, and progress was demonstrated by the strong

improvements in refinery reliability in the second half of the year.

Report by Chairman and Managing Director

Building on underlying strength

Caltex Australia in 2001 recorded a full year net loss after tax of $186.1 millioncompared with a net profit after tax of $36.1 million in 2000. It included a$147.5 million write-off of goodwill relating to the company’s purchase of PioneerInternational Limited’s 50% interest in Caltex Australia Petroleum Pty Ltd in 1997,booking of a $16 million profit on a transaction relating to a vessel chartered byCaltex, and full provision for the $11.4 million ($8.0 million after tax) debt owed to Caltex by Ansett. Excluding the goodwill write-off, the company made an aftertax loss of $38.6 million.

Refinery reliability

A team of independent experts

commissioned by the board made

recommendations in March covering

technical actions and management and

people systems at the refineries. Progress

was evident by the end of the year.

Rollout of the brand

Caltex’s profile was further strengthened

in 2001 through advertising and promotion

campaigns and continued progress in rolling

out the new logo and livery to Caltex sites.

Report by Chairman and Managing Director continued


Refiners’ margins – the difference between the cost of crude oil and

the price received by refiners – were at record low levels during the

year and were negative for eight weeks. The average margin was

US$1.61 a barrel compared with US$3.05 a barrel in 2000. In

Australian dollar terms, this impact was partly offset by the lower

value of the Australian dollar.

In marketing, the company increased its returns from fuels sales

in an intensely competitive market. Caltex maintained its domestic

transport fuels marketshare leadership and recorded growth in

sales of specialty products and some key finished lubricants.

There was further growth in earnings from the convenience

store network and related non-fuel activities. By the end of 2001,

Caltex’s national store network, launched four years ago, had

grown to 405 Star Marts and Star Shops (2000: 359). Average

Star Mart store sales grew 5% and sales from the smaller

Star Shop were 6% higher than the previous year.

A company-wide strategic procurement program delivered further

benefits in 2001, and the refineries also continued to make substantial

gains from profit improvement and cost savings programs.

Australia faces challenges in upgrading its petroleum refineries

to manufacture clean fuels, in order to reduce air pollution and

greenhouse gas emissions. In this regard, Caltex welcomes the

Prime Minister’s continued commitment to Measures for a Better

Environment, including incentives for the early introduction of

ultra low sulfur diesel to the Australian market.

Longer term, it seems inevitable there will be further tightening

of fuel and vehicle standards. Australia could potentially gain

competitive advantage by facilitating investment by its refineries

in clean fuels ahead of their Asian competitors, while reducing air

pollution and greenhouse gas emissions. This strategy should be

considered by industry and government. Caltex advocates early

action incentives, in the form of a small excise differential between

mandated and cleaner grades of fuel, for both petrol and diesel

production.

Fuel pricing and marketing regulation remain significant public

policy issues and subject to state government initiatives, such as

the highly complex and anti-competitive regulation in Western

Australia. There are also some concerns at the federal level, such

as potential changes to s46 of the Trade Practices Act and a greater

role for the ACCC in pricing. Caltex will continue to take a strong

stance in favour of market forces and against excessive regulation

as the interests of consumers and industry are best served by

a competitive, deregulated market.

A decision on early investment on ultra low sulfur diesel will be

made once it is clear that the diesel sulfur excise differential will

be introduced on schedule from January 2003.

Caltex is concerned at the Commonwealth Government’s decision

to permit continued use of MTBE as a petrol additive until 1 January

2004, as part of the new mandatory national fuel quality standards.

MTBE is a threat to water supplies as even trace quantities of MTBE

in drinking water make it undrinkable. Australian refiners do not

currently add MTBE to petrol. If sub-standard imports continue to

be allowed in direct competition with environmentally preferable

Australian refined products, they will adversely affect prospects for

refinery investment.

ChevronTexaco merger

The merger of Chevron Corporation and

Texaco Inc in October 2001 will generate

benefits for Caltex Australia in the sharing

of best practices in both manufacturing

and marketing.


OutlookIn positioning itself for the future, the company has improved

refinery productivity, reliability efficiency and cost savings and

developed more effective and better-targeted marketing strategies.

This enhanced underlying performance has been achieved in an

environment of refiners’ margins that have fallen by 25% in the

four years since the Asian economic crisis and an increasingly

competitive domestic market.

Caltex’s core business of refining and marketing petrol is sound

and the fundamentals of our company remain strong. While

maximising returns from investment in real estate and its retail

network, the company continues to build up non-fuel revenue

streams to improve its consistency of earnings.

The 2001 merger of Chevron Corporation and Texaco Inc has begun

to generate a number of benefits for Caltex Australia and this will

increase in the future. These benefits will be in the areas of

strategic alignment and the sharing of best practices in both

manufacturing and marketing.

The company is strongly committed to achieving world class safety,

health, environmental and reliability performance, which is the key

to sustainable low cost operations. We are strongly focussed on

extracting greater value from our manufacturing and marketing

activities and where possible stabilising returns by maximising

profits from those areas not impacted by international oil prices.

The company’s key objective is to maximise profit and cash flow

to improve gearing. Our primary focus will be on reducing debt

while maintaining capital expenditure.

Managing Director Tony Blevins

and Chairman Dick Warburton.

RFE Warburton

Chairman

TC Blevins

Managing Director & CEO

Review of Operations


In this section:8 Manufacturing and

supply Review

12 Marketing Review

18 Corporate Review

Kurnell refineries

The Kurnell fuels and lubricants refineries,

in southern Sydney NSW, are a key part of

Caltex’s overall refining capability.


Planned total shutdown of Lytton refinery

Maintenance and capital improvements to

the refinery’s electrical, steam, fuel gas and

flare systems in October/November made

Lytton more robust in dealing with the

consequences of any external power failure.

Stack rebuilt at Kurnell

The construction and commissioning of a

new exhaust stack at Kurnell refineries was

completed in only three and a half months

with no injuries or lost time accidents.

Manufacturing and Supply Review


Summary of Key Points● Reliability and safety performance improved

● Refiner margins at record low levels

● Fall in crude prices generated significant losses on inventory

● Successful Lytton maintenance shutdown

● Ongoing benefits delivered from profit improvement and

cost savings programs

Costs and MarginsThe operating profit from Manufacturing and Supply was significantly

lower than the previous year mainly due to a $186.1 million loss on

inventory in 2001 (2000: gain of $40.1 million).

Inventory losses were generated by a significant fall in crude oil

prices, particularly in the second half of the year. The price of

regional benchmark Tapis crude fell from US$27.38 a barrel in

December 2000 to US$18.64 a barrel in December 2001, averaging

US$24.99 for the year (2000: US$29.45). Falls in crude prices mean

a gap between what the company paid for its crude inventory and

the price that can be recouped in the marketplace. The impact is

approximately A$20 million less profit before tax for every US$1

a barrel fall in crude price. The reverse situation applies in a rising

crude market.

Regional oversupply of petrol led to sharp falls in refiners’ margins1

to negative levels between May and August, falling as low as

minus US$2.08 a barrel in July. Regional refineries had ramped up

production in response to what proved to be erroneous reports

of expected shortages of petrol supplies for the North American

summer driving season. The oversupply situation resulted in

Singapore margins averaging US$1.61 a barrel in 2001, down

from US$3.05 a barrel the previous year.

The Manufacturing and Supply division purchases crude oil from Australia andoverseas for refining at Caltex’s fuels refineries in Sydney and Brisbane and theassociated lubricants refinery in Sydney. The refineries produce petrol, diesel, jet fueland a range of lubricants that are then distributed via ship, road or pipeline to thecompany’s finished product terminals and on to retail and wholesale customers.The refineries also produce a range of specialty products including petrochemicalfeedstocks, LPG, wax and bitumen.

1 Refiners’ margin is the difference between the price of the Tapis

crude oil feedstock and the quoted Singapore ex-refinery price of

petroleum products.


Initiatives to improve refinery economics were implemented in

accordance with the intensive profit improvement study conducted

in 2000. Improved catalytic cracker production at Lytton resulted in

an increase in liquid recovery.

Total improvements implemented to date are delivering benefits

at an annualised rate of $25 million, with the fully implemented

program in 2003 estimated to deliver benefits of $50 million

per annum.

Overall operating costs were 11% higher than those for the

previous year due to exchange rate impacts on shipping, higher

insurance costs, increased provisions for major maintenance and

increases in other costs due to wage increases and work done on

improving refinery reliability.

Capital expenditure of $46.7 million in 2001 was more than double

that of the previous year. Major expenditure in 2001 was related

to improving plant reliability and integrity at both refineries (see

below) including $11.5 million on capital projects during the

planned maintenance shutdown and turnaround at Lytton refinery,

in addition to the $27 million cost of the shutdown. Other funds

were directed to enhancing LPG production and marketing

facilities at both Kurnell and Lytton and preparing for new national

fuel standards.

Cost efficiency remains an important focus of the Manufacturing

and Supply division, with further successful initiatives in 2001 in

the area of purchasing and contract maintenance.

Production and ReliabilityCaltex refinery production of petrol, diesel and jet fuels in 2001

was slightly higher than that for the previous year. Production of

specialties increased by 4.5%, particularly LPG. The refineries

operated at below rated capacity due to the impact of several

unplanned events.

The Kurnell fuels refinery operated at only 90% of its finished

product capacity for the first quarter of the year until the

completion of a project to replace an exhaust stack that developed

a structural fault in November 2000. At the Lytton refinery in

Queensland, external power failures in March and April resulted

in brief refinery shutdowns.

In the second half of the year, operations were significantly more

reliable with the major event affecting refinery production being

the planned total plant shutdown at the Lytton refinery in

October/November. The shutdown’s inspection and maintenance

program was completed successfully and it also enabled major

capital improvements to be made to electrical, steam, fuel gas and

flare systems to make Lytton more robust in dealing with the

consequences of any external power failure.

The impact of the shutdown on supply was minimised by planning

well in advance for inventories to be built up and Lytton supplies to

be supplemented by products from Caltex’s Kurnell refinery and

imports.

There was a general improvement in supply reliability in 2001

over 2000 both in the Caltex refinery supplied areas of NSW and

Queensland and in states normally supplied from competitor

refineries.

Increased production of specialties

2001 was an excellent year for specialty

products with increased production and

sales. Products such as LPG, bitumen, wax,

marine fuels and petrochemical feedstocks

currently account for over 7% of refinery

production.

Progress in inventory management

Inventory forecasting and management

by the Supply Department supported

improvements in refinery optimisation,

product supply reliability and working

capital management.

Profit improvement program

A new LPG load-out system and storage

vessel at Lytton refinery will enable Caltex

to increase revenue from the sale of

commercial butane.

Wharf upgrade at Kurnell

A $4 million upgrade to the Kurnell refinery

wharf was completed in 2001. Forty million

barrels of crude oil and other feedstocks are

fed into the refinery through the 1.5 km-long

wharf facility each year.

Manufacturing and Supply Review continued


Improvement ProgramsIncident-free operationsElimination of unplanned incidents is the refineries’ prime thrust

to improve productivity, with an intensified focus on safety, health,

environmental and reliability performance. In March 2001, a

major independent review of operations and management at

both Kurnell and Lytton refineries was concluded by a team of

international and local experts. The team evaluated the root causes

of the reliability incidents which caused unscheduled production

interruptions at both refineries in 2000.

The team’s report confirmed that while existing refinery risk

reduction and safety initiatives were sound, a large number of

improvements could be made covering technical actions,

management systems and people systems.

A priority list of actions and improvements was made – some specific

to one refinery, but many common to both refineries – and during

2001 significant progress was achieved, contributing to the improved

reliability and safety performance in the second half of 2001.

The program to achieve incident-free operations by implementing

the report’s recommendations will be continued over the next two

years. Examples of key elements are:

Management of change – A new system called “Request for Change”

has been developed, drawing on the best of ChevronTexaco’s

systems and existing systems at both refineries. It will form part

of Caltex’s new Process Safety Management System which is

being implemented across both refineries.

The improved management of change process was launched

at the Kurnell refinery in December 2001 and is currently being

introduced at Lytton. Recommendations being put in place include

ensuring all people involved are trained at the right level, detailed

checklists and prompts, a process for ensuring that all changes

have the appropriate level of technical evaluation, methodology

for safety and design reviews and regular auditing.

Equipment upgrades – A number of the report’s recommendations

on specific equipment upgrade requirements for Kurnell refinery

started being put into place in 2001. Planning also commenced for

major projects including a new replacement furnace for No 3 crude

unit and the replacement of three large solvent pumps on a key

specialties’ processing unit .

At Lytton, the largest reliability risk identified was the refinery

utility systems. The refinery has a steam system reliability

improvement program and has identified issues related to

hardening the electricity system to better withstand short power

dips. This includes the need for a back up source of energy for

furnaces and boilers and an additional source of fuel to the

refinery gas system was added with the installation of an

emergency LPG vaporiser in October. This has substantially

improved Lytton’s reliability in emergency scenarios such

as power upsets.

Human factors – Programs are under way to improve work

practices and systems, redefine roles and responsibilities and

implement leadership and supervisory training. Among them is

the development of a behavioural safety program which works to

provide clear direction, increase awareness of safety-related issues

and encourage employees to observe their workplace and draw

attention to any hazards.


Preparation for clean fuelsThe Commonwealth Government has set national standards for

petrol and diesel which came into force on 1 January 2002. Caltex

participated actively in the development of those standards and

was producing petrol and diesel meeting the standards prior to

1 January.

To continue operating from 2006, onwards Australian refineries

will be required to make changes to diesel and petrol processing

units to manufacture fuels to comply with the new fuel

specifications. Commonwealth regulations require the level of

sulfur in diesel sold in Australia to be reduced from current levels

of around 1,000 parts per million (ppm) to no more than 500 ppm

by the end of 2002 and 50 ppm by 2006. The standard for sulfur in

unleaded petrol is to be reduced from 500 ppm to 150 ppm in

2005 and the standard for benzene is to be reduced from 5% by

volume to 1% in 2006.

Caltex has been conducting feasibility studies and reviewing

process design and technical options for both refineries to

produce fuels that meet these specifications. It is estimated that

the company will need to invest to meet the new standards for

benzene in petrol and sulfur in both petrol and diesel required in

2005 and 2006, but is able to meet the other requirements with

no or minor investment. The bulk of any investment in clean fuels

would be required in 2004 and 2005.

The Prime Minister has said the government will continue its

commitment to the Measures for a Better Environment program,

including providing incentives for the early introduction of ultra

low sulfur diesel to the Australian market. Such a scheme would

benefit the environment and assist oil refiners to fund the large

investments required to meet the new national standards.

South Korea

North Korea

China Japan

Vietnam

Taiwan

Philippines

Malaysia

IndiaArabian

Sea

Indonesia

Australia Lytton

Singapore

Kurnell

Margins a regional matter

The returns Australian refiners receive for manufacturing

petrol, diesel and other products depend on supply and

demand for petroleum products in the Asia-Pacific region.

This market stretches from the Arabian Gulf in the west to

the US West Coast, and from China in the north to Australia

in the south.

In the region, the commonly-used benchmarks are product

prices in Singapore, which is the major export refining centre.

Prices for supply from refineries around the region are quoted

relative to Singapore prices for petrol, diesel, jet fuel and

other products. Singapore product prices relative to crude oil

– known as Singapore refiner margins – vary with regional

product supply/demand balances.

The prices received by Caltex’s Australian refineries for

petroleum products are related to Singapore prices plus

product freight – the cost of the imported product alternative

supply. Petroleum product freight rates are higher than the

crude oil freight rates paid by Australian refiners for crude oil

supplies, which gives refiners a small freight cost advantage

relative to imported product competition.

The Marketing division promotes and sells Caltex’s diverse range of fuels, lubricants and specialty products through a national network of service stationsand distributors and directly to commercial accounts. The division also operates theCaltex/Ampol service station and convenience store network. It is also responsiblefor building brand awareness through advertising and the management of Caltex’smotorsport sponsorships.

Automation at fuels terminals

A new terminal automation system is being

installed at Caltex’s main terminals. The

system controls product movement, storage

and truck loading and manages business

transactions, allocations and inventory.

Fuel testing at service stations

To validate fuel quality and protect brand

integrity, Caltex launched a program of

random fuel testing in late 2001 at Caltex

and Ampol sites.

Marketing Review


Summary of Key Points● Earnings up from the previous year

● Caltex sales volumes and market share were lower, but market

leadership retained

● Further growth in earnings from convenience stores and

related non-fuel activities

● Growth of customer preference and recognition of the

Caltex brand

Fuel SalesCaltex improved its returns from fuels sales despite intense market

competition in 2001. This was achieved by focusing on profitable

business rather than volume increase. Total Caltex transport fuel

sales were 1.4% lower than those of the previous year but grew in

the more profitable retail channel.

The Australian market for major transport fuels grew 1.3% in 2001

after contracting the previous year. Demand for petrol and diesel

was up but jet fuel sales declined. Caltex’s total transport fuels

market share decreased to 27.3% (2000: 28.1%) but retained

market leadership.

Service stations – Retail sales of petrol and diesel were 2% higher

in volume than the previous year, with premium unleaded petrol

(including Vortex and Ampol Gold) accounting for 7.4% of retail

petrol sales in 2001. The average petrol throughput in company-

operated, commission agent and franchised service station sites

increased slightly to almost 300,000 litres per month in 2001

which compares well with international standards.

Aviation fuel a growth area

The aviation fuel business currently accounts

for 14% of all Caltex’s fuel sales and has

grown steadily in the last six years. Clients

range from Qantas and other international

carriers to the RAAF.

Motorsport sponsorship (above)

2001 was a big year for Caltex motorsport

sponsorship with wins at the Honda Indy 300

and Australian Rally Championship. All racing

teams sponsored by Caltex use standard

Havoline oil products.


Commercial and Industrial – Diesel and aviation fuel sales volumes

were slightly down on those of last year but margins recovered

from the previous year with diesel supply agreements renegotiated

to cover increased sea freight costs and a reduction of credit terms.

Despite a slowing of international demand for aviation fuel

following the terrorist attacks in the US in September, Caltex sales

recovered and were down only 0.8% on 2000 volume by the end of

the year. Aviation profit was adversely impacted by provision for the

$11.4 million bad debt following the collapse of the Ansett group.

Specialty products recorded improved sales and margins with a

strengthening of marine, bitumen and LPG sales.

Distributors and Independent resellers – Regional supply

disruptions and adverse weather conditions in harvest areas had

a negative impact on fuel sales to distributors and independent

resellers, with diesel and petrol sales in these channels down

significantly from the previous year.

A full strategic review of the Caltex StarCard business was

conducted in 2001 and a number of revenue enhancing and cost

reduction initiatives introduced. Further initiatives will be rolled

out during 2002 and 2003.

Lubricants Finished lubricants volumes suffered due to the downturn in some

key industry sectors, but margins were stronger and there was

sound growth in sales of some products.

Sales of the flagship diesel engine oil Delo 400 more than doubled

from the previous year in response to successful promotion and

sales strategies. Crop spray oils also recorded continued strong

growth, up 30% from the previous year.

Convenience Store NetworkThe convenience store program has contributed significantly

to non-fuel earnings income of $41.2 million in 2001, up from

$37.5 million the previous year.

The national convenience store network continued to grow in size

and average store turnover. At the end of 2001, there were 174

Star Mart convenience stores supported by a network of 231

smaller Star Shops.

Average Star Mart store sales grew 5% and Star Shop sales were

6% higher than the previous year. Growth continued in sales of

both convenience items and core grocery lines, with store turnover

boosted by fast-growing areas such as new age beverages,

telephone cards, instore bakery and packaged bread sales that

more than doubled during the year.

The focus on pizza was extended during the year, with Caltex

replacing an external supplier with its own Pizza Plus brand and

adding pasta and other quick serve meals to the range. These will

be further extended in 2002.

The retail network also benefited from increased sales of Caltex

motor oil Havoline Formula 3 that followed a major promotional

push in September/October.

The supply chain for Caltex’s convenience store network is being

transformed with the rollout of the company’s new centralised

distribution system. Under this system, store orders are collated for

suppliers, then delivered to a central cross dock warehouse in each

state for delivery at set times to stores. This was successfully

introduced for a number of sites in NSW and Queensland during

the year and will be extended in 2002.

Car wash network upgraded

The Olmos family, who have four franchise

sites in the ACT, say their state of the art car

wash at their Braddon site helps attract

customers.

Sales expand to fleet customers

A substantial percentage of retail fuels sales

are transacted via Caltex StarCard accounts.

Fleet StarCard sales increased in 2001 with

particular growth in accounts with leading

national businesses.

Marketing Review continued


The year saw an increase in the number of independent operators

that have chosen the Caltex Star Mart and Star Shop offers to

complement their new site developments. This highlights a

significant shift for Caltex in the role as franchisor. In the past the

company has traditionally owned or leased property and facilities

and then appointed a franchisee. This new approach has seen the

company reduce investment significantly in new developments

and has independent operators paying Caltex a royalty for the

significant value it is providing in the convenience store and fuel

forecourt offers. These stores look no different to the company

operated or traditional franchised outlets; however, they provide

Caltex with a lower risk income stream and confirmation that its

Star Mart and Star Shop franchises are creating significant value

for both the company and its franchisees.

Additional ActivitiesCaltex continued to develop activities to expand retail

opportunities at its sites throughout Australia.

New initiatives during the year included the launch of a trial

venture with Midas for car repair and maintenance workshops

at Caltex service stations.

The company also launched a program to upgrade and expand its

38-site car wash network, buying the car wash equipment owned

by Robo Wash HK at 13 sites and announcing plans to replace

facilities at older sites and increase the number of sites carrying

the service.

In May, Caltex launched a service known as Caltex Pick Up Point

that enables Internet shoppers to collect their goods from a local

Caltex service station. The service has initially been offered at

83 Caltex sites across Australia with extended trading hours.

Travelmate (travelmate.com.au), Caltex’s one stop shop web site

devoted to Australian road travel, has continued to experience

strong growth in site traffic, accommodation bookings and

revenue. In October, Caltex launched an associated web site

(needitnow.com.au), an accommodation service for last minute

travellers, which has exceeded expectations for revenue growth.

The program of installing National Australia Bank automatic teller

machines at Caltex sites continued during the year, with ATMs now

at 229 sites, including all Star Marts.

Franchisee ProgramsDuring the year, Caltex introduced some significant elements to its

new retail operating model for Caltex franchisees with Star Marts

and Star Shops.

In April, the company launched a national All Stars program to

introduce and monitor standards, systems and brand image

throughout the retail franchise network.

Areas covered by the program include customer service, promotional

compliance, merchandising, brand and site presentation, food safety,

security and environment, health and safety. It succeeds the earlier

Mystery Shopper program and moves the improvement focus from

the back office to the shop floor for Caltex’s 550 franchisees and

90 company owned and operated Calstores.

Feedback from sites during the initial All Stars period has been

very positive, resulting not only in higher scores but improved

consistency of offer across the network. The program enables sites

to measure and compare their performance with others in the

Caltex network, with participants offered rewards or penalties

based on audit results.

Coffee makes a difference

Caltex’s coffee dispenser, which won a

design award in 2001, is popular with Star

Mart customers. Caltex teamed up with

Nescafé and state roads and traffic

authorities for a successful national “Stop,

Revive, Survive” safe driving campaign.

Nice’nEasy TV commercial

Caltex launched another successful TV

commercial in July using the Nice’nEasy

theme. Research showed an increase in the

percentage of motorists who considered

Caltex the service station brand of choice.


An increasing number of franchisees are using Caltex’s online

services. These were expanded during the year with the upgrading of

the company’s online Business Centre, which provides franchisees

and other business partners with a range of Internet-based facilities

such as price information, electronic ordering, bill payment, account

enquiry, online manuals, merchandising and contact data.

In August, an online operations manual was launched to provide

an easy-to-access and frequently-updated guide to the basic

requirements and procedures for managing a Star franchise.

It is planned to expand the Business Centre to provide the retail

network with a forum, bulletin board, brand, local site marketing

manual and links to order from external suppliers online.

Caltex Brand and Customer Preference An integrated advertising communications program and continued

progress in upgrading Caltex sites with the new Delta logo further

strengthened Caltex’s profile during 2001.

This year, the distinctive new Caltex logo and livery were installed

at a further 144 sites, including 28 Star Marts and 80 Star Shops,

bringing the total number of re-branded sites to 375 – nearly half

of the equity sites in the Caltex/Ampol retail network.

The year also marked the start of major activity in rebranding smaller,

independent sites mainly in the distributor network, which is helping

the new logo gain recognition in rural and regional areas.

The rebranding project commenced in 1999 and is scheduled for

completion in 2005/6.

Research showed that Caltex Nice’nEasy TV commercials during

the year made a strong and positive impression on consumers.

A new television commercial on the Caltex Nice’nEasy theme was

launched in July and this and existing Caltex TV commercials were

screened during the year with particular focus on Sydney, Brisbane

and Perth where the new Caltex livery is most heavily concentrated.

Consumer brand awareness and preference for Caltex service

stations continued to increase. Particularly good results were

achieved in the key Sydney market, where independent research

in October revealed Caltex to be the preferred convenience store

for Sydney shoppers. This was the result of advertising and the

increased presence of Star branded stores in the market, with

Sydney consumers indicating that they perceived Star Mart stores

to be “leading” in terms of offer and appearance.

Brand building for key Caltex oils Havoline and Delo continued

with participation in motorsport activities, TV, radio and print

media. Promotion of Havoline motor oil is based around proof of

performance in motorsport, and the win by the Caltex Havoline

Indy Car at the Gold Coast Indy in October generated widespread

publicity.

Awareness of the Havoline brand also increased as a result of

radio advertising and on site broadcasting on the Triple M network.

A major promotion took place in October to coincide with the

Bathurst 1000 and the Gold Coast Indy races.

The Delo diesel engine oil brand was supported by a successful

regional consumer promotion and advertising campaign that was

conducted in the latter part of the year.

Caltex conducted a road safety awareness campaign at Easter

with a “Driver Fatigue. Look for the Signs” advertising campaign in

newspapers around Australia. At Christmas, Caltex combined with

Nescafé to conduct a “Stop, Revive, Survive” safe driving campaign

supported by radio advertising around Australia to encourage

motorists to stop for a free cup of coffee at a participating Star Marts.

Safe shutdown a big fundraiser

Safety performance during the planned

Lytton refinery shutdown was linked to an

incentive scheme that raised $16,000 for the

Starlight Children’s Foundation. For every day

without a treatable workplace injury, funds

were donated by Caltex, alliance partner

Transfield and other contractors.

Oil spill rapid response

Training of emergency teams for rapid

and effective response to any oil spill is

conducted year round at both refineries,

both internally and in conjunction with

outside agencies.

Corporate Review


Environment, Health, Safety and Risk ManagementIn 2001, Caltex recorded improved performance in a number of

key EHS measures. There was a significant reduction in lost time

injuries, fewer incidents directly relating to key risks and continued

steady reduction in the number of spills at Caltex facilities.

This was a particularly sound achievement in a year where there

were major construction, repair and maintenance activities at both

Caltex refineries involving large numbers of outside contractors.

Caltex continued to take corrective actions to improve control of

significant risks, as outlined in its key risk management plans.

There was further work done on existing safety management

systems and in developing new strategies. At the refineries, a

major independent review of operations and management by a

team of international and local experts provided recommendations

which are being implemented in relation to process and safety

management systems (PSM). A team with international expertise

was established to ensure that common standards and procedures

are put in place, knowledge and expertise is shared and effective

training and communication takes place in every area of refinery

operations.

Caltex further strengthened its rigorous program of EHS risk

auditing to ensure compliance with the company’s EHS policy

and to identify opportunities for improvement. During the year,

additional review and follow up processes were developed and a

total of eight EHS risk management system audits were conducted

in different business units. These included audit of the Marketing

division assisted by personnel from ChevronTexaco.

Occupational health and safety performance – Caltex made

further progress towards its goal of achieving incident-free

operations throughout the business. The company continued to

monitor closely and assess its performance against EHS targets to

identify areas for improvement. EHS targets were part of Caltex’s

2001 short term incentive bonus scheme for employees.

There was significant improvement in health and safety

performance in 2001, as measured by the number of injuries

that required medical treatment and the number of injuries that

resulted in time lost time for each million hours worked. Compared

with the previous year, the Lost Time Injury Frequency Rate (LTIFR)

and the Total Injury Frequency Rate (TTIFR) have decreased by 30%

for employees and contractors as a result of the efforts of workers

to maintain focus on safety.

Health and safety performance 2000 vs 20012000 2001

LTIFR – Contractors 11.2 2.1

LTIFR – Employees 2.6 1.8

TTIFR 15.9 10.7

The reduction in injury rate was due to new and revised programs

including random auditing, increased focus by management, more

detailed planning and improved injury management.

Emergency and crisis management – Caltex’s Crisis Management

System was the subject of a company-wide audit in 2001. As a

result, the company updated its overall crisis management system

and 24-hour emergency response capabilities and developed a

business continuity plan that ensures company operations at its

head office can continue in the event of a major crisis.

Minimising impact on the environment

Care is taken at Caltex refineries to minimise

the operations’ impact on adjacent wetlands,

national parks and other natural features

surrounding the refineries.

Advanced new fire training facility (above)

Caltex is a partner with Queensland

government agencies in an advanced

fire training facility, opened in October

on Lytton refinery land in Brisbane.


Local emergency response plans at the refineries and fuels

terminals were tested by both desktop and field exercises involving

local and regional authorities.

Environmental performance – Standards for environment

protection continue to increase and Caltex continued to work

on minimising environmental impact from activities as well as

making more environmentally friendly products for its customers.

Reduction in major spills

Over the past four years there has been a steady reduction in the

number of major spills, that is any crude oil or petroleum product

spill which poses significant risks to safety, human health or

ecosystems.

Caltex provided information on emissions from its refineries and

fuels terminals to each state environment protection agency for

the National Pollutant Inventory (NPI) in 2001. This information is

available to the public and provides information on emissions for

NPI listed substances. NPI data submitted for Caltex sites is

available at www.npi.ea.gov.au. Caltex has submitted the 2001

data to the state environmental protection agencies and it is

scheduled for release on the NPI web site in 2002.

0

3

6

9

12

15

1998 1999 2000 2001

Human ResourcesAll major enterprise bargaining agreements at Caltex refineries,

terminals and Sydney airport were renewed during the year. Most

are not scheduled to be renegotiated until 2003, although the

Kurnell operators’ enterprise bargaining agreement will be

renegotiated in 2002.

At the Kurnell refineries in Sydney, the long-running EBA negotiation

with refinery operators was eventually concluded by an arbitration

by the Full Bench of the Australian Industrial Relations Commission

in July 2001. The result supported management directing training

and conducting regular competency assessments of employees,

appointing supervisors and ensuring that employees appointed to

leadership roles are able to be held accountable for their performance

in these roles.

At the Lytton refinery in Queensland, EBA negotiations with both

maintenance and operator employees were concluded without

disruption. Similar agreements were reached with maintenance

groups at Kurnell.

In training programs for 2001, a priority was to continue to build

leadership skills for team leaders and potential first line managers.

A further 51 people from across the company attended a

Leadership for Team Leaders program.

During the year, 55 people attended a company negotiation skills

workshop, which aims to develop skills in business/commercial

negotiations. The program was introduced in 2001 to support

current procurement initiatives to get the best value for the

company’s significant purchases of goods and services.

Fuel Taxation Inquiry

Excise incentives for clean fuels would

facilitate lower air pollution and greenhouse

gas emissions, stimulate investment in

petroleum refining, encourage fuel

innovation and facilitate vehicle

innovation – Caltex submission.

Training at the refineries

One of the initiatives to achieve incident-free

operations is competency testing to refresh

skills of refinery technicians.

Corporate Review continued


A revised induction program for new employees was launched

in August. The two-day program provides a detailed overview of

all areas of the business and an opportunity to meet with senior

managers and visit the Kurnell refineries, the Banksmeadow

Customer Service Centre and a Star Mart convenience store.

Despite a lower share price, there was continued high level of

employee participation in the Caltex Australia Limited Employee

Share Plan, which was in its second year of operation.

A number of appointments to senior positions across the

company during the year helped to improve the company’s

overall “benchstrength”.

ProcurementThroughout 2001, the Strategic Procurement Initiative has

continued to gain support from all areas of the company, resulting

in significant benefits to the business and shareholders. With

a small central team working cooperatively with each of the

business units, a further $10 million in savings and cost avoidance

has been achieved. The key strategy adopted has been the use of

a formalised commercial process using specialised procurement

tools, ongoing training of business owners in the application of

these tools, and motivating suppliers to search for innovative and

cost effective solutions to the issues facing Caltex.

The success of this process within Caltex has been recognised

externally. Two major suppliers who were unsuccessful in their

bid for Caltex’s business have approached Caltex to gain a better

understanding of the Strategic Procurement process so that they

can become ’more innovative and cost effective providers'.

It is intended to further capitalise on this continued success

during 2002, providing additional benefit and support to

company profitability.

Corporate AffairsCaltex continued to lobby strongly for an appropriate regulatory

environment for refining and marketing. A major policy thrust was

for development of a long term Commonwealth industry policy to

support investment in Australian refining. Caltex’s submission to

the fuel taxation inquiry advocated excise incentives for clean

petrol and diesel, a level playing field for conventional and

alternative fuels, and simplification of the administration of fuel

taxation. Lobbying continued on new national fuel standards,

including a ban on MTBE and appropriate regulation of ethanol.

Caltex took a strong stance against excessive marketing regulation,

particularly in Western Australia where rigorous price control

legislation has been passed.

Recognition of students’ success

Megan Stride won the Caltex Best All

Rounder award in 2001 at Duval High School

in Armidale, NSW. More than 97% of all

Australian secondary schools participated in

the Caltex-sponsored program.

(Photo: Armidale Express)

Tree regeneration at Lytton refinery

With the help of the Australian Trust for

Conservation Volunteers, 6,000 native

seedlings are being planted next to the

Lytton refinery in Brisbane to create a natural

habitat for native birds and fauna.

Caltex supports lifesaving clubs in the

areas near its refineries (above)


A new colour magazine for Caltex employees, distributors and

franchisees was launched in June 2001. The Star will be published

six times a year and focuses on Caltex business activities.

Caltex provides contributions and ongoing sponsorships for a

range of community, arts, welfare and education activities. In

addition to contributions to a wide range of local community

organisations close to key company facilities and service stations,

some of the major activities in 2001 included:

Education ● Best All Rounder – Caltex each year invites all secondary

schools around Australia to select a student who is a good all

rounder excelling in many fields. In 2001, 97% of Australia’s

secondary schools participated and the winner from each was

presented with a medallion and certificate from Caltex at the

schools’ presentation night. Winners are also eligible to enter

an essay competition run in conjunction with The Bulletin

magazine where the best entries are published and $500 is

awarded to the school and the student.

● Innovation in Teaching – To encourage innovations in primary

and secondary school education Caltex and the Rotary Club of

Sydney jointly recognise up to three teachers each year who

develop creative programs at their schools. In 2001, three

award-winning teachers from NSW received a return airfare

to visit an agreed school or institution overseas or in Australia

with accommodation and travelling expenses paid.

EnvironmentCaltex sponsors a number of ongoing environmental projects.

Among these is support for National Parks and Wildlife Service

projects in areas surrounding the Kurnell refinery in Sydney. In

Queensland, the Lytton refinery assists the Australian Trust for

Conservation Volunteers, and refinery staff are helping in the work

of revegetating the buffer zone between the refinery and the

adjacent Fort Lytton National Park.

The Arts Caltex supports the Australian Chamber Orchestra and in 2001

sponsored a national tour by Mezzo soprano Bernada Fink.

Starlight FoundationCaltex is a major sponsor of the Starlight Children’s Foundation of

Australia, a non-profit organisation dedicated to brightening the

lives of seriously ill children between the ages of four and 18. In

2001, in addition to a major contribution from the company,

Caltex staff volunteers raised record funds through selling Starlight

merchandise to the public on Star Day in May and a special

“Teams for Dreams” fundraising competition at the end of the

year. A safety incentive program to raise funds during the

planned maintenance shutdown of the Lytton refinery in

October/November also attracted substantial sponsorship

from the company and contractors.

Directors’ Report


TC (Tony) BlevinsBAccounting, BSc

(Stephen F Austin State University)

Managing Director & Chief Executive Officer

Date of birth: 14 November 1943

(Age: 58 years)

Tony was appointed as Chief Executive

Officer in April 2000 and appointed

Managing Director with effect from

20 April 2000.

Tony joined Texaco Inc (now part of the

ChevronTexaco Group) in 1966 and held

several accounting positions with the

company in the USA and Europe. He also

served as the General Accounting Manager,

Downstream at Texaco Inc from 1988 to

1991, and then as Finance Director at

Texaco Limited (UK) from 1991 to 1995.

Tony was the Chief Executive Officer at

Texaco Brazil SA from 1995 to March 2000.

External directorship● Chair of the Australian Institute

of Petroleum.

RFE (Dick) Warburton

Chair, Non-executive director

Date of birth: 14 December 1940

(Age: 61 years)

Dick was appointed as a non-executive

director with effect from 29 July 1999 and

as Chair with effect from the end of the

Annual General Meeting held on 26 April

2001. Dick is the Chair of the Human

Resources Committee and attends

meetings of the Audit & Risk Committee

in an ex-officio capacity.

External directorships● Chair of David Jones Limited, AurionGold

Limited and the Board of Taxation.

● Director of Nufarm Limited, Southcorp

Limited and Tabcorp Holdings Limited.

● Member of the Reserve Bank Board and

the Garvan Research Foundation.

MG (Malcolm) Irving AMBComm (UNSW), Hon. D.Litt (Macquarie)

Non-executive director

Date of birth: 30 October 1929

(Age: 72 years)

Malcolm was appointed as a non-executive

director with effect from 1 December 1990.

Malcolm is the Chair of the Audit & Risk

Committee and a member of the Human

Resources Committee. Malcolm previously

served as Chair of Caltex Australia Limited

from 30 September 1995 to 26 April 2001.

External directorships● Chair of Cabonne Limited, Keycorp

Limited, and a number of other

companies.

Directors’ Report to the membersThe directors of Caltex Australia Limited present this report for Caltex Australia Limited and its controlled entities for the year ended 31 December 2001.

Board of DirectorsThe board of directors of Caltex Australia Limited is currently comprised of Mr Richard (Dick) Warburton (Chair), Mr Tony Blevins (Managing Director & Chief Executive Officer), Mr Malcolm Irving, Mr Leo Lonergan, Mr Ken Watson and Mr Michael Wirth.

Directors’ profiles


LG (Leo) LonerganBSc (Victoria University, New Zealand)


Date of birth: 18 July 1953

(Age: 48 years)

Leo was appointed as a non-executive

director with effect from 1 July 2001,

and is a member of the Audit & Risk

Committee and the Human Resources

Committee. Leo previously served as a

non-executive director of Caltex Australia

Limited from 29 January 1998 to

29 July 1999.

Leo is President, Joint Ventures and New

Business Development at ChevronTexaco

Global Energy Inc (formerly known as

Caltex Corporation) in Singapore. He has

held a number of senior management

positions with companies in the

ChevronTexaco Group.

KT (Ken) WatsonLLB (Sydney), LLM (Virginia)


Date of birth: 6 July 1943

(Age: 58 years)

Ken was appointed as a non-executive

director with effect from 9 February 1996

and is a member of the Audit & Risk

Committee.

Ken is a partner of Minter Ellison, Sydney,

and is admitted to practise as a solicitor in

New South Wales, Victoria and

Queensland.

Memberships● Australian Mining and Petroleum Law

Association.

● Australian and New Zealand Institute

of Insurance and Finance.

MK (Michael) WirthBS (Chemical Engineering) (University

of Colorado)


Date of birth: 5 October 1960

(Age: 41 years)

Michael was appointed as a non-executive

director with effect from 1 July 2001.

Michael is President, Marketing and

Corporate Vice-President at ChevronTexaco

Global Energy Inc (formerly known as

Caltex Corporation) in Singapore. He has

held a variety of refining and marketing

positions with companies in the

ChevronTexaco Group.

Directors’ Report continued


Meetings of DirectorsThe board of directors of Caltex Australia Limited formally met on 11 occasions during the year ended 31 December 2001. In addition,

board papers were circulated to the directors on three other occasions, whilst a separate strategy meeting was held over two days during

the year.

The Audit & Risk Committee and the Human Resources Committee each met on three occasions during the year. Special purpose

committees were convened on two occasions during the year.

The number of directors’ meetings and committee meetings attended by each director are set out in the following table:

Director Board of Audit & Human Resources Special Purpose Directors Risk Committee Committee Committees

Current directorsMr Richard Warburton 11 (11) 3 (3) 3 (3) 1 (1)

Mr Tony Blevins 10 (11) – – – – 1 (1)

Mr Malcolm Irving 10 (11) 3 (3) 2 (3) 2 (2)

Mr Leo Lonergan 5 (5) – – 1 (1) – –

Mr Ken Watson 11 (11) 3 (3) – – 2 (2)

Mr Michael Wirth 5 (5) – – – – – –

Former directorsMr John Banner 6 (6) – – 1 (2) – –

Mr Joseph Bernitt 5 (6) – – – – – –

Mr Robert Bothwell 6 (7) – – – – – –

Mr Desmond Mackney 6 (6) 1 (1) – – – –

Mr Shariq Yosufzai 5 (6) – – – – – –

Note: (1) This table shows the number of meetings attended by each director in the year ended 31 December 2001. The number of meetings heldduring each director’s time in office for the year is shown in brackets.

(2) Mr Johannes (Steve) de Bruyn, who served as an alternate director for Mr Banner, Mr Bernitt and Mr Yosufzai, did not attend any directors’meetings during the year.

Principal ActivitiesThe principal activities of the consolidated entity during the

year were the purchase, refining, distribution and marketing of

petroleum products and the operation of convenience stores

throughout Australia. There were no significant changes in the

nature of the consolidated entity’s activities during the year.

Consolidated ResultThe consolidated net loss after income tax attributable to members

of Caltex Australia Limited for the financial year amounted to

$186,169,000 (2000: net profit after tax $36,062,000).

Review of OperationsFor a detailed review of operations during the year, members

are referred to the Report by Chairman and Managing Director

(pages 3 to 5), Manufacturing and Supply Review (pages 8 to 11).

Marketing Review (pages 12 to 15), Corporate Review (pages 16

to 19), and Corporate Governance Report (pages 26 to 29), which

are included in the Annual Review and form part of the

Directors’ Report.

Appointments and ResignationsDuring the year ended 31 December 2001:

● Mr Leo Lonergan and Mr Michael Wirth were appointed as

directors with effect from 1 July 2001; and

● Mr John Banner, Mr Joseph Bernitt, Mr Desmond Mackney

and Mr Shariq Yosufzai resigned as directors with effect from

1 July 2001. Also, Mr Robert Bothwell resigned as a director

with effect from 27 August 2001.

As a result of the resignations of Mr Banner, Mr Bernitt and

Mr Yosufzai, Mr Steve de Bruyn’s appointment as an alternate

director ended with effect from 1 July 2001. Mr de Bruyn has

subsequently been appointed as an alternate director for

Mr Lonergan and Mr Wirth with effect from 21 February 2002.

On 1 March 2002, Caltex Australia Limited announced that

Mr Tony Blevins had advised the board of Caltex Australia Limited

that he intended to retire. It was also announced that, subject to

the finalisation of terms, Mr Jeet Bindra would be appointed as

the incoming Managing Director & Chief Executive Officer.


Dividends Paid and RecommendedThe following dividends have been paid or declared by Caltex

Australia Limited since the end of the previous financial year:

As proposed and provided for in last year’s annual review:

Final dividend (fully franked at 34%) of

6 cents per share paid on 21 March 2001 $16,200,000

No dividends have been paid or proposed in respect of the current

financial year.

Significant Change in State of AffairsDuring the financial year the directors resolved to write off the

$147.5 million balance of goodwill relating to its purchase of

Pioneer International Limited’s 50% interest in Caltex Australia

Petroleum Pty Ltd (acquired in 1997) due to a deterioration in the

economic conditions when compared to the assumptions upon

which the acquisition was based.

Other than the write-off of goodwill, it is the opinion of the

directors that there were no other significant changes in the state

of affairs of the consolidated entity that occurred during the

financial year under review.

Significant Events after Balance DateThere has not arisen in the interval between the end of the

financial year and the date of this report, any item, transaction or

event of a material or unusual nature likely, in the opinion of the

directors of Caltex Australia Limited, to affect significantly the

operations of the consolidated entity, the results of those

operations or the state of affairs of the consolidated entity

in subsequent financial years.

Likely DevelopmentsThe consolidated entity will continue to purchase, refine, distribute,

and market petroleum products and operate convenience stores

throughout Australia. The directors of Caltex Australia Limited

make no further reference to other likely developments in the

operations of the consolidated entity (or expected results of those

operations) other than disclosed elsewhere in the Annual Review

as such inclusions would, in the opinion of the directors,

unreasonably prejudice the interests of the consolidated entity.

Environmental RegulationsEHS and risk managementThe consolidated entity has business-focused environment, health,

safety (EHS) and risk management systems in place that allow

compliance with Australian laws, regulations and standards.

EHS targets are set and regular reports are prepared that allow

the directors of Caltex Australia Limited to gauge the consolidated

entity’s performance against these targets. In addition to the

directors’ review, the Managing Director, General Managers and

Business Unit Managers meet regularly to critically review EHS and

risk performance and ensure that issues are adequately addressed.

During 2001, EHS audits were carried out by the business units

to ensure compliance with relevant legislation and the standards

imposed by the consolidated entity. These audits found no major

non-compliance issues but did identify areas where opportunity

for improvement existed. Results of all EHS management system

audits along with resultant action items are reported to the Audit

& Risk Committee.

ComplianceFourteen pollution control licences were held by the consolidated

entity in 2001 and they covered the three refineries, eight

terminals and three depots.

Licence conditions were exceeded on seven occasions in 2001

which required notification and reporting to the relevant

Government environmental agency. These breaches have been

investigated and the management team remains committed

to achieving 100% compliance.

Infringements and prosecutionsDuring 2001, there were no prosecutions against the consolidated

entity under Environment, Health and Safety Law.

Strong relationships with regulatory authorities and commitment

to continued improvement of EHS management systems have

contributed to this positive outcome.

Further information regarding the consolidated entity’s EHS

systems and performance can be found in the Corporate Review

on pages 16 to 19 of the Annual Review.

Directors’ InterestsThe relevant interests of each current director of Caltex Australia

Limited in the company’s share capital, as at 31 December 2001,

are shown in the following table:

Director No of shares

Mr Richard Warburton 10,000

Mr Tony Blevins 5,000

Mr Malcolm Irving 25,000

Mr Leo Lonergan 2,000

Mr Ken Watson 7,500

Mr Michael Wirth –

No shares in Caltex Australia Limited have been acquired or

sold by any current director, or by their related entities, since

31 December 2001.

The directors of Caltex Australia Limited do not hold relevant

interests in any other companies in the Caltex Australia Group.

Directors’ Report continued


Emoluments of Directors and Senior ExecutivesDirectorsAt the Annual General Meeting of Caltex Australia Limited held in

March 1998, shareholders approved an annual aggregate amount

of $650,000 for non-executive directors’ fees.

Within this approved aggregate amount, for the year ended

31 December 2001:

● the Chair of Caltex Australia Limited was paid at the annual

rate of $150,000, inclusive of committee fees;

● fees to non-executive directors (other than the Chair) were

paid at the annual rate of $50,000, plus superannuation

guarantee charge (where applicable); and

● non-executive directors (other than the Chair) who served on

the Audit & Risk and Human Resources Committees received

an additional $5,000 for each committee membership, which

increased to $10,000 for each non-executive director who

served as chair of a committee.

Retirement payments to directorsAustralian resident non-executive directors are entitled to a

retirement payment equal to:

● one year’s total emoluments, after three years of service; and

● three year’s total emoluments, after nine years of service.

The retirement benefit accrues on a pro-rata basis between years

three and nine.

Role of the Human Resources CommitteeThe Human Resources Committee is responsible for decisions on

remuneration issues for senior executives of the company.

Remuneration policy is designed to ensure that remuneration for

senior executives is commensurate with the executive’s duties,

responsibilities and accountabilities, and that remuneration is

market-competitive and, therefore, enables the company to attract,

retain and motivate exceptional performers. Remuneration,

particularly incentive-based remuneration, reflects closely the

company’s financial and operational performance. Specifically,

senior executives may receive short-term cash bonuses and longer-

term share-based incentives provided that predetermined goals and

objectives, related to their own performance and the performance

of the company, are achieved.

EmolumentsDetails of the nature and amount of each element of the emoluments of each director of Caltex Australia Limited and each of the five

most highly paid executive officers of Caltex Australia Limited and its controlled entities, are set out below:

Super Non-Cash Retirement

Directors’ Fees Salary Bonus Contributions Benefits Plan Benefits Total

$ $ $ $ $ $ $

Director

Current directors

Mr Richard Warburton 121,666 – – 9,733 – – 131,399

Mr Tony Blevins – 473,940 – – 201,588 – 675,528

Mr Malcolm Irving 93,333 – – – – – 93,333

Mr Leo Lonergan 27,500 – – – – – 27,500

Mr Kenneth Watson 55,000 – – 2,200 – – 57,200

Mr Michael Wirth 25,000 – – – – – 25,000

Former directors

Mr John Banner 27,500 – – – – – 27,500

Mr Joseph Bernitt 25,000 – – – – – 25,000

Mr Robert Bothwell 33,333 – – 2,933 – 50,147 86,413

Mr Desmond Mackney 27,500 – – 2,200 – 109,160 138,860

Mr Shariq Yosufzai 25,000 – – – – – 25,000

Officer

Mr Ken Bania – 342,000 74,976 22,451 2,301 – 441,728

Mr Alex Strang – 327,560 70,246 21,514 2,301 – 421,621

Mr Simon Hepworth – 326,245 69,063 21,415 2,301 – 419,024

Ms Helen Conway – 236,256 45,792 15,462 – – 297,510

Mr Steven Parker – 232,545 45,331 15,023 – – 292,899

Note: Mr Steve de Bruyn, who served as an alternate director for Mr Banner, Mr Bernitt and Mr Yosufzai during the year ended 31 December 2001, did not receive a director’s fee.


Deeds of indemnity and insurance have previously been entered by

Caltex Australia Limited with other current directors and officers,

and with former directors and officers, under which similar

indemnity provisions and insurance obligations apply.

Contract of insuranceThe company has paid or agreed to pay a premium in respect of a

contract insuring the directors and officers of the company against

a liability.

The directors have not included details of the nature of the

liabilities covered or the amount of the premium paid in respect of

the directors’ and officers’ liability, as such disclosure is prohibited

under the terms of the contract.

Rounding of AmountsCaltex Australia Limited is an entity to which ASIC Class Order

[CO 98/100] applies and, in accordance with the class order,

amounts have been rounded off to the nearest thousand dollars,

unless otherwise stated in the 2001 Concise Financial Report and

the 2001 Full Financial Report.

Signed in accordance with a resolution of the board of directors

of Caltex Australia Limited:

Sydney, 22 February 2002

RFE Warburton

Director

TC Blevins

Director

In addition to the emoluments disclosed above, directors and

officers are eligible to receive a discount on private fuel purchases

in line with that available to all employees of the consolidated

entity.

Indemnities and InsuranceDeeds of indemnity and insuranceDuring the year ended 31 December 2001, Caltex Australia Limited

entered into deeds of indemnity and insurance with Mr Leo

Lonergan and Mr Michael Wirth, who were appointed as directors

during the year, and Mr John Willey, who was appointed as a

secretary during the year.

Under the deeds, Caltex Australia Limited has agreed to indemnify

these persons (to the extent permitted by law) on and from the

date of their appointment against:

● liabilities incurred as a director or secretary of Caltex Australia

Limited or a subsidiary (as the case may be), except for those

incurred in relation to the matters set out in section 199A(2)

of the Corporations Act 2001 (Cth); and

● reasonable legal costs incurred in defending an action for a

liability or alleged liability as a director or secretary of Caltex

Australia Limited or a subsidiary (as the case may be), except

for those incurred in relation to the matters set out in section

199A(3) of the Corporations Act 2001 (Cth).

The total liability of Caltex Australia Limited for any single claim

is limited to the company’s total net assets, as disclosed in the

company’s most recently audited accounts prior to the claim.

Caltex Australia Limited has also agreed to effect and maintain,

and pay the premium on, a directors’ and officers’ insurance policy

on terms that are no less favourable than:

● the policies of the directors of Caltex Australia Limited and

its subsidiaries; or

● if there is no policy for the directors of Caltex Australia Limited

and its subsidiaries, policies typically maintained by other

groups of companies that are similar to Caltex Australia

Limited and its subsidiaries.

The obligation to effect and maintain, and pay the premium on,

a policy continues for a period of seven years after the party has

ceased to be a director or secretary (as the case may be).

This policy must not seek to insure against liabilities (other than

for legal costs) arising out of:

● conduct involving a wilful breach of duty in relation to Caltex

Australia Limited or a subsidiary; or

● a contravention of sections 182 or 183 of the Corporations

Act 2001 (Cth).

Corporate Governance


Board of DirectorsRoleCaltex Australia Limited’s Constitution provides that the company’s

business is to be managed by, or under the direction of, the directors,

except for matters that the Constitution, the Corporations Act 2001

(Cth) or the Australian Stock Exchange (ASX) Listing Rules require to

be exercised by the company in general meeting.

Accordingly, the board of directors of Caltex Australia Limited is

responsible for the company’s overall direction and for setting the

strategic, financial and operational goals for the Caltex Australia

Group. The directors are, in turn, accountable to the shareholders

for their stewardship of the company.

The board of directors views its primary responsibility as achieving

long-term value for all of the company’s shareholders. At the same

time, the board is aware that, as a major Australian corporation, and

as one of Australia’s leading oil refining and marketing companies,

it is also important that Caltex Australia Limited is a good

corporate citizen.

The responsibility for daily management of the Caltex Australia

Group is delegated to the Managing Director & Chief Executive

Officer. However, the board closely monitors the performance of

the Caltex Australia Group against the strategic, financial and

operational goals that it sets.

Size and compositionThe Constitution requires that Caltex Australia Limited must have

at least three directors, and no more than 12 directors. The number

of directors in office is determined by the directors within the

minimum and maximum numbers, subject to the constraint that

the number of directors cannot be reduced below the number in

office at that time. The minimum and maximum numbers of

directors may, however, be increased or decreased by the

company’s shareholders in general meeting, subject to the

requirements of the Corporations Act 2001 (Cth).

There are currently six directors of Caltex Australia Limited, five

of whom are non-executive directors. The board of directors

is comprised of Mr Richard Warburton (Chair), Mr Tony Blevins

(Managing Director & Chief Executive Officer), Mr Malcolm Irving,

Mr Leo Lonergan, Mr Ken Watson and Mr Michael Wirth.

Term of appointment of directorsNon-executive directors are typically appointed for a period of

around three years, subject to the rules that apply in relation to

directors who are appointed to fill casual vacancies and the

rotation of directors, as set out in the Constitution and the ASX

Listing Rules.

Introduction

The main corporate governance practices of the Caltex Australia Group are set out,in broad terms, in this report.

Conflicts of interests of directorsUnder the Corporations Act 2001 (Cth), the directors of a company:

● are required to give notice, to each other director, of material

personal interests that they have in matters that relate to the

company’s affairs; and

● may give standing notice of any other matters.

At all meetings of the Caltex Australia Limited board, directors

have the opportunity, as the first agenda item for the meeting,

to disclose details of any interests, conflicts or changes in

circumstances that have arisen since the last meeting.

It is the policy of the board that, in accordance with the Corporations

Act 2001 (Cth), a director who has a material personal interest in

a matter that is being considered by the board must not:

● be present whilst the matter is being considered by the board; or

● vote on the matter.

Related party questionnaireA related party questionnaire is sent at the end of each financial

year to current directors, and to other persons who have served as

directors during the year, to request details of any related party

transactions between the director (including their related entities)

and companies in the Caltex Australia Group to ensure full and

accurate disclosure in Caltex Australia’s financial statements.

Information provided to directorsFor each board meeting, management at Caltex Australia provide

detailed board papers for the directors’ review and consideration,

and regularly attend board meetings to answer any questions

that the directors may have. Directors are free to liaise with

management to obtain any further information they may require.

Legal adviceThe directors have access to the Caltex Australia Legal and

Corporate Secretariat departments to obtain guidance in relation

to legal and corporate governance matters. Directors may also

obtain external legal advice which, subject to board approval,

will be paid for by Caltex Australia Limited.

Access to company books and recordsThe Corporations Act 2001 (Cth) gives directors a right of access to a

company’s financial records at all times. Current and former directors

also have a statutory right of access to inspect a company’s books.

Caltex Australia Limited has formal arrangements in place with its

directors under which they have a similar right of access to the

company’s books.


Director trainingThe Company Secretary & General Counsel arranges for newly

appointed and current directors to attend director training courses

as required.

Board meetingsThe board of directors formally met on 11 occasions during the

year ended 31 December 2001. In addition, board papers were

circulated to the directors on three other occasions when no

meeting was held. One of the board meetings was combined with

a detailed operational review at the Kurnell refinery. The board

also held a separate strategy meeting over two days. Between

meetings, the directors liaise with, and provide advice to,

senior management.

Board CommitteesAudit & Risk CommitteeThe Audit & Risk Committee is currently comprised of three non-

executive directors, Mr Malcolm Irving (Chair), Mr Leo Lonergan

(with effect from 1 January 2002) and Mr Ken Watson.

During the year ended 31 December 2001:

● Mr Richard Warburton served as a member of the Audit &

Risk Committee until 31 December 2001, and as Chair until

26 April 2001. Mr Warburton currently attends meetings in

an ex-officio capacity.

● Mr Irving was appointed as Chair with effect from 26 April 2001

and, before this time, attended meetings in an ex-offico capacity.

● Mr Desmond Mackney served on the committee until 1 July 2001,

when his resignation as a director took effect.

Representatives of the external auditors, KPMG, and Caltex

Australia management also attend committee meetings.

The committee meets at least three times a year.

The Audit & Risk Committee is principally responsible for:

● reviewing the interim and annual financial statements for the

Caltex Australia Group;

● reviewing accounting policies adopted by the Caltex Australia

Group;

● reviewing and assessing the external and internal audits of,

and audit plans for, the Caltex Australia Group, including any

material issues that arise during audits;

● reviewing and assessing the adequacy of the financial controls

for the Caltex Australia Group;

● reviewing and assessing risk management including environment,

health and safety, legal compliance (including compliance with

the ASX Listing Rules), and ethical guidelines; and

● making recommendations to the board of Caltex Australia

Limited in relation to the appointment of external auditors.

Before a committee meeting, the committee members meet with

Caltex Australia’s external auditors, KPMG, in the absence of

management, to provide a forum for issues or concerns (if any) to

be raised free of management influence. Also, the Internal Audit

Manager at Caltex Australia is able to directly approach the Chair

or any member of the Audit & Risk Committee at any time.

Human Resources CommitteeThe Human Resources Committee is currently comprised of

three non-executive directors, Mr Richard Warburton (Chair

with effect from 26 April 2001), Mr Malcolm Irving (who served as

Chair until 26 April 2001) and Mr Leo Lonergan (with effect from

1 July 2001). Mr John Banner also served on the Human Resources

Committee until 1 July 2001, when his resignation as a director

took effect. Caltex Australia management also attend committee

meetings. The committee meets at least twice a year.

The Human Resources Committee is principally responsible for:

● identifying and reviewing, from time to time, the terms of

employment (including remuneration) and performance of

the Managing Director & Chief Executive Officer and senior

management at Caltex Australia;

● monitoring director and employee remuneration

arrangements; and

● monitoring and planning for director and senior management

succession.

In relation to director succession, the committee:

● identifies the skills, experience and personal qualities required

of potential candidates;

● engages external consultants to assist in identifying

appropriate candidates; and

● makes recommendations to the board as to the suitability of

the selected candidates.

Any director who is appointed to the board of Caltex Australia

Limited as a casual vacancy holds office until the end of the next

Annual General Meeting, but is eligible for election at that meeting.

Other committeesOther special purpose directors’ committees are established, as

necessary, to consider specific matters. During the year ended

31 December 2001, special purpose committees were convened

on two occasions.

Remuneration PolicyDirectors’ remunerationAt the Annual General Meeting of Caltex Australia Limited held in

March 1998, shareholders approved an annual aggregate amount

of $650,000 for non-executive directors’ fees. The allocation of

directors’ fees within this aggregate amount was last considered

by the board of Caltex Australia Limited in August 2000. On that

occasion, the board considered independent data from an external

expert when setting the level of fees for non-executive directors to

ensure that remuneration was appropriate given market practice.

28 Caltex Annual Review 2001 28

Corporate Governance continued

On the basis of this data, the board determined that, with effect

from 1 September 2000:

● the Chair would receive a director’s fee of $150,000 per annum,

inclusive of committee fees; and

● directors’ fees for non-executive directors (other than the

Chair), would be paid at the rate of $50,000 per annum,

exclusive of committee fees.

The board also determined that it would not review the level

of directors’ fees again until August 2002.

There has been no change in the quantum of committee fees paid to

directors since April 1998, when committee fees were set at $5,000 for

each committee membership and $10,000 for the chair of a committee.

Retirement payments to directorsAustralian resident non-executive directors are entitled to a

retirement payment equal to:

● one year’s total emoluments, after three years of service; and

● three year’s total emoluments, after nine years of service.

The retirement benefit accrues on a pro-rata basis between years

three and nine.

Senior management remunerationThe Human Resources Committee determines the remuneration

of the Managing Director & Chief Executive Officer and senior

management at Caltex Australia. In broad terms, remuneration is

set by reference to independent data, external professional advice,

the Caltex Australia Group’s circumstances, the skills that

management bring to their positions, and the requirement

to attract and retain high calibre management.

Share Trading PoliciesShare trading guidelinesCaltex Australia has developed guidelines in relation to dealings in

the shares of Caltex Australia Limited by employees of companies

in the Caltex Australia Group. These guidelines have been endorsed

and approved by the board of Caltex Australia Limited, with the

directors also subject to these guidelines.

The guidelines serve as an important notice to employees that,

from time to time, they may have access to information that is not

generally available to the public and could have a material effect on

Caltex Australia Limited’s share price. Employees are reminded that,

when they have access to price sensitive information, the insider

trading provisions of the Corporations Act 2001 (Cth) require that

they must not trade in Caltex Australia Limited’s shares.

To minimise the potential for insider trading, the guidelines suggest

that employees should not trade in Caltex Australia Limited’s shares

except in the period of 30 days following a public announcement of

Caltex Australia’s half yearly and yearly financial results.

Disclosure of share trading by directorsThe board of Caltex Australia Limited is committed to ensuring

that directors’ transactions in the company’s shares are publicly

disclosed within five business days, in accordance with the ASX

Listing Rules.

Each of the current directors has agreed to give details of their

transactions in Caltex Australia Limited’s shares to the company

within three business days of the transaction.

Ethical StandardsCode of ethicsCaltex Australia’s code of ethics, which has been adopted by the

board of Caltex Australia Limited, is designed to provide guidance

to employees of the Caltex Australia Group in dealings with

shareholders, customers, government agencies, the general

public, and each other.

Amongst other principles, Caltex Australia is committed to:

● recognising the essential dignity of each and every person;

● being actively concerned for the well-being of the community

and the environment;

● providing a challenging and safe workplace; and

● ensuring that all relevant laws and accounting procedures are

complied with.

Political donationsIt is the policy of Caltex Australia that political donations not be

made by any company in the Caltex Australia Group.

In accordance with this policy, the Caltex Australia Group did not

make any donations to political parties in the year ended 31

December 2001.

Corporate giftsThe Caltex Australia gift policy provides that an employee must not

accept gifts from customers or suppliers, directly or indirectly, if

these are likely to influence the employee’s judgment or place the

employee in a position of compromise.

Caltex Australia management also discourage the practice of

offering gifts to customers and suppliers.

Other policiesThe board of Caltex Australia Limited has adopted policies in

relation to trade practices compliance, environment, health and

safety, equal opportunity and privacy, to provide guidance to

employees in these areas. The policy in relation to privacy was first

adopted by the board in December 2001 in compliance with the

Privacy Amendment (Private Sector) Act 2000 (Cth), which came

into effect on 21 December 2001.

Corporate SponsorshipsCaltex Australia is a sponsor of a range of community, arts, welfare

and education activities and programs, including the Starlight

Children’s Foundation of Australia, and the Caltex Best All Rounder

and Innovation in Teaching programs.

Caltex Australia views its contributions and sponsorships as long-

term investments in the community. In this way, Caltex Australia

has the opportunity to develop close relationships with community

groups and organisations, and through the positive publicity

associated with these contributions and sponsorships, Caltex

Australia’s public profile and brand recognition is enhanced.


Disclosure of and Access to CompanyInformationHalf yearly and yearly announcementsThe Managing Director & Chief Executive Officer makes two

presentations in relation to the financial performance of the Caltex

Australia Group, including Caltex Australia Limited, in respect of

each financial year.

Results presentations are held in relation to the financial

performance for:

● the half-year to 30 June, around August of that year; and

● the year to 31 December, around February of the following year.

All shareholders, the press and members of the public are welcome

to attend these presentations.

Continuous disclosureCaltex Australia Limited is committed to ensuring that information

that is expected to have a material effect on the price or value of the

company’s shares is immediately notified to the ASX for dissemination

to the market in accordance with the ASX Listing Rules.

Ms Helen Conway, Company Secretary & General Counsel, has

been appointed by the board of Caltex Australia Limited as the

primary person responsible for communications with the ASX in

relation to listing rule matters.

Shareholder access to informationEach year, shareholders in Caltex Australia Limited receive a concise

financial report and a half yearly report. In addition, shareholders

may request a copy of:

● the company’s full financial report, directors’ report and

auditor’s report;

● the company’s Constitution; and

● any minutes of shareholders’ meetings, or extracts from those

minutes.

Shareholders are asked to send their requests in writing to the

Company Secretary, Caltex Australia Limited, Level 12, MLC Centre,

19-29 Martin Place, Sydney New South Wales Australia 2000.

Please note that information about Caltex Australia can be found

at www.caltex.com.au. The Caltex Australia web site, which was

substantially re-designed at the end of 2001, allows shareholders

to access:

● corporate information about Caltex Australia;

● investor relations information, including previous annual

reviews, full financial reports and half yearly financial

information; and

● recent media releases and management addresses to external

bodies.

IndemnitiesThe Constitution of Caltex Australia Limited provides that, to the

extent permitted by law and subject to sections 199A and 199B

of the Corporations Act 2001 (Cth), Caltex Australia Limited

indemnifies every person who is, or has been, an officer of Caltex

Australia Limited or a subsidiary against:

● any liability, other than a liability for legal costs, incurred by

that person as an officer of Caltex Australia Limited or a

subsidiary; and

● reasonable legal costs incurred in defending an action for a

liability or alleged liability incurred by that person as an officer

of Caltex Australia Limited or a subsidiary.

It is the practice of Caltex Australia Limited to enter into deeds of

indemnity with its directors and secretaries.

Internal ControlsThe Caltex Australia Group has established controls at the board,

executive and business unit level that are designed to safeguard the

group’s interests and ensure the integrity of its reporting. These

include accounting, financial reporting, environment, health and

safety and other internal control policies and procedures, which are

directed at ensuring that all companies in the Caltex Australia

Group fully comply with all regulatory requirements and

community standards.

An Internal audit function operates under a charter, which

defines the purpose, authority and responsibility of the Internal

Audit Group. The Group’s mission is to provide an independent

assessment of risk and the effectiveness of the company’s

recommendations are reported on a timely basis to management.

The Caltex Australia Group also has policies relating to interest rate

management, foreign exchange risk management and credit risk

management. Through these and other policies, the company

seeks to minimise the risk that arises through its activities.

Comprehensive practices are in place for ensuring that:

● capital expenditure and revenue commitments above a certain

amount obtain board approval; and

● financial exposures, including the use of derivatives,

are minimised.

Risk Management System The Caltex Australia Group intends to be a high performance,

low risk organisation. A large proportion of the group’s physical risk

comes from exposures associated with the environment, health

and safety. In order to manage these risks in a cost-effective

manner, the group has:

● identified and prioritised the key risks which face the company;

● developed risk management plans to reduce these risks; and

● developed an ongoing set of indicators which are used to

measure and reduce risk in all aspects of Caltex’s operations.

Statement of Financial Performancefor the year ended 31 December 2001


Consolidated

Thousands of dollars Note 2001 2000

Gross sales revenue 7,932,222 8,347,045

Product duties and taxes (3,236,598) (3,441,071)

Net sales revenue 4,695,624 4,905,974

Other revenue from ordinary activities 4 200,779 181,565

Revenue from ordinary activities 4,896,403 5,087,539

Changes in inventories of finished goods and inventory in process (78,659) 67,670

Raw materials and consumables used (3,958,245) (4,252,803)

Employee expenses (180,809) (173,145)

Depreciation and amortisation expenses 5 (272,501) (122,691)

Borrowing costs 5 (91,105) (97,736)

Other expenses (534,156) (449,910)

Share of net profit or loss of associates and joint

ventures accounted for using the equity method 912 1,601

(Loss)/profit from ordinary activities before income tax expense (218,160) 60,525

Income tax benefit/(expense) 32,638 (23,302)

Net (loss)/profit (185,522) 37,223

Net profit attributable to outside equity interest (647) (1,161)

Net (loss)/profit attributable to members of the parent entity (186,169) 36,062

Basic earnings per share (cents per share) 8 (69.0) 13.4

Diluted earnings per share (cents per share) 8 (69.0) 13.4

The statement of financial performance is to be read in conjunction with the discussion and analysis on page 31 and the notes to the concise financial statements.

Concise Financial Report


Discussion and Analysis of the Statement of Financial Performance

● The consolidated entity’s net loss attributable to members

of the parent entity for the year was $186.1 million, down

$222.2 million from the $36.1 million net profit recorded

in 2000.

● The major driver for this result was the dramatic fall in

crude prices during 2001 which saw the price of the regional

benchmark Tapis crude move from US$27.38 per barrel in

December 2000 to US$18.64 per barrel in December 2001.

[A fall in crude prices results in a gap between what the

company paid for its crude inventories and the price refined

products can be sold in the marketplace. The impact is

approximately $20 million less net profit (before tax) for

every US$1 per barrel fall in crude price. In 2001 there was

an inventory loss of $186.1 million (before tax)].

● There were three other significant items which affected the

consolidated entity’s results in 2001. These were:

– the write-off of the $147.5 million balance of goodwill

(nil tax effect) relating to the purchase of Pioneer

International Limited’s 50% interest in Caltex Australia

Petroleum Pty Ltd (acquired in 1997) due to a deterioration

in the economic conditions when compared to the

assumptions upon which the acquisition was based;

– a net profit before tax of $15.5 million ($15.8 million after

tax) arising from the release of obligations with respect to

a vessel chartered by the consolidated entity; and

– full provision made against the $11.4 million debt owed

by Ansett Airlines ($8.0 million after tax).

● Gross sales revenue fell in line with the easing in crude prices

over the year and a lower sales volume year on year.

● Trading profit was also affected by a regional over-supply of

petrol which led to sharp falls in refiners’ margins in the middle

of the year, and by instances of unreliability in the first quarter

at the refineries. However, offsetting this weakness on the

refining side of the business, marketing margins proved to be

extremely robust – showing a significant increase year on year.

● Borrowing costs eased year on year due to improved working

capital management, which led to lower average borrowings

over 2001, and the flow through benefit of interest rate cuts

on the consolidated entity’s net debt.

● Earnings per share decreased to negative 69.0 cents per share

from positive 13.4 cents per share in 2000.

● The return on equity (net profit or loss attributable to members

of the parent entity, after tax excluding significant items, on

parent entity interest in total equity) moved from 3.6% in 2000

to negative 5.7% in the current year.


Statement of Financial Positionas at 31 December 2001


Consolidated


Current assets

Cash assets – 41,711

Receivables 523,146 666,290

Inventories 492,736 562,671

Tax assets 5,738 10,332

Other 24,923 26,366

Total current assets 1,046,543 1,307,370

Non-current assets

Receivables 23,443 28,232

Investments accounted for using the equity method 12,577 11,345

Property, plant and equipment 1,664,534 1,662,458

Intangibles – 158,011

Other 15 15

Total non-current assets 1,700,569 1,860,061

Total assets 2,747,112 3,167,431

Current liabilities

Payables 466,801 632,839

Interest bearing liabilities 228,848 246,616

Provisions 36,891 56,879

Total current liabilities 732,540 936,334

Non-current liabilities

Interest bearing liabilities 1,035,852 1,036,286

Deferred tax liabilities 130,561 159,197

Provisions 26,949 26,480

Total non-current liabilities 1,193,362 1,221,963

Total liabilities 1,925,902 2,158,297

Net assets 821,210 1,009,134

Equity

Contributed equity 543,415 543,415

Reserves – 319,865

Retained profits 9 270,017 136,321

Parent entity interest 813,432 999,601

Outside equity interest 7,778 9,533

Total equity 10 821,210 1,009,134

The statement of financial position is to be read in conjunction with the discussion and analysis on page 33 and the notes to the concise financial statements.



Discussion and Analysis of theStatement of Financial Position

● The consolidated entity’s net assets decreased by

$187.9 million during the year to $821.2 million.

● The consolidated entity’s total assets decreased by 13.3%

during the year to $2,747.1 million due to movements in

three specific asset groups:

– lower receivables on the back of a fall in price of the

regional benchmark Tapis crude (from US$27.38 per

barrel in December 2000 to US$18.64 per barrel in

December 2001);

– lower inventories year on year reflecting the lower crude

price, but offset by higher inventory volumes held to

accommodate the major planned shutdown at Lytton

in the fourth quarter of 2001; and

– the write-off of the $147.5 million balance of goodwill

relating to the purchase of Pioneer International Limited’s

50% interest in Caltex Australia Petroleum Pty Ltd.

● The decrease in payables balance of $166 million (or 26%)

reflects the 32% decline in crude prices year on year, offset by

a further depreciation of the Australian dollar as against the

US dollar.

● Net debt at 31 December 2001 stood at $1,264.7 million, an

increase of $23.5 million from 31 December 2000. As a result,

the consolidated entity’s gearing (borrowings less cash, to

borrowings less cash plus equity) was 60.6%, up from 59.3%

at the end of the prior year (when measured on a comparative

basis, excluding goodwill).

● During 2001, the parent entity transferred all realised capital

profits from the applicable equity reserve into retained profits.

● Net tangible asset backing per share (net assets attributable to

members of the parent entity less intangible assets, on number

of shares in issue) decreased from $3.12 to $3.01.


Statement of Cash Flows for the year ended 31 December 2001


Consolidated


Cash flows from operating activities

Receipts from customers 9,541,226 9,047,513

Payments to suppliers, employees and governments (9,374,411) (8,896,306)

Dividends received 1,080 1,777

Interest received 842 1,254

Interest and other borrowing costs paid (87,542) (100,942)

Income taxes refunded/(paid) 7,719 (56,654)

Net operating cash flows 88,914 (3,358)

Cash flows from investing activities

Purchase of controlled entities, net of cash

acquired – 622

Proceeds from sale of controlled entities 4 655 2,250

Purchases of property, plant and equipment (90,200) (80,557)

Maintenance and shutdown expenditure capitalised (43,854) –

Proceeds from sale of property, plant and equipment 4 24,649 23,001

Proceeds from sale of intangibles 4 17,000 –

Proceeds from sale of investments 4 – 120

Purchases of operating licences and goodwill (2,003) (1,295)

Loans to associates – (7,100)

Net investing cash flows (93,753) (62,959)

Cash flows from financing activities

Proceeds from borrowings 6,195,000 8,127,000

Repayments of borrowings (6,221,000) (7,963,300)

Repayments of finance lease principal (2,896) (2,500)

Dividends paid (16,200) (64,800)

Net financing cash flows (45,096) 96,400

Net (decrease)/increase in cash held (49,935) 30,083

Cash at the beginning of the year 41,711 11,628

Cash at the end of the year (8,224) 41,711

The statement of cash flows is to be read in conjunction with the discussion and analysis on page 35 and the notes to the concise financial statements.



Discussion and Analysis of the Statement of Cash Flows

● Net operating cash flows in 2001 were positive in spite of the

consolidated entity reporting a book loss for the year. This

resulted from lower crude prices decreasing the working

capital requirements of the business. Operating expenses

were in line with those for the prior year. Interest and other

borrowing costs eased year on year due to improved working

capital management, which led to lower average borrowings

over 2001, and to the benefit of interest rate cuts on the

consolidated entity’s net debt.

● Capital expenditure for the year was $90.2 million with the

focus on developing a consolidated retail network under

the Caltex delta image, yield and risk improvements at the

refineries, and information technology and environmental

projects. A further $43.9 million was outlaid on maintenance

and shutdown expenditure for:

– the one-in-ten year total steam shutdown at the Lytton

Refinery in Brisbane;

– ship maintenance payable by Caltex under shipping

contracts; and

– other qualifying maintenance expenditure.

There was also a $17 million inflow arising on a transaction

which released Caltex from obligations with respect to a vessel

chartered by the consolidated entity.

● Dividend payments in 2001 were down on 2000 as no dividend

was declared in relation to the 2001 year. While there were

adequate operating cash flows, there were insufficient

earnings to justify a distribution.


Notes to the Concise Financial Statementsfor the year ended 31 December 2001


1 Basis of preparation of concise financial reportThe concise financial report has been prepared in accordance

with the Corporations Act 2001, Accounting Standard AASB 1039

“Concise Financial Reports” and applicable Urgent Issues Group

Consensus Views. The financial statements and specific

disclosures required by AASB 1039 have been derived from the

consolidated entity’s full financial report for the year. Other

information included in the concise financial report is consistent

with the consolidated entity’s full financial report. The concise

financial report does not, and cannot be expected to, provide as

full an understanding of the financial performance, financial

position and investing and financing activities of the

consolidated entity as the full financial report.

It has been prepared on the basis of historical cost and except

where stated, does not take into account changing money

values or current valuations of non-current assets.

These accounting policies have been consistently applied by

each entity in the consolidated entity and, except where there

is a change in accounting policy, are consistent with those of

the previous year.

A full description of the accounting policies adopted by the

consolidated entity may be found in the consolidated entity’s

full financial report.

2 Reclassification of financial informationSome line items reported in the previous year have been

reclassified and repositioned in the financial statements as

a result of the first time application on 1 January 2001 of

the revised standards AASB 1018 “Statement of Financial

Performance”, AASB 1034 “Financial Report Presentation and

Disclosures” and the new AASB 1040 “Statement of Financial

Position”.

The following assets and liabilities have been removed from

previous classifications and are now disclosed as separate line

items on the face of the statement of financial position:

● “Investments accounted for using the equity method”,

previously presented within “non-current investments”;

● “Tax assets” as a current asset, previously presented within

“current receivables”; and

● “Deferred tax liabilities”, previously presented within

“non-current provisions”.

3 Change in accounting policyThe consolidated entity applied AASB 1041 “Revaluation

of Non-Current Assets” for the first time from 1 January 2001.

This did not result in any change to the consolidated entity’s

accounting policies, as the carrying amounts of all non-current

assets are valued on a cost basis and are reviewed at least

annually to determine whether they are in excess of their

recoverable amount. If the carrying amount of a non-current

asset exceeds the recoverable amount, the asset is written

down to the lower value. In assessing recoverable amounts,

the relevant cash flows have not been discounted.



Consolidated

Thousands of dollars 2001 2000

4 Other revenue From operating activities

Interest received or due and receivable from:

Other corporations 842 1,254

Rental income 38,501 45,196

Royalties and franchise income 54,642 46,014

Other income 64,490 63,730

From outside operating activities

Proceeds from the sale of property, plant and equipment 24,649 23,001

Proceeds from sale of intangibles (a) 17,000 –

Proceeds from sale of controlled entities 655 2,250

Proceeds from sale of investments – 120

200,779 181,565

(a) During the year, Caltex agreed to be released from its obligations with respect to a vessel chartered by the consolidated entity.

The proceeds on this transaction were $17 million, and the net profit after tax was $15.8 million.

5 Costs and expenses Cost of goods sold 4,361,586 4,418,613

Borrowing costs:

Interest paid or due and payable to:

Other corporations and persons 89,036 95,761

Finance charges on capitalised leases 2,069 1,975

91,105 97,736

Depreciation of:

Freehold buildings 8,276 8,308

Plant and equipment 99,474 96,641

107,750 104,949

Amortisation of:

Leasehold property 5,632 5,640

Leased plant and equipment 743 722

Intangibles 158,376 11,380

164,751 17,742

Total depreciation and amortisation 272,501 122,691

Operating leases rental expense 78,332 74,267

Finance lease contingent rentals 401 58

Net expense from movement in provision for:

Bad and doubtful debts 15,580 3,953

Employee entitlements 1,610 (2,483)

Net foreign exchange losses 23,928 43,592

Loss on disposal of non-current assets 473 533

Notes to the Concise Financial Statementsfor the year ended 31 December 2001


Notes to the Concise Financial Statementsfor the year ended 31 December 2001 – continued


6 Individually significant items There were three significant items which affected the consolidated entity’s results in 2001. These were:

(a) The directors resolved to write-off the $147.5 million balance of goodwill relating to the purchase of Pioneer International Limited’s

50% interest in Caltex Australia Petroleum Pty Ltd (acquired in 1997) due to a deterioration in the economic conditions when

compared to the assumptions upon which the acquisition was based (nil tax effect);

(b) A net profit before tax of $15.5 million arising from the release of obligations with respect to a vessel chartered by the consolidated

entity ($15.8 million after tax); and

(c) Full provision has been made against the $11.4 million debt owed by Ansett Airlines ($8.0 million after tax).

Consolidated

Thousands of dollars 2001 2000

7 DividendsDividends paid and proposed

Dividends provided for or paid by the parent entity are:

No final dividend has been declared (2000: 6 cents per share, fully franked at 34%) – 16,200

No interim dividend was paid (2000: 10 cents per share, fully franked at 34%) – 27,000

– 43,200

8 Earnings per shareBasic earnings per share (cents per share) (69.0) 13.4

Diluted earnings per share (cents per share) (69.0) 13.4

Weighted average number of ordinary shares used in the calculation of earnings per share was 270 million

(2000: 270 million shares).

9 Retained profits Retained profits at the beginning of the year 136,321 143,459

Net (loss)/profit attributable to members of the parent entity (186,169) 36,062

Transfer of realised capital profits from reserve to retained profits 319,865 –

Dividends – (43,200)

Retained profits at the end of the year 270,017 136,321

10 Total equity reconciliation Total equity at the beginning of the year 1,009,134 1,016,225

Total changes in parent entity interest recognised in the statement of financial performance (186,169) 36,062

Dividends – (43,200)

Total changes in outside equity interest (1,755) 47

Total equity at the end of the year 821,210 1,009,134

11 Contingent liabilitiesThe details and estimated maximum amounts of contingent liabilities (for which no provisions are included in the financial report) are

set out below. The directors are not aware of any circumstance or information which would lead them to believe that these liabilities

will crystallise and consequently no provisions are included in the financial report in respect of these matters.

(a) Legal and other claims 2,000 2,000



Notes to the Concise Financial Statementsfor the year ended 31 December 2001 – continued

(b) Bank guarantees

The parent entity has granted indemnities to banks to cover

bank guarantees given on behalf of controlled entities to

a maximum exposure of $8,460,000 (2000: $7,518,000).

At 31 December 2001, the total outstanding was $2,506,000

(2000: $3,429,000).

(c) Class order relief

Pursuant to ASIC Class Order 98/1418, relief has been granted

to certain of the parent entity’s wholly owned controlled

entities as listed in note 28 of the full financial report from

specific accounting and financial reporting requirements.

(d) Environmental matters

In addition to the environmental exposures already provided for

in the financial statements in accordance with the consolidated

entity’s accounting policy, the consolidated entity may be

subject to contingent liabilities as a result of environmental

laws that at some time in the future may require the

consolidated entity to take action to correct the environmental

effect of past disposal or release of petroleum substances by

the consolidated entity or by others. The amount of future cost

is indeterminable due to such factors as the unknown nature

of new laws, the magnitude of possible contamination, the

unknown timing and extent of corrective factors that may be

required, the determination of the consolidated entity’s

possible liability in proportion to other possible responsible

parties and the extent to which such costs are recoverable

from insurers.

The consolidated entity is a member of the Cristal Fund and the

International Oil Pollution Compensation Fund and as such may

be called upon to meet a share of the cost of future claims

made to the two funds. There are no calls outstanding which

the consolidated entity has not provided for and there is no

indication of when future claims will occur or the amount of

future claims.

(e) Merger warranties

In connection with the merger of its former petroleum and

marketing business with that of Ampol Limited in 1995, the

parent entity gave certain warranties regarding the financial

position of its refining and marketing subsidiaries and entered

into a tax indemnity deed and an environmental indemnity

deed. The Tax Indemnity Deed between Pioneer International

Limited (Pioneer), the parent entity and Caltex Australia

Petroleum Pty Ltd entered into at the time of the merger

continues in force and other merger agreements have been

either terminated or varied as appropriate.

There are no existing claims under these warranties and the

directors are not aware of any potential claims likely to emerge

in the future.

Pioneer entered into a deed with the parent entity on

31 December 1997 under which Pioneer undertook to be

liable for one-half of any tax, environmental and third party

liability of any company in the Caltex Australia Petroleum

Pty Ltd consolidated entity arising out of the conduct of its

business in the period from 1 January 1995 to the date of

completion (31 December 1997) which has not been paid

or adequately provided for in the Caltex Australia Petroleum

Pty Ltd accounts to the extent that the amount of such

liabilities (after recoveries) exceeds $2.5 million. Pioneer’s

obligation will apply for seven years for tax liabilities, eight

years for environmental liabilities and two years for third party

liabilities as from 31 December 1997. Pioneer’s maximum

potential liability under this deed is one-half of the net assets

of the Caltex Australia Petroleum Pty Ltd consolidated entity

as at 31 December 1997.

(f) Contingent consideration amounts

Part of the consideration for the acquisition by the parent

entity of the remaining 50% interest in Caltex Australia

Petroleum Pty Ltd at 31 December 1997 comprised a

contingent consideration amount in respect of each of the

five years ending 31 December 1998 to 2002. This amount

is calculated on the following basis:

● a maximum payment in each of the five years of $12 million

will be payable if the Caltex Australia Petroleum Pty Ltd

consolidated earnings before interest and tax after certain

adjustments (EBIT) equals or exceeds the high benchmark

set for that relevant year;

● no payment will be made in any year if EBIT equals or

is below the relevant low benchmark in that year; and

● if the EBIT in any of the five years is between the relevant

high and low benchmarks, the contingent consideration

amount will be calculated on a straight line pro-rata basis.

No amount has been provided for future years in respect of

this contingent consideration in these financial statements

(2000: nil).

12 Segment reportThe consolidated entity operates within one geographic region

– Australia. The consolidated entity’s activity is in the oil

industry through the purchase, refining, distribution and

marketing of petroleum products and the operation of

convenience stores.


Audit Report Directors’Declaration


Independent audit report on Concise Financial Reportto the members of Caltex Australia Limited

ScopeWe have audited the Concise Financial Report of Caltex Australia

Limited (“the parent entity”) and its controlled entities for the

financial year ended 31 December 2001, consisting of the

statement of financial performance, statement of financial

position, statement of cash flow, accompanying notes 1 to 12,

and the accompanying discussion and analysis on the statement

of financial performance, statement of financial position and

statement of cash flows set out on pages 30 to 40 in order to

express an opinion on it to the members of the parent entity.

The parent entity’s directors are responsible for the concise

financial report.

Our audit has been conducted in accordance with Australian

Auditing Standards to provide reasonable assurance whether the

concise financial report is free of material misstatement. We have

also performed an independent audit of the full financial report

of Caltex Australia Limited and its controlled entities for the year

ended 31 December 2001. Our audit report on the full financial

report was signed on 22 February 2002, and was not subject to

any qualification.

Our procedures in respect of the audit of the concise financial

report included testing that the information in the concise

financial report is consistent with the full financial report and

examination, on a test basis, of evidence supporting the amounts,

discussion and analysis, and other disclosures which were not

directly derived from the full financial report. These procedures

have been undertaken to form an opinion whether, in all material

respects, the concise financial report is presented fairly in

accordance with Accounting Standard AASB 1039 “Concise

Financial Reports” issued in Australia.

The audit opinion expressed in this report has been formed on the

above basis.

Audit opinionIn our opinion the concise financial report of Caltex Australia

Limited and its controlled entities for the year ended 31 December

2001 complies with AASB 1039 “Concise Financial Reports”.


In the opinion of the directors of Caltex Australia Limited, the

accompanying concise financial report of the consolidated entity,

comprising Caltex Australia Limited and its controlled entities for

the year ended 31 December 2001, set out on pages 30 to 39:

(a) has been derived from the full financial report for the

financial year; and

(b) complies with Accounting Standard AASB 1039

“Concise Financial Reports”.

Signed in accordance with a resolution of the board of directors:


RFE Warburton

Director

TC Blevins

Director

SA Gatt

Partner

KPMG



Comparative Financial Information

Caltex Australia Limited1 Consolidated Results

2001 2000 1999 1998 21997

Profit and Loss ($m)

Net profit before significant items, interest and tax 14.6 155.8 216.7 198.2 42.0

Interest income 0.8 1.3 1.4 0.8 8.4

Interest expense (91.1) (97.7) (72.8) (70.2) (7.0)

Income tax expense before significant items 29.3 (23.3) (59.0) (49.5) (1.5)

Net (loss)/profit after tax and before significant items (46.4) 36.1 86.3 79.3 41.9

Significant items (net of tax) (139.7) – 16.3 – (193.8)

Net (loss)/profit after income tax (186.1) 36.1 102.6 79.3 (151.9)

Dividends

Amount paid and payable ($/share) – 0.16 0.22 0.22 0.18

Times covered (excluding significant items) – 0.84 1.45 1.34 1.29

Other data

Equity attributable to members of the parent entity ($m) 813.4 999.6 1,006.7 960.7 4941.4

Total equity ($m) 821.2 1,009.1 1,016.2 969.4 950.9

Return on equity attributable to members of the

parent entity after tax, excluding significant items (%) (5.7) 3.6 8.6 8.3 36.8

Total assets ($m) 2,747.1 3,167.4 2,974.1 2,721.8 42,894.7

Net tangible asset backing ($/share) 3.01 3.12 3.10 2.89 42.78

Debt ($m) 1,264.7 1,282.9 1,118.6 1,168.0 4972.6

Net debt ($m) 1.264.7 1,241.2 1,106.9 1,152.4 929.0

Net debt to net debt plus equity (%) 60.6 555.2 52.1 54.3 49.4

1 Caltex Australia Limited (CAL) owned 50% of Caltex Australian Petroleum Pty Ltd (CAPPL) (then known as Australian Petroleum Pty Ltd) up until 31 December 1997 when it acquired the remaining 50%. Prior to 31 December 1997, CAL only recognised dividend income from CAPPL. For comparativepurposes, in this document references to 1997 financial data relate to CAL, while references to 1997 operational and sales data relate to CAPPL.

2 Earnings included 50% interest in CAPPL.

3 Calculated on figures excluding the issue of shares to Pioneer International Limited in partial consideration of the purchase of its interest in CAPPL.

4 Consolidation of 100% ownership of APPL on 31 December 1997.

5 Gearing at 31 December 2000 was 59.3% when measured excluding goodwill. Therefore four-fifths of the year on year movement between 2000 and2001 arose as a result of the write-off of the $147.5 million balance of goodwill in 2001.

Replacement Cost of Sales Basis of Accounting


● To assist in understanding the group’s operating performance, the directors have provided additional disclosure of the group’s results

for the year on a replacement cost of sales basis1, which excludes net inventory gains and losses.

● On a replacement cost of sales basis, the group’s net profit after income tax for the year was $83.7 million, compared to a profit of

$9.5 million in 2000.

● 2001 net profit before significant items, interest and income tax on a replacement cost of sales basis was $200.9 million, an increase of

$85 million over 2000.

Cumulative Five years 22001 22000 21999 21998 31997

Historic cost net profit before interest,

income tax and significant items 786.1 14.8 155.8 216.7 198.2 200.6

Add/(deduct) inventory losses/(gains)4 176.2 186.1 (40.1) (144.9) 100.1 75.0

Replacement cost net profit before interest,

income tax and significant items 962.3 200.9 115.7 71.8 298.3 275.6

Net interest expense (422.7) (90.3) (96.5) (71.4) (69.4) (95.1)

Historical cost tax expense (114.0) 28.9 (23.3) (28.9) (49.5) (41.2)

Add/(deduct) tax effect of inventory (losses)/gains (53.0) (55.8) 13.6 52.2 (36.0) (27.0)

Replacement cost profit after income tax 5 372.6 83.7 9.5 23.7 143.4 112.3

1 Caltex Australia Limited’s results are signifcantly impacted by external factors such as crude oil price movements. Such price movements are outside thecontrol of the company. As a general rule using the historic cost basis of accounting, rising crude prices will result in increased profit for Caltex, fallingcrude prices will result in decreased profit. This movement in profit, often referred to as an inventory gain or loss, can create large variations in Caltex’sresults as calculated by the historic cost method. Consequently, in order to provide a better insight into the operating performance of the company, CaltexAustralia Limited’s financial reporting includes earnings on a replacement cost of sales basis. Replacement cost of sales earnings exclude inventory gainsand losses and are calculated by restating cost of sales using the replacement cost of goods sold rather than the historic cost.

2 Caltex Australia Limited.

3 Caltex Australia Petroleum Pty Ltd (formerly Australian Petroleum Pty Ltd).

4 Historic cost results include gross inventory gains or losses from the movement in crude oil prices. In 2001, the historical cost result includes $186.1 million in inventory losses (2000: $40.1 million in inventory gains). Net inventory gain/(loss) is adjusted to reflect impact of revenue lags.

5 Replacement cost profit after income tax is calculated before taking into account any significant items over the five years. The total effect of thesesignificant items in each year was:

1997: $36.1 million profit before tax ($23.1 million after tax);

1998: no significant items;

1999: $21.6 million loss before tax ($13.8 million loss after tax);

2000: no significant items; and

2001: $143.4 million loss before tax ($139.7 million loss after tax).


Shareholder Information

Shareholder EnquiriesShareholders with queries about their shares or dividend

payments should contact the company’s share registry on

telephone 02 8234 5222 or facsimile 02 8234 5050, or through

its web site www.computershare.com using their holder

identification number or shareholder reference number to

access their shareholder specific information, or write to:

Computershare Investor Services Pty Limited

GPO Box 7045

Sydney NSW 1115.

All enquiries should include a shareholder reference number

which is recorded on the holding statement.

Dividend PolicyThe board aims to maintain a consistent pattern of dividend

payments in line with the sustainable earnings of Caltex Australia

Limited. The levels of dividend and franking credits depend on a

number of factors including the company’s profitability, available

cash flows and taxation position.

Payment of DividendsAustralian shareholders are encouraged to have dividends paid

directly into a bank, building society or credit union account in

Australia to facilitate receipt on payment date. A form for this

purpose, or for advising a change of account details, is included

with this mailout, or is available from the company’s share registry.

Change of AddressShareholders on the issuer sponsored sub-register who have

changed their address should notify the company’s share registry

in writing. CHESS holders should notify their controlling sponsor.

Caltex Australia PublicationsThe company’s Annual Review (including concise financial report)

which is published in March each year is the main source of

information for shareholders. Shareholders who do not wish to

receive an Annual Review or half yearly report should notify the

company’s share registry in writing. Alternatively, shareholders

who have previously requested not to receive an Annual Review

may now wish to change their election and receive an Annual

Review by notifying the company’s share registry in writing.

Shareholders can also receive the full financial report by notifying

the company’s share registry.

Voting RightsThe share capital of Caltex Australia Limited is comprised of

270 million fully paid ordinary shares.

Shareholders in Caltex Australia Limited have a right to attend and vote

at all general meetings, in accordance with the company’s Constitution,

the Corporations Act 2001 (Cth) and the ASX Listing Rules.

At a general meeting, individual shareholders may vote their

shares in person or by proxy. A corporate shareholder may vote its

shares by proxy or through an individual who has been appointed

as the company’s body corporate representative. Shareholders with

at least two shares may appoint up to two proxies to attend and

vote at a general meeting on their behalf.

If shares are held jointly and two or more of the joint shareholders

purport to vote, the vote of the shareholder named first in the

register will be counted, to the exclusion of the other joint

shareholder or shareholders.

Shareholders who are entitled to vote at the meeting should

note that:

● on a poll, each shareholder has one vote for each share they

hold; and

● on a show of hands, each shareholder has one vote. If the

shareholder has appointed a proxy, the proxy may vote but,

if two proxies have been appointed, neither proxy may vote.

For a complete analysis of shareholders’ voting rights, it is

recommended that shareholders seek independent legal advice.

Stock Exchange ListingThe company’s shares are listed on the Australian Stock Exchange.

General EnquiriesThe Manager, Investor Relations 02 9250 5595 or the Company

Secretary’s office 02 9250 5481 are always available to deal with

other enquiries during business hours.

Shareholder Information continued


1.4 The shareholding is distributed as follows:

No of Holders No of Shares %

a)

1 – 1,000 15,798 9,298,727 3.45

1,001 – 5,000 10,894 29,393,338 10.89

5,001 – 10,000 1,997 15,804,523 5.85

10,001 – 100,000 1,162 27,233,577 10.09

100,001 – over 56 188,269,835 69.73

29,907 270,000,000 100.00

b) There are 3,555 shareholders holding less than a marketable parcel of shares in the company.

1.5 The 20 largest shareholders held 67.52% of the ordinary shares in the company.

1.6 The 20 largest holders of ordinary shares, the number of ordinary shares and the percentage of capital held by each are as follows:

No of Shares %

1 ChevronTexaco Global Energy Inc 135,000,000 50.00

2 RBC Global Services Australia Nominees Pty Limited 14,582,196 5.40

3 Rubicon Nominees Pty Ltd 8,608,436 3.19

4 National Nominees Ltd 5,670,345 2.10

5 Westpac Custodian Nominees Ltd 4,108,593 1.52

6 AMP Life Limited 2,806,824 1.04

7 ANZ Nominees Limited 1,465,254 0.54

8 AMP Nominees Pty Ltd 1,391,257 0.52

9 Chase Manhattan Nominees Ltd 1,374,801 0.51

10 Commonwealth Custodial Services Limited 1,169,768 0.43

11 Citicorp Nominees Pty Limited 966,772 0.36

12 S H Kam Investment Pty Ltd 800,000 0.30

13 AA Brofay Pty Limited 645,717 0.24

14 Equipart Nominees Pty Ltd 636,983 0.24

15 Transport Accident Commission 616,438 0.23

16 Fortis Clearing Nominees Pty Ltd (SGAEL Custodian Account) 568,037 0.21

17 Chemical Trustee Limited 500,000 0.19

18 Ms Pamela Margaret Ryan 500,000 0.19

19 Guardian Trust Australia Ltd (Meridian Account) 479,723 0.18

20 Questor Financial Services Ltd (TPS RF Account) 355,297 0.13

General InformationThe following additional information is furnished as required

by Listing Rule 4.10 of the Australian Stock Exchange:

1 As at 31 January 2002:

1.1 Substantial shareholders: ChevronTexaco Global Energy Inc holding 135,000,000 ordinary shares.

1.2 There is only one class of equity securities (namely fully paid ordinary shares) and the number of holders is 29,907.


2 Company Secretaries: Ms Helen Conway, Mr John Willey.

3 The address and telephone of the registered office is:

Level 12, MLC Centre, 19-29 Martin Place Sydney NSW 2000

Telephone 02 9250 5000 Facsimile 02 9250 5742

with the postal address being GPO Box 3916, Sydney NSW 2001

Web site www.caltex.com.au

4 The address at which the register of shares (being the only securities on issue) is kept is:

Computershare Investor Services Pty Limited

Level 3, 60 Carrington Street, Sydney NSW 2000

Telephone 02 8234 5222 Facsimile 02 8234 5050

with the postal address being GPO Box 7045, Sydney NSW 1115

Web site: www.computershare.com

Financial Calendar

Financial Calendar for Caltex Australia LimitedYear ended 31 December 2001

Annual General Meeting 2 May 2002

Year ending 31 December 2002*

Half year results and interim dividend announcement 30 August 2002

Record date for interim dividend entitlement 18 September 2002

Interim dividend payable 2 October 2002

Full year results and final dividend announcement 21 February 2003

Record date for final dividend entitlement 12 March 2003

Final dividend payable 26 March 2003

Notice of Annual General Meeting and

2002 Annual Review 2002 mailed 26 March 2003

Annual General Meeting 1 May 2003

* These dates are tentative and may be subject to change.


Statistical Information

Year ended 31 December 2001 2000 1999 1998

People

Employees 11,558 11,469 11,610 11,680

Assets

Fuels refineries 2 2 2 2

Lube oil refinery 1 1 1 1

Lube blending plants – – – 3

Road tankers 27 27 34 36

Rail cars (operational) 68 68 68 68

Storage terminals (owned or leased, and operational) 11 11 11 13

Star Mart convenience stores 174 166 138 110

Service stations (owned or leased) 651 658 777 915

Depots 126 127 130 140

Operations

Nameplate refining capacity (barrels per day):

Caltex Refineries (NSW) Pty Ltd 124,500 124,500 124,500 116,700

Caltex Refineries (Qld) Ltd 105,500 105,500 105,500 104,000

Caltex Lubricating Oil Refinery Pty Ltd 3,750 3,750 3,750 3,750

Fuel production (ML) 11,045 10,928 10,908 11,050

Lubes production (ML) 169 186 167 161

Total sales volumes (ML) 11,669 12,257 11,881 11,908

(LTIFR) (lost time injury frequency rate) 1.8 2.6 0.9 2.2

1 Excludes employees of Calstores Pty Ltd (1,257) and Caltex 100% owned distributors (119).


Directory


Corporate OfficesCaltex Australia LimitedABN 40 004 201 307

Level 12, MLC Centre

19-29 Martin Place

Sydney NSW 2000

Australia

Mail GPO Box 3916

Sydney NSW 2001

Australia

Telephone: 02 9250 5000

Facsimile: 02 9250 5742

Web site: www.caltex.com.au

Share RegistryComputershare Investor Services Pty Limited

GPO Box 7045

Sydney NSW 1115

Australia

Tollfree: 1300 850 505

(enquiries within Australia)

Telephone: 61 3 9611 5711

(enquiries outside Australia)

Facsimile: 02 8234 5050

Web site: www.computershare.com

RefineriesCaltex Refineries (Qld) LtdABN 46 008 425 581

South Street

Lytton Qld 4178

Telephone: 07 3362 7555

Facsimile: 07 3362 7111

Environmental hotline: 1800 675 487

Caltex Refineries (NSW) Pty LtdABN 19 000 108 725

Solander Street

Kurnell NSW 2231

Telephone: 02 9668 1111

Facsimile: 02 9668 1188

Community hotline: 02 9668 1244

Caltex Lubricating Oil Refinery Pty LtdABN 44 000 352 205

Sir Joseph Banks Drive

Kurnell NSW 2231

Telephone: 02 9668 1111

Facsimile: 02 9668 1188

Marketing OfficesNew South WalesCaltex Banksmeadow Terminal

Penrhyn Road

Banksmeadow NSW 2019

Telephone: 02 9695 3600

Facsimile: 02 9666 5737

Queensland/Northern TerritoryCaltex Lytton Terminal

Tanker Street, off Port Drive

Lytton Qld 4178

Telephone: 07 3877 7333

Facsimile: 07 3877 7464

Victoria/South Australia/TasmaniaCaltex Newport Terminal

Douglas Parade

Newport Vic 3015

Telephone: 03 9287 9555

Facsimile: 03 9287 9572

Western AustraliaCaltex Fremantle Terminal

85 Bracks Street

North Fremantle WA 6159

Telephone: 08 9430 2888

Facsimile: 08 9335 3062

Customer SupportFeedback Line (complaints,

compliments and suggestions) 1800 240 398

Mon-Fri 8.30am to 5.00pm (EST)

Card Support Centre 1300 365 096

Card enquiries 24 hours/seven days

Lubelink 1300 364 169

Mon-Fri 8.00 am to 6.00 pm (EST)

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Documents

Caltex Australia Limited ACN 004 201 307 Annual Review 2001