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February 1, 2017

Volume 17 Issue 52

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Valvoline Profits Rise

Valvoline Inc. reported operating income of $100 million for its three operating segments – North America, quick lubes and international – during the fiscal quarter ending Dec. 31, 9 percent higher than in the year-earlier period.

“Disciplined margin management and strong performance from our two growth engines, quick lubes and international, drove better-than-expected profitability for the quarter,” Valvoline CEO Sam Mitchell said in the company’s quarterly earnings news release.

The three segments together posted sales of $489 million for the quarter, up 7 percent from the year before. The core North America segment accounted for about 48.4 percent, quick lubes for 26 percent and international for 25.6 percent of sales in the quarter.

North American lubricant volume grew 2 percent to 24.1 million gallons, compared to a year earlier. “The segment volume increase was the result of share gains and timing of promotional campaigns,” the company stated.

Lubricant sales through quick lubes grew 15.2 percent to 5.3 million gallons. At Valvoline Instant Oil Change, a group of the same company-operated stores increased sales to 9.5 percent of sales for the quarter, up from 5.6 percent. The company attributed improvements in same-store sales growth to an increased number of transactions, driven by success of its customer acquisition and retention tools.

International lubricant sales – excluding unconsolidated joint ventures – grew 12.3 percent to 13.7 million gallons for the quarter. Valvoline said the international operating segment delivered broad-based volume growth across both emerging and mature markets. “Volume gains were driven by a combination of ongoing market penetration, as well as growth in the heavy duty market,” the company stated.

In September 2015, Ashland announced plans to spin off Lexington, Kentucky-based Valvoline. In September of last year, an initial public offering raised about $759 million. After the IPO’s completion, Ashland owned 170 million shares, representing 83 percent of total outstanding shares of Valvoline’s common stock. Prior to the IPO, Ashland held nearly all of the assets and liabilities related to Valvoline’s current business.

According to the earnings news release, Ashland is expected to distribute its 83 percent stake in Valvoline following the release of earnings for the second fiscal quarter ending March 31, subject to market conditions and other factors. Valvoline currently operates as a stand-alone business with “arms-length” transition service agreements with Ashland, the release stated.