February 28, 2017
Volume 7 Issue 4
Profits Up at Castrol and Hi-Tech, Down at Apar
Castrol India Ltd. recorded healthy gains in profit in its most recent quarter, and so did Pakistani supplier Hi-Tech Lubricants. India's Apar Industries Ltd. did not fare as well.
Castrol India Ltd. reported an 11 percent jump in its fourth quarter net profit, thanks to lower expenses and upticks in its other income segment. The lubricant maker said 2017 will be a challenging year due to rising feedstock costs and the country’s demonetization scheme, which may continue to negatively impact its sales.
The Mumbai-based company posted a standalone net profit of Rs 155.8 crore (approximately Rs 1.6 billion, or U.S. $23.3 million) during its October through December period, up from Rs 140.8 crore in the same period last year.
Total expenses fell 2.5 percent on year to Rs 573.5 crore, while other income jumped nearly 61 percent to Rs 35.8 crore. The other income segment included a one-time profit of Rs 10 crore from the sale of property, Chief Financial Officer Rashmi Joshi said on a recent earnings report conference call.
Castrol sold 47 million liters of automotive and industrial lubricants during the quarter for revenue of Rs 779 crore, a decrease of around 1 percent.
The company’s full year net sales of Rs 3,358 crore were up 2.2 percent from Rs 3,285 crore in 2015. Net profit increased about 10 percent to approximately Rs 675 crore during the period.
“These results have been delivered by excellent performance across both automotive and industrial segments,” Managing Director Omer Dormen said. He noted that overall volume increased more than 4 percent for the year due to continued momentum in the personal mobility segments and power brands, which include Edge, Magnatec, GTX, Activ and Vecton. Both personal mobility segments and power brands delivered double-digit growth.
“The industrial segment also showed significant volume growth driven by customer wins in the automotive, manufacturing, metalworking and wind energy segments, despite a challenging environment,” Dormen stated.
Castrol said it also saw improvements in its commercial vehicles engine oil business with the re-launch of its CRB Plus diesel engine oil. Looking ahead, it expects Castrol India to benefit from parent company BP’s new wind turbine predictive maintenance joint venture with Romax Technology’s InSight.
“The excellent results for the year have been achieved in an environment which continues to be challenging,” the company said in a press statement. Dormen explained, “We expect [base oil] prices to continue increasing in the first half of the year and we have a response plan in place in terms of how we recover some of those costs."
“The fourth quarter was particularly affected by demonetization, which impacted lubricants consumption as well as the sale of vehicles.”
India’s Prime Minister Narendra Modi on Nov. 8 announced a demonetization scheme that withdrew Rs 500 and Rs 1,000 notes from public use with an aim to crackdown on black money, terror funding, corruption and fake currency. The government also put restrictions on cash withdrawals.
Dormen stated the demonetization hampered Castrol’s sales volume by about 8 percent to 10 percent in November. Despite this, the quarter’s overall volume grew by 2 percent.
India’s demonetization also affected Apar Industries Ltd. The transformer and specialty oils division of Apar recorded a 15 percent drop in gross profit in its third quarter, earning Rs 35.6 crore during the period which ended Dec. 31 versus Rs 41.9 crore the year before.
Revenue for the segment, which includes automotive lubricants, was down 6 percent to Rs 423 crore. Apar said it believes that demonization caused a decline in the sales to its factory-fill and aftermarket automotive customers during its third quarter. “Sales in month of October were very strong, but post-demonetization, the momentum was disturbed,” Apar said in its earnings report.
Despite the setback, sales volumes for the segment were up 6 percent to around 80,000 metric tons, the highest it’s ever recorded during a third quarter. The growth was driven by domestic sales of transformer oils, white oil exports, and its rubber processing oil business.
Pakistani lube supplier Hi-Tech Lubricants Ltd. reported a 61 percent jump in its second quarter net profit. The company’s sales and other income increased while total expenses and taxes declined.
Hi-Tech posted a consolidated net profit of approximately 272.5 million Pakistani rupees (U.S. $2.6 million) in its quarter ended Dec. 31, up from Rs 169 million in the same period last year, according to a regulatory filing.
The company reported that its total expenses fell 14 percent to Rs 278.8 million, and that taxes declined approximately 33 percent to Rs 64.2 million. Other income jumped to Rs 28.4 million from Rs 2 million.
Consolidated net sales rose 9 percent to Rs 2.2 billion during the October-December 2016 period, compared to Rs 2 billion a year earlier. Hi-Tech distributes SK Lubricants’ Zic brand of finished lubricants, greases and specialty oils to more than 150 sellers in Pakistan.