Castrol India

Castrol India reported a 19% fall in bottomline to Rs 95.10 crore in Q3CY'11 on a 5% growth in topline to Rs 674.10 crore compared to corresponding previous year period. 5% growth in topline was contributed by 3% growth in automotive segment to Rs 565.20 crore which contributed 84% of the total revenues and 15% growth in non automotive segment to Rs 106.10 crore contributing 16% of the total revenues.

OPM fell significantly by 670 bps to 19.7% leading a 22% fall in operating profits to Rs 132.80 crore as consumption of raw materials as a percentage of net sales rose to 54.7% in the quarter ended September 2011 from 50.3% in the corresponding previous year period. Purchase of traded goods rose to 5.1% from 2.3%, staff cost increased to 4.6% from 4.2%, other expenses rose to 7.5% from 7.1%., carriage, insurance and freight charges remained flat at 2.8% while Advertisement expenses decreased to 6.2% from 7.0%.

Other Income of the company doubled to Rs 14.5 crore in Q3CY11 from Rs 7.2 crore in Q3CY10 while interest cost being negligible at Rs 0.9 crore and depreciation fell 2% to Rs 6.2 crore. As a result PBT was down 18% to Rs 140.20 crore. The effective rate of tax increased to 32.2% from 31.9% leading a 19% fall in PAT to Rs 95.10 crore.

Segment wise PBIT margins were down in both the segments. Automotive PBIT margins fell 710 bps to 18.4% while non auto motive segment was down 240 bps to 24.2%.

Commenting on the results, Naveen Kshatriya, Vice Chairman, Castrol India Limited, said, The results reflect the continued challenging base oil and additive cost environment in the first nine months of the year. The company has taken pricing actions, while continuing its focus on cost efficiencies.

During the July - September 2011 quarter, the unit cost of goods increased by almost 30% over the previous year. To partly offset the cost of goods increase, the company has increased selling prices by 15%. This has put pressure on the retail value chain. In addition, lower liquidity, higher interest rates and the inflationary environment have also had an impact. The competition has taken longer than usual to take up its prices. As a result, our volumes have been under pressure in the retail segment. However, our workshop and institutional business has continued to grow from strength to strength. We are also seeing pricing equilibrium returning.

The company is stepping up investment in its technology capability at its Wadala Technology Centre. Recognizing the growing importance of the Indian motorcycle market in Castrol's global portfolio, the Castrol global motorcycle product development activities will be relocated from the UK to India from January 2012. This will enable Castrol India to develop closer co-engineering relationships with strategic motorcycle Original Equipment Manufacturers (OEMs) and develop bespoke products in line with Indian two-wheeler consumer needs.

During the quarter under review, the company relaunched its premium, high performance two stroke motorcycle oil - Castrol Power1, supported by an online digital campaign and consumer promotion. For the rapidly growing workshop channel, the company launched its international Castrol Professional range of products developed exclusively for professional workshops.

Castrol's Industrial team has recently launched new generation grinding fluids based on the latest generation of EHVI hydrocracked oils and technology performance additives.

For 9MCY2011 Net Sales of the company rose 9% to Rs 2220.50 crore compared to corresponding previous year while bottomline fell 3% to Rs 374.20 crore. OPM fell 510 bps to 23.1% leading a 11% fall in operating profits to Rs 513.50 crore. Other income rose 173% to Rs 61.70 crore while interest cost was down 12% to Rs 1.50 crore and depreciation 4% up to Rs 18.8 crore. PBT as result fell 4% to Rs 554.90 crore. Effective rate of taxes fell to 32.8% from 33.8% leading a 3% fall in PAT to Rs 374.20 crore.

Outlook as per company

We expect market pricing equilibrium to be better in the last quarter of the year. This is expected to positively impact company performance during the next quarter. However, demand for lubricants may soften given the challenging global economic situation while the significantly weakening rupee against the dollar, may add further pressure on input costs. In spite of this, we remain confident of the longer term growth potential for the company based on our strong brands and enduring relationships with all key stakeholders.

The promoter's shareholding remains unchanged at 71.03% as on 30 th September 2011 compared to quarter ended June 2011.

The scrip is trading around Rs 478 on the BSE

Castrol India results

Castrol Segment Results