Hello. Good morning. Right now we are ready to start the meeting. Good morning. My name is Voranart Meethavorn , the IR manager. I would like to welcome you to SPRC analysis meeting for the second quarter of 2026 performance. Before we begin, I would like to introduce SPRC management who are present in the meeting with me. First, Khun Herbert Matthew Payne, the CEO.
[Foreign language]
Second, Khun Shashank Nanavati, Executive Vice President, Commercial. Third, Khun Nutsara Somkiatweera, Vice President, Finance and Accounting.
[Foreign language]
Lastly, Khun Nongnapa Thongpitukthavorn, Vice President, Strategy, Policy and Development.
[Foreign language]
We will refer to the presentation that is available on SPRC website. Today meeting, Khun Matthew will begin with the key strategy and highlight, then followed by the performance analysis by Khun Shashank and Khun Nutsara. Lastly, Khun Nongnapa will present for looking ahead before the Q&A sessions. If you have any questions, please click on the raise hand button or send the question through the chat channels. As a reminder, this virtual meeting is being recorded. At this time, I will now turn the session over to our CEO, Khun Matthew. Please go ahead.
Good morning, everyone, and thank you for joining us, and thank you for your continued support and interest in SPRC. Last quarter, we outlined SPRC's journey from disruption to resilience with a clear strategy to navigate geopolitical conflict and market volatility. Since then, we have completed the first phase successfully, absorbing the immediate impact and stabilizing our response. We are now in the reinforcement phase, where the focus is on sustaining operational continuity through disciplined execution. This phase is about staying the course. We will continue to operate with reliability and safety to protect our supply commitments, preserve liquidity, and reduce our exposure to geopolitical risk through diversification and optimization. The playbook for this is clear. First, we will continue to support Thailand's energy security by operating safely and reliably and meeting our statutory reserve obligations.
Second, we maintain that operational excellence by protecting supply reliability and delivering contracted volumes despite any continued volatility in the markets. Third, we will preserve our financial strength through disciplined cash flow management and prudent balance sheet controls. Fourth, we will continue to mitigate the risks of the geopolitical exposure through diversification, optimization, and continuous monitoring of market developments. The actions for this time is clear. SPRC has moved beyond absorbing the impact and is now executing this reinforcement phase, staying disciplined, sustaining our operational continuity, and continuing to support Thailand's energy security through this volatile cycle. Let's move now to highlights from our first half. SPRC has delivered strong financial performance with adjusted profit of $272.1 million, excluding the stock gain of $169.6 million. This represents a significant year-on-year improvement.
This was supported by stronger margins and disciplined execution across both the refinery and commercial businesses. Our enterprise margin improved to $20.70 per barrel, mainly driven by strong refinery margin of $19.10 per barrel. On the commercial side, we maintained our domestic sales at 93.9%, continuing to support Thailand's energy demand while holding a commercial margin of $1.60 per barrel. Operationally, through the first half of the year, refinery utilization was 74.3% and enterprise sales volumes were at 28.5 million barrels. This volume is lower year on year due to the impact of our major turnaround that we had in the first quarter. However, due to the stronger margins and good execution and optimization efforts, our overall profitability has been higher.
Also, importantly, our enterprise value capture reached $55 million, reflecting the benefit of our integrated refinery and commercial business. Overall, these results show that SPRC continues to execute with discipline to maximize value capture and sustain strong performance through the volatile market environment. Now let's move to some initiatives that will help us to continue to sustain value. Our focus has to not only be on navigating this current volatile time, we also need to build stronger capabilities for the future. We are doing this in three key areas that we will talk about today: crude flexibility, cost discipline, and long-life infrastructure investment. First, on crude flexibility. We have strengthened SPRC's crude optimization flexibility and improved our ability to respond under different supply scenarios. This is an important capability not only in the current geopolitical environment, but in the future, where crude availability, freight costs, and pricing can change rapidly.
As shown on the slide, our Middle East crude share was reduced from a pre-war level of 84% down to 54% in the second quarter of 2026, demonstrating our ability to adjust the crude mix and diversify sourcing when required. In a high uncertainty scenario, SPRC has the capability to further balance crude sourcing across the globe. This flexibility helps reduce reliance on any single source and supports supply reliability during periods of disruption. At the same time, we have executed the Light Crude Project, which supports maximum value capture. During the full quarter operation of the second quarter of 2026, jet production yield increased to 13% compared with the pre-project level of around 10%-11%. Jet output increased from approximately 1.7 million barrels on the quarter to about 2 million barrels per quarter post this project.
This demonstrates that our crude flexibility is not only helping us to manage supplies, but also enabling SPRC to align production with market demand and to capture high value products. Second, the cost efficiency. Cost efficiency remains a key area of our focus. In second quarter 2026, our normal enterprise OpEx was reduced to $2.40 per barrel, below our long-term target of $2.50 per barrel. This reflects the continuous business efficiency improvements being implemented across both the refinery and the commercial parts of our business. Third, on infrastructure, our SPM upgrade project came online on the 11th of June 2026. This extends our marine operation capabilities through the SPM for another 30 years.
This is an important infrastructure milestone that strengthens the reliability of our crude receiving operations, enhances our supply chain efficiency, and supports our long-term cost competitiveness by keeping our crude supply freight costs low. Overall, these initiatives show that SPRC is proactively strengthening our resilience and unlocking sustainable value even amid this current market volatility. Through crude mix flexibility, disciplined cost management, and strategic infrastructure investment, we are better positioned to sustain operational continuity, to maximize enterprise margin, and to create sustainable value for the future. Next, let's turn to our dividend. SPRC remains committed to delivering stable and reliable dividends through the business cycle while preserving the financial strength needed to support our long-term sustainability. Our financial priorities are clear and unchanged. First, we will provide reliable dividends. Second, we will maintain a strong balance sheet and invest with discipline focused on high return projects with attractive payback periods.
Third, when performance and financial capacity allow, we will return excess cash and retain earnings to shareholders through additional dividends or other appropriate measures. The strong financial performance in the first half of 2026 provides a solid foundation for us to continue with this commitment. Given the strong first half 2026 results, combined with our outlook for the coming business cycle, the board has approved an interim dividend of THB 0.5 per share, up from THB 0.25 per share in the first half of 2024 and THB 0.15 per share in the first half of 2025. Our dividend framework is designed to remain resilient across market cycles. Our overall approach is to balance attractive shareholder returns with long-term business resilience.
Supported by the strong first half earnings and execution, disciplined capital management, and this clear dividend framework, SPR remains committed and well-positioned to deliver stable and reliable returns and dividends to shareholders throughout the business cycle. Now, we will move to performance analysis.
Thanks. Thank you, Matthew, and good morning, everyone. Sawasdee khrap. Let me take you a bit through our refinery and commercial performance. Starting with crude prices, the Dubai crude averaged $96.20 a barrel in the second quarter, up from $86.90 a barrel in the first quarter of 2026. This was largely due to the prolonged disruption in the Strait of Hormuz, which constrained the crude flows into Asia. Murban crude's premium over Dubai also rose sharply to $11.50 a barrel, reflecting the geopolitical risk premium. Looking ahead, crude prices and premiums are likely to remain volatile as the conflict continues to create supply and sourcing uncertainty. Against this backdrop, SPRC delivered very strong refining margins of $23.70 a barrel in the second quarter.
The result was supported by stronger middle distillate and gasoline cracks due to lower regional supply, tight inventories, and uncertainty over shipments through the Strait of Hormuz and from the Middle East. Middle distillate cracks, in particular, strengthened significantly with jet fuel averaging $62.80 a barrel and diesel at $62.90 a barrel. Again, this was supported by Middle East supply disruptions, lower Asian refinery runs, reduced Middle East and Chinese exports, low inventories, and concerns over supply. Although the jet cracks eased a bit as the Hormuz gradually reopened and diesel demand remained softer in industrial and freight sectors, the regional supply seems to be tight still and is expected to continue. Gasoline crack increased to $28.90 a barrel, supported by lower regional refinery output, restricted Chinese exports, disruptions in the Middle East, declining inventories, and summer driving demand.
Looking ahead, refining margins are expected to remain firm in the near term. As mentioned, lower regional inventories, continued restrained exports, seasonal demand, and a gradual recovery of the flows through the Strait of Hormuz should continue to support gasoline and middle distillate cracks. However, as Asian refinery runs recover and product availability improves, the cracks may gradually ease from the elevated levels we saw recently in the second quarter. Overall, continued geopolitical uncertainty in the Middle East and the potential disruption to Russian product exports remain key upside risks to margin. Even with the elevated margins, we are mindful of the downside. A faster normalization of product flows to the Strait of Hormuz, along with higher refinery utilization in Asia, could ease the supply tightness and soften the margins. Shifting over to the commercial side of the business.
We continue to prioritize domestic supply while optimizing the value across our sales channels. In the second quarter of 2026, our total enterprise sales increased to 16.3 million barrels. That was supported by the normalization of our refinery operations following the turnaround in the first quarter. The domestic business remains strong, accounting for 94% of our total sales volume. This reflects our continued commitment to meeting local demand and supporting Thailand's energy security. The remaining 6% was exported under permitted export arrangements to our contract customers. The commercial margin was $1.40 a barrel in the quarter, lower quarter-on-quarter, reflecting the softness in the domestic market. The decline was mainly reflected in our commercial, industrial, and bulk sales channels, and the market oversupply caused by export restrictions.
However, the margin did improve year-on-year, supported by stronger value capture across our higher return sales channels. For the first half of the year, the total enterprise sales volume decreased to 28.5 million barrels, mainly as I mentioned in the first quarter. In addition, the temporary export ban also has restricted our sales a little bit year-on-year. Nevertheless, domestic sales remain strong at around 94% of our total sales, and commercial margin improved to $1.60 a barrel for the first half. This is supported by higher sales contribution from our higher margin sales channels. Looking ahead, the commercial margin is expected to remain under pressure, primarily due to the export ban and softer domestic margin conditions. The wholesale segment is likely to remain very challenging due to market oversupply and intense price competition.
Consumer spending also remains constrained due to overall weaker economic conditions, high household debt, and slower growth in the tourism sector. In addition, elevated fuel prices and ongoing geopolitical uncertainties may leave consumers and transportation operators to manage their fuel consumption more cautiously. Despite these external pressures, our commercial platform remained resilient by maintaining reliable domestic supply and continuously optimizing our channel mix. We continue to capture value and protect performance despite the pressure in select market segments. Taking a deeper look into our retail segment, let me highlight how we are strengthening our high net back retail channel by improving the network productivity and expanding the partnership ecosystem across the Caltex network. For the first six months of the year, retail sales volume continued to increase by 3% year-on-year.
Despite the impact of the turnaround and the normalization of market demand in the second quarter, after a temporary surge of fuel consumption in March, the volume was sustained by ongoing improvements in network productivity and stronger performance across the retail platform. At the end of the quarter, the Caltex network sat around 532 stations, representing a retail market share of 5.7%. To support our ambition to double retail volume by 2030, we are not only increasing station throughput and selectively expanding the network, but we are also working to build a stronger Caltex retail ecosystem. Through our smart partnership strategy, we are working with the Franchise and License Association (Thailand) and other partners to continue expanding opportunities for our retail partners. This collaboration has attracted over 100 branded partners across the food and beverage, convenience retail, and other services.
As a result, more than 1,350 retail outlets now operate within the Caltex station network nationwide, enhancing consumer experience, increasing station attractiveness, and supporting growth in our non-oil business. Looking ahead, we aim to continue expanding our retail outlet coverage to more than 85% of our station network. This will be supported by new brand partnerships, stronger promotional campaigns, growth in the active Caltex Rewards user base, and selective station expansion. Together, these initiatives will help us scale retail volume more effectively, strengthen our retail footprint, and improve profitability over the medium term, while positioning Caltex stations as destinations that connect mobility, everyday lifestyles, and new business opportunities. With that, let me pass it to Nutsara Somkiatweera to cover financial performance.
Thank you, Shashank Nanavati. Turning now to our financial performance, SPRC delivered EBITDA of $25 per barrel in second quarter of this year. This improving both quarter-on-quarter and year-on-year. This price of refinery margin of $23.7 per barrel and a commercial margin of $1.4 per barrel. The improvement was mainly driven by stronger Middle East rate crack spread, supported by tight regional supply and high geopolitical tensions. Following the sharp decline in Dubai crude price in June, we record an inventory loss of $0.70 per barrel. However, inventory valuation could remain volatile during the periods of sharp crude price movement, particularly as geopolitical tension in the Middle East continue to evolve. For the first half of this year, the enterprise margin was $19.1 per barrel, significantly improved from the same period last year, supported by stronger crack spread across our refined products.
We also record a stock gain of $9 per barrel for the first six months. Turning to cost performance, normal enterprise OpEx declined to $2.4 per barrel, as Matthew mentioned earlier in this quarter. This was mainly due to lower maintenance after the completion of the turnaround, together with ongoing cost-saving initiatives. For the first six months, enterprise OpEx was $2.6 per barrel, also lower comparing to last year. Turning to the EBITDA, SPRC delivered consolidated EBITDA of $296 million in this quarter, slightly lower than previous quarter. This was mainly driven due to the inventory loss in this quarter compared with an inventory gain in quarter one. However, EBITDA was higher than the same quarter last year, supported by a strong refinery margin. For the first half of 2026, consolidated EBITDA reached $608 million, a significant increase driven by strong refinery margin and the realization of the inventory gains.
Finally, net profit for second quarter was $230 million, slightly lower than prior quarter, but higher than same quarter last year. This is in line with EBITDA performance. Excluding the inventory loss impact, adjusted net profit was $221 million, improving both quarter-on-quarter and year-on-year on the back of strong refinery performance. For the first six months, net profit was $442 million, while adjusted net profit was $272 million, both improved significantly from last year due to stronger refinery performance and benefit from stock gain. Turning now to our financial position. SPRC maintains a strong and resilient balance sheet at the end of June. Total consolidated assets were $2.3 billion, increasing from year end last year, mainly from higher trade and other receivable in relation to the increased product price, and also an outstanding oil fuel fund subsidy from government measures to stabilize domestic diesel price.
Total consolidated liabilities stood at $709 million, down from December last year. The decrease was mainly due to lower trade payable following the decline in Dubai price toward the end of June. We also had no short-term borrowing and partially repaid our long-term borrowing. As a result of strong net profit in first half, shareholder equity strengthened to $1.6 billion. Our liquidity position also improved, with cash increasing while interest-bearing debt decreasing. At the end of second quarter, SPRC moved to a net cash position. This reflects our operating cash generation and disciplined balance sheet management. Overall, SPRC remains in a strong financial position to navigate market volatility, pursue value equity investment, and deliver sustainable return to our shareholder. With our semester performance, we announce an interim dividend of 50 satang per share. This demonstrate our commitment to balance attractive shareholder returns with long-term financial strength and resilience.
This is the summary of financial performance, and would like to turn to Khun Nongnapa for the way ahead.
Thank you, Khun Nutsara. Looking ahead, the future opportunities, while we continue to manage near-term challenges and support Thailand's energy security through reliable supply, we remain focused on building operational resilience and capturing future opportunities. Our long-term approach is centered on two strategic pillar designed to deliver sustainable growth and superior total shareholder returns. The first one is the value chain optimization across the refining and marketing. Second is the profitable growth in our marketing business. The first one, the strategic move in transforming a standalone refinery into a fully integrated energy provider. This strengthen our market presence and create a stronger value chain that connect production directly to consumers.
Under this first pillar, we are strengthening end-to-end execution from crude sourcing through refinery operations to product placement with a continued emphasis on the operational excellence to maintain high standard of safety, reliability, and deliver of committed outcomes. The capital discipline remains the key to this approach. We continue to preserve cash, prioritize high return investment, and ensure that every capital decision supports superior long-term shareholder value. We continue to improve our bottom line through LEAP program and cost efficiency initiatives across the value chain. This cover feedstock selection, freight and logistic optimization, demurrage, inventory and energy management, project optimization, and also maximizing product supply to customers. The successful completion of this turnaround, both for the process units and SPM, have further strengthened production reliability, improved operating efficiency, and position us to deliver sustainable long-term returns.
In parallel, we are exploring integration opportunity with refinery and petrochemical partners to capture broader value chain benefits. As SPRC's goal is to support Thailand on its journey to a lower carbon future, we actively reduce the carbon intensity of our operations while continuing to provide a reliable, affordable energy that powers the nation's growth. Apart from the full compliance of ESG governance, circular business is one of our focus to build the capability and infrastructure needed to capture evolving demand. The second pillar is the profitable growth of the marketing business. As we expand beyond refining into retail fuel distribution, this not only allows us to optimize value across both business segments, but also provide more stable and predictable cash flow from the retail fuel sales. On top of that, we are able to grow profitability through Spot to Street strategy.
This integrated commercial framework designed to maximize the total fuel netback margins by routing from low to high margin sales channel. One of the key focus in our long-term strategy is to enhance the customer experience and strengthen the retail ecosystem. This through platform improvements, automation, digitalization to accelerate domestic growth. In parallel, we are lowering cost to serve by streamlining logistics and improving supply chain efficiency. Finally, we are expanding product placement and pursue new term export opportunity across ASEAN, helping to diversify revenue stream beyond the domestic market. Together of these two strategic pillars position SPRC to capture future opportunities with discipline, strengthening resilience, delivering sustainable growth, and creating superior value of our shareholder returns over the longer term. Thank you. May I return to Khun Voranart.
Thank you, management, for the presentation. That concludes our presentation. Next, we turn to the Q&A sessions. If you have any question, please click the raise hand buttons, or you can send the question into the chat channels. Okay, first one, Khun Constan, please go ahead.
Can you hear me?
Yes.
First off, good morning. Thanks for the presentation, and congratulations for the great result and first half dividend. My first question is that in the second quarter, is it cheaper still to use Middle East crude versus non-Middle East crude, including freight costs and everything? In the second quarter, how much is Brent linked portion in the crude diet? Related to this question, in the third quarter and fourth quarter, would you change your crude diet, given that the re-blockage of Strait of Hormuz. Second quarter is that you mentioned jet incremental volume around 3 million. Is that a major part of, or a part of the reasons why your GRM was stronger than the rest of the pack in the second quarter? What was the higher jet coming out of? Is that fuel oil?
Or in the second quarter, which product yield that lower versus jet? Does the investment in Light Crude Project, if I understand correctly or remember correctly, is at THB 30 million. Would it paid off by first quarter result from the jet improvement? The last question is for Khun Nutsara. Can you go over the page number 7, particularly the chart on the right bottom side on the future dividend? Thank you.
Okay. Thank you, Khun Constan.
Constan, thank you for the questions. Let's start with the questions around crude oil. Your question was, in the second quarter, was Middle Eastern crude still cheaper than alternatives from other regions when you take into account premiums and freight? The answer to that question is essentially yes. We still see that Middle Eastern crudes, on average, in general, are more affordable and have a higher sort of refining value than their alternatives. The question about why diversify is just a matter of, are those crudes available? It's one thing for them to price in a way that makes them have a higher refining value. There's another question as to whether or not you can actually procure those crudes in a way that is legally compliant.
In the second quarter, the bigger issue was that procuring those crudes in a legally compliant way was quite difficult for a large amount of those crudes. That is why you see us saying that we had a good bit of diversification away towards crude from other regions, is because we needed to do that just to be able to have crude oil able to run. You also asked how much of the crude is Brent linked. I probably won't go into a great amount of detail on that. I would just say as a process, when we purchase crude, we try to eliminate basis risk that comes from the pricing across different regions. Because our products generally price tracked to Dubai, then we try to match our crude purchases to the Dubai crude sort of benchmark.
We try to avoid having a lot of basis risk introduced in our crude procurement processes. The GRM improvement, it's hard for me to speak to why our GRM was so much stronger than some of the others that have been announced. What I'll tell you is that we did make decisions in the second quarter quite early when it came time to have to diversify, especially early on when the conflict broke out, which allowed us to early on, have some decent advantages around crude procurement because we made decisions quickly to move to areas where crude was available, and we were able to pick up some of those cargoes before some of the premiums got exceptionally high. Beyond that, we'd have to look into the details.
I think a lot of this probably has to do with how folks manage financial risk for their crude procurement processes. As you know, as a process, we've shared often, we don't hedge crack margins. We don't really put a lot of hedging on our flat price position. In some quarters, that works in our advantage. Some of that may be there. There were a lot of questions, so I'm probably starting to run out of remembering what the next one was. I know that I have a next question that I started that said, "How was-
I was intrigued by your performance of the jet fuel, proportion of jet fuel. You mentioned the 3 million additional jet fuel. Does that contribute significantly into the second quarter uplifts from the first quarter and the Light Crude Project investment cost? How much is that? Is that $30 million US? Was that paid off by the first quarter result of the strong movement of jet? Thank you.
Okay. Yes, the uplift in jet for the quarter was a result of the Light Crude Project. We were able to expand some of our jet processing capabilities as a result of that project. You asked where did the yield come from? Normally, I would say that those yields, the light yield would come from heavier products, fuel oil and the like, but primarily in the second quarter, because we had the export ban on diesel. What you were seeing is us moving as much diesel into jet as we could because it allowed us to continue to produce a high value product that we could get to market. A lot of the additional jet fuel in the second quarter would have come from the diesel production that we're constrained on having outlets for.
As far as paying for the project, we don't look at exactly how. We wouldn't say, "Oh, we paid for this project all in the first half." What I would say is, as Khun Nutsara mentioned in our financial position, we ended the second quarter with no net debt. Any previous financing that we had done to fund business opportunities at this point have essentially been paid off.
For the remaining question is for the dividend, and just relax.
Okay. For the dividend that we already announced for Q3 for the interim of this year. Actually we will assess the performance obviously again, what will be the total year dividend at the end of this year. What we put here as the base dividend for 2027, for the next f our or five year, that's what we try to emphasize that when we look at the dividend projection, we look to the turnaround cycle to ensure that over the next four or five years, we should be able to return to the shareholders at the reliable and steady dividend as the base dividend. So that's why we put the bar chart over there. That's based on our projection.
We should be able to deliver the dividend that actually increased from previous base dividend, which we can say that previous base dividend, we just assume of just least a year. But actually you can see that lastly we also pay higher than base dividend. So in the next four or five years, what we put is already increased our base dividend. Again, to reemphasize that, we still emphasize on the financial policy that in addition to the base dividend, we also reward the extra dividends. We have the extra return on cash.
Thank you, Khun Nutsara. Excellent. Thank you.
Okay. Thank you, Khun Costan. If you have any question, please go ahead. Anyone? Next, Khun Panuwat, please go ahead.
Thank you for presentation. I have two questions. The first one is regarding the OpEx, which has come down quite well in the second quarter. Do you think this level is sustainable? Do you see further room for further improvement? That is my first question. Second question, regarding the dividend, could you maybe explain the underlying reason, how you come up with the THB 0.50 per share, and what should we view as the payout ratio for this year compared to last year? Given last year had a lot of CapEx from the turnaround, should this year payout should be higher? What is your base dividend going forward right now? Thank you.
Okay. Let's start with the OpEx level first. Khun Nutsara, please.
For the first half of this year, we achieved the OpEx per barrel of $2.6. Actually, $1.8 is from the refinery business, which you can see that we have a barrel improvement from refinery performance for the refinery OpEx is more than $2. Now already decreasing. For the commercial, we also expect to be around $17 or $18 per barrel. In total, we believe that we should maintain the OpEx level at maybe just $2.4 or $2.5 for the longer term. However, we still emphasize or still encourage in term of the many initiatives to improve in term of the cost efficiency to save the OpEx of the company.
If I could add to that a bit. As Khun Nutsara mentioned, the OpEx is a key focus for us and a little bit different on the two sides of the business. Costs always matter in this business and we're blessed today with having a very robust margin environment, but those don't last forever, and when the margins are lower, the thing that we can control is really how disciplined we are around how much money we spend. We're spending quite amount of time working on lowering the base operational expenses that we must have to run the business. We're looking at ways to use new technologies to lower the OpEx. We're looking at ways of just being more efficient in how we do our maintenance activities to lower the OpEx. We're looking at how we manage our contracts, to lower our OpEx.
It's a full look through the business on an ongoing basis to think about how we can lower the cost of the business. On the refinery side of the business, that is basically looking at lowering the absolute cost of running the refinery. On the commercial side of the business, a little bit different because the commercial side of the business is we are still growing the sales that we make, that we call our enterprise sales, our sales where we sell directly to customers ourselves. That costs money. The intention here, though, is that on a per barrel basis, we'll try to hold the cost flat or as close to flat as we can on the commercial side of the business while growing the amount of sales that we have through that business, so the normalized cost per barrel would come down.
Overall, we have quite a few initiatives ongoing in the company to really focus on making sure that we can be very efficient, very cost-focused, so that when margins do come back down, we still have a decent and healthy profit margin that can help us to sustain our overall returns and overall value return to shareholders. The second question was actually about the dividends. The question was a little bit about the underlying reasons for the THB 0.50 level. Look, I think, I'll just be clear, we're aware that THB 0.50 per share is lower than 50% of our earnings for the first half. The board's intent when determining the interim dividend was to make sure that we came up with a dividend that we feel like we can sustain through the business cycle.
As we'd spoken to the community before, we had previously thought about where our base dividend was, and we felt like our business was stronger, and we should be able to increase that, but there was quite a lot of uncertainty within our business itself that we needed to clear before we could talk about having a higher base dividend. We needed to get through the turnaround that was going to take place in the first half of this year. That was a really big deal for us, and it had a lot of variability in what the potential outcomes could be. Then we also still had the SPM upgrade that needed to be completed. Getting that done introduced a lot of variability into what our financial outcomes could be. Thankfully, those things have both now been completed. They were completed with excellence.
They were completed, I would say, at the upper end of our expectations, in terms of how successfully they were completed, how close to budget, the timeliness of their completion. With those things behind us, we have a bit more clarity on the road ahead as far as things that we can control. However, the current market situation is still quite volatile, and we still have to see how this current environment of geopolitical upheaval will play out. The THB 0.50 per share was the board's way of looking and saying, "Regardless of how we're seeing this situation play out, we actually believe that this is a level of dividend that we can sustain through our next business cycle." That's where we are with the THB 0.50 per share.
As Khun Nutsara mentioned, as we get through the end of the year, as we get more clarity on how this current situation will resolve itself, there may be more dividend that can be paid with the year-end above an additional THB 0.50 per share. We may be able to reward more, but that will all depend on how the rest of the year plays out and how we see the volatility and how we ensure that we can have enough cash and retained earnings on hand to make sure that we can continue to fund business activities and fund any necessary growth opportunities that we see that would be compelling for us. Our financial priority remains unchanged. Our financial priority is we will provide a reliable dividend going forth.
We want that to be somewhat predictable for the community to understand what our intention is and what our desired dividend level will be.
Okay. Thank you, Matthew. Next, Eliza, please go ahead for your questions.
Hi. Thank you for taking my questions, and congrats on the blowout second quarter and as well as the revised dividend policy. Two questions at my end. Firstly is about the utilization rate. I noticed that the second quarter utilization, even after we are done with the turnaround project, utilization rate is at 85% versus the normalized level of 90%-plus. I am just wondering how should we be thinking about the utilization rate going forward with the ongoing export ban? That is my first question. Then the second question is that I also noticed that SPRC intends to double its retail footprint by 2030. Just wondering what is the CapEx required here? Is this a kind of like a step change compared to where we were initially thinking about the retail business, which is more focused on capturing the low-hanging fruits at the point of acquisition. Yeah. Thank you.
Thank you very much.
Thank you for the questions.
We have the questions about the utilizations. Matthew will take, and then about the retail topics will be wit h Khun Shashank.
As far as the refinery utilization, you kind of touched on the main thing. As long as the exports remain banned, we do remain constrained on how fully we can utilize the refinery, because we need to be able to sell the products that we make. Demand in Thailand at this part of the year, it is this traditionally low-demand season, rainy season. Demand is weaker than what you would see on your average, and that impacts our ability to be able to run the refinery at full utilization. As long as the exports remain banned, I think you will see us continue to operate at this level, 80, 85% to 90% or so of throughput capacity. Maybe a little bit of upside to that, if the ban continues beyond the rainy season, we see normal improvement in domestic diesel demand.
But that would probably be nominal in order to full utilization. Thailand is long diesel production capability as a whole, and to get to full utilization, we would need the export ban to be lifted.
Thanks, Matthew. Just adding an answer, Eliza, on the retail question. Since the acquisition of the Caltex marketing business, the strategy has been to expand the presence of the Caltex stations, primarily for two reasons. One is, the amount of production that we sell through our Caltex network isn't all of our production. In other words, it's a small percent of our total capabilities in the refinery. We would like to further integrate the refining and marketing sales presence to the Caltex brand. The second reason is we repeatedly and consistently hear from the market and from our customers that they would like to have more access to the Caltex fuel quality and the brand. There's sort of an unmet need in the market. The strategy hasn't changed.
The plan always was to increase the number of stations as well as the volume that we sell. That's done through a combination of adding new locations into the network, in underserved markets, and also steadily increasing the throughput of each of our stations by investing in the retail ecosystem as well as the offering for the consumer. The plan was to get from 100 million liters a month of sales through the Caltex network at the start of 2024 and get to well over 200 million liters a month by 2030. We're continuing down that path. To achieve that, we believe that the CapEx or the investment on an annual basis is somewhere in the $30 million-$35 million range to get to that final landing point by 2030.
Okay, great. Thanks very much, Matthew and Shashank.
I would like to make one just brief clarification. Eliza, you mentioned a change in dividend policy. I want to be clear, our dividend policy has not changed. Our policy remains that we provide a dividend of at least 50% of earnings after adjusted earnings, after considering the stock gains and losses. That will continue to be the policy going forward. We do adjust that up or down on a quarterly basis, just basis the situations at the time and what's needed to make sure that we fund the business. Over the long period, over the long time, though, at least 50% of earnings being dividend remains the policy. Like I said earlier, when we look through the cycle, this represents a level of dividend that we feel very confident that we can maintain.
Thank you.
Okay, got it. Very clear. Thank you.
Next turn is Mr. Panuwat, please go ahead. Khun Panuwat, please go ahead.
Can you hear me?
Yes, we can hear you.
Okay. Congratulations on your robust quarter. I have two questions. The first one is what is your view on the crude sourcing for the rest of the year? The second one is, can you update on your crude premium in the second quarter?
Okay. Yes, we can provide a little color here. On the crude procurement for the rest of the year, my question is going to sound boring and generic, but we are going to source the crudes that provide us the highest margin. We will continue on that path. If we are able to procure crude from the Middle East, we have a high confidence that we can actually have those crudes arrive and not be disruptive to the operation of the refinery. When that is the case, we will purchase crude from the Middle East because they tend to be the highest margin, highest value for us. But we have to do that whole sort of risk analysis. We have to manage the risk that many of these crudes, they may not be available, just because of conflict in the region.
We will balance those two things, but our aim will be to make sure that we are running the crudes that are the most profitable for us. On the crude premiums, look, the crude market is highly volatile, and it is really hard for us to sort of pinpoint a range where these things can land over the remainder of the year. What I will say is that you can depend on us to be exceptionally attentive to what is happening in the market, and to make sure that we are using all the tools that we have at our disposal to optimize the crude sourcing. That is inclusive of the benchmark prices, the premiums, the freights, all of that, we will take into account, and we will make sure that we are capturing as much value from the margin situation as we possibly can.
Yeah. Just to add to that, Matthew, I think the question also is asking for second quarter, the crude premiums. We saw crude premiums about in the mid-teens, so $15-$16 a barrel in the second quarter.
Thank you to Matthew and Khun Shashank. Next turn to Khun Anutri. Please go ahead for your questions.
Hi. Thank you for the opportunity for asking the question, and congrats on the strong results in the first half. May I ask on your view regarding the industry capacity constraint for the rest of the year? Also considering your view on the Chinese refinery utilization as well as the export outlook for the rest of the year. My second question is regarding the dividend. As you mentioned, considering the 50% payout policy, as you mentioned, and also the core EPS of 2 THB per share in the first half. Does that mean we should take full year dividend per share to be 1 THB as a base case already? That is my two questions. Thank you.
Great. The-
For the industry view, and about the China exports, Khun Matthew will handle for this. About the dividends, the payments for this year will
I'll take that one.
Khun Matthew will take as well.
Okay. As far as the industry's capabilities, capacities for the remainder of this year, at least within Thailand, not much has changed. The capabilities, capacities are all still there. We're all across the industry, as far as I know, are all impacted by the export ban. I think you'll, just depending on what the amount of diesel yields for each of these facilities are, you'll see some amount of capacity not being able to be accessed just because, again, we all need outlets for the diesel product to run full. Globally, there's been quite a bit of disruption to the refining capacity, and it's on both sides. There's, I would say maybe a very structural sort of reduction of capacity in the Middle East, where several refineries have been targeted via attacks and drone attacks and missile attacks and things like that in the Middle East.
There is capacity offline there. Similarly, in Russia, we see capacity offline, due to results from the conflict between Russia and Ukraine. Those weigh on the global industry as a whole. On the other end, you rightly asked about China. China has quite a bit of excess refining capacity that can be brought to market or not brought to market, depending on how the authorities there want to manage their energy security situation within China. On balance, I think, most analysts who look at this situation feel like that situation is constructive for the supply/demand situation for the refining industry right now. That's sort of the view.
All the view that I can share is that, for the folks who really, really study this, they feel like there's been more disruption to refining capacity globally, than there is incremental capacity to bring to market. So that's sort of the view on refining capacities exposures. On the dividend. The math that you've done is correct. Again, for each period, we do have a dividend policy. The policy is that over time, we will dividend 50% of the earnings. But for each period, the board has to sort of look at what is taking place at that time, and make sure that we have enough funds available to fund the business. One of the things about this particular period of time with this amount of volatility going on is that the working capital needs of the business swing quite widely. The board has to consider that.
What I'll tell you is when we get to the end of the year, like I said, if our performance is very strong, you'll see that represented in the dividend that the board approves, that we take to the shareholders for approval. But that will have to also take into account exactly what's going on at that moment in time. If this conflict is still lingering out there, the board will likely have to consider some matters around just how much volatility there is in the business. But again, I'll state that as we see it right now, the board has taken a very strong look at many different scenarios. As we see it right now, the THB 0.50 a ton per share dividend that we've announced in interim is a level that we believe that we can sustain through the business cycle, volatility or not.
That's a level of dividend that we have a high confidence in being able to sustain across the rest of the business cycle. So that's the guidance that I would provide there.
Thank you, Matthew, for your answer. Next, Khun Komsan, please go ahead.
Sorry. Last quick question for Khun Nutsara. How much depreciation per quarter will drop into? I recall that you mentioned that some of the refinery kits are fully depreciated after 30 years of operation. Thank you.
Yes. For depreciation, just for the refinery in the past, it used to be around 1.4, but right now it is down to around $1.1 or $1 a barrel.
In U.S. dollars terms, is that $5 million per quarter?
Yes. $5 million.
Amount. Thank you.
Amount. $5 million. Yes.
That's the rate.
That is quite a lot. Thank you.
$5 million a month is what we should expect depreciation to be now after the reduction. Yes.
It is around $1 a barrel per month.
Yeah. A reduction of about $2.2 million, $2.3 million a month. A reduction of about $2.3 million a month from what we would have seen in depreciation before.
Thank you, Matthew.
Can we have for the last question from Steve? Please go ahead.
Hi. Good morning. I have two questions. First is on the GRM. I think last week, some refiners have released their MD&A, and I think they also have the simulation of the third quarter GRM, which I think this is much subject to the crude premium that I think Shashank just mentioned that about $15 in Q3 for SPRC. I think, may I check that because the other refiners are expecting GRM quarter to date, Q3 at about 15.8. Let's round it to about 16. So may I double-check that this number is in line with what SPRC should be achieving in Q3? I mean, based on we have come halfway already. That is my first question.
And-
Second question?
Sure. Okay. Continuing to my second question is on the CapEx, because you mentioned that you are projecting dividend over the cycle, over a period of time. I like to know the CapEx that you are projecting maybe 2026 to 2030 based on the dividend graph that you showed over maybe four, five years. What would be our CapEx per year based on, I mean, maintenance CapEx per year. Yes.
Thank you, Steve. First question is about the guideline and updates on the GRM right now. The second question is about the CapEx projecting through the cycle. Matthew will handle for this one.
You want to take the GRM question?
Yeah. No. Thanks for the question. On the GRM side, we are seeing slightly more elevated or more expensive crude premiums so far in the third quarter compared to second quarter. There is a slightly higher cost of the feedstocks given the volatility and the kind of on-again, off-again nature of the conflict, and the disruptions to the flows of crude. From a GRM basis specifically, I think we've seen slightly stronger GRMs already in the third quarter than we had seen in the second quarter. I know I mentioned
Sort of mid-teens in the second quarter. I think we may see something. That was the crude premium. I think we'll see slightly higher crude premium in Q3. So far, the GRM seems to be well supported even into the third quarter. So we are seeing fairly strong GRMs even into the third quarter so far.
I'd say the GRMs that we are seeing is in line with the number that you mentioned. We're in line with what other folks are saying, mid-teens GRM through the first half of the third quarter of 2026. On the CapEx trends, I think we shared earlier with you guys that we're in the range of $50 million per year CapEx expected across this sort of business cycle for us. And that'll fund the maintenance capital that's needed at the refinery. It'll fund a few margin improvement, sort of yield improvement projects that we'll be executing at the refinery. Most of those will probably come online at the time of the next turnaround. Additionally, it'll fund our retail growth aspirations that Shashank alluded to earlier. So, right now we're intent on that's our sort of projected level.
I will say that we're like any other company, we're continuously evaluating opportunities. And if we see opportunities where we can grow shareholder value with funds in a way that shareholders don't otherwise have access to it on their own, then we may accelerate that a bit because, as Nutsara has mentioned before, we've gotten to a point to where our financial position is quite strong. And so with that, we have really an expectation of ourselves to be trying to find ways to if we can help do more for the shareholders. But again, that needs to be in a way that shareholders couldn't do it on their own. It needs to be in a way that's advantage or we can uniquely bring value to the shareholders. So we'll be looking for opportunities.
For right now, we're still within that guided range of about $50 million a year over the coming four years or so.
Just want to double-check, 15 or 50?
50. Correct. 50.
50. Okay. Just a follow-up question on the utilization in Q3. Can I expect it about the same level as Q2?
Again, the refinery is capable of running at a higher utilization than we are running today, but we are constrained by diesel products outlets. Until the diesel ban is lifted or until domestic diesel demand picks up significantly, we will be roughly at the same utilization rate that you have seen in Q2.
Okay, thank you.
Thank you, Matthew. I think we already cover operation we received today. I would like to take a moment here to thank you all of you to attend SPRC analyst meeting for the second quarter performance. Thank you very much.
Thank you.