Another factor that could affect margins would be the extra refining capacity expected to come online in China and India this year.
“This means that Asia’s supply and demand, at least for a while, will be in balance,” Mr King said.
Shares in the refiner slumped 93c or 7 per cent to $12.38, after it warned that its pre-tax earnings would take another $30 million to $35 million hit this quarter from two “unplanned maintenance pit stops” of its Kurnell and Brisbane refineries.
This comes on top of the $40 million to $50 million hit the company has already taken from “unplanned refinery outages” in the first quarter of this year.
The refiner reported a $131 million profit before tax and interest for the first quarter, down $67 million on the previous corresponding period.
The only good news was that refining margins in the period were 7.2c a litre, down from 7.6c 12 months earlier, despite the strong appreciation in the Australian dollar.
“Our stated guidance for production to be in line with 2007 is still achievable. However, we may continuously choose to reduce production should margins not outweigh the working capital costs,” Mr King said.
Given the high cost of oil, he said a fall in margins might not justify the cost of Caltex stocking big amounts of unrefined product.
Meanwhile, Caltex’s new chairwoman, Elizabeth Bryan, faced her first grilling from shareholders.
The biggest complaint they raised was the company’s relatively low dividend pay-out ratio, which last financial year was slightly more than 50 per cent of Caltex’s net profits.
Ms Bryan said the company’s reduced final dividend for last year and pay-out ratio were in recognition that Caltex operated in a cyclical industry.
As for the $200,000 increase in the board’s remuneration pool to $1.6 million a year, Ms Bryan said it was “considered appropriate in the interests of board continuity and succession”.
One shareholder expressed disgust that the board and management of Caltex should be afforded hefty pay increases while shareholders saw the value of their shares continue to fall.
Des King’s base pay in the 2008 year increased 50 per cent to $1.4 million.
Caltex shares have halved in value during the past 12 months.