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Two Large Companies Support Service Stations Achieving Reasonable Margins, Despite ACCC Criticism

Caltex Australia (CTX) chief executive Julian Segal has hit back at competition watchdog accusations of petrol price gouging, saying increased regulation has raised the cost of operating individual service stations, with compliance sometimes requiring an extra $1 million of investment not reflected in the margins.

If the industry was forced into lower margins and petrol stations were to remain open, safety standards would need to drop, he says.

The defence of the sector came as Caltex delivered underlying profit at the upper end of guidance and confirmed it was investigating a rebranding and company name change in the next 12 to 18 months to go with the rollout of radically different pilot convenience stores.

Mr Segal said the Australian retail fuel market remained 'very, very competitive'.

'You are talking about sites that have to handle hazardous substances and the level of regulation, rightly so, is significantly higher as time goes by,' Mr Segal said.

'Compliance with these kinds of regulations costs up to $1m of investment in each site, so when you look at the money we invest, in order to build, maintain and operate this network, you find out the competition is intense'.

Source: Matt Chalmers – The Australian

Wesfarmers chief financial officer Terry Bowen joined Caltex chief Julian Segal in rejecting ACCC accusations of petrol station price gouging.

Mr Segal said ACCC claims that petrol retailers were making record margins failed to take into account other costs, including increased regulation.

Wesfarmers, which owns Coles Express petrol stations, agreed cash margins were not growing. 'Lease costs are going up every year, wage costs are going up every year and it informs the cost of the business,' Mr Bowen said.

Colin Long Financial Review 23/8/16 Page 7:

'Small businesses making a reasonable margin for their effort is a good thing . Apart from the big players in the market- Coles and Woolworths- many service stations are small, family run businesses and these are keeping the big companies honest in the , marketing of petrol. I think it is interesting that the ACCC is commenting on margins in the petrol industry when it does not comment on margins in other industries'.

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