Profits Fall for SK, Indian Blenders


South Korean base oil refiner SK Lubricants reported a year-to-year decline in its second-quarter operating profit, while lubricant suppliers Castrol India and Gulf Oil Lubricants India Ltd. each reported upticks in net profit.

SK Lubricants

SK Lubricants profit fell sharply despite increased sales in the period from April through June, according to an earnings report filed last week by SK Innovation, the refiners parent company.

The base oil and lubricants subsidiary earned an operating profit of 78.2 billion won (U.S. $65.4 million) for the second quarter, a 38 percent decrease from 126.1 billion won of the same period in 2018. But its sales increased 3.5 percent to 846.8 billion won.

In the second quarter, sales volume of API Group III base oil increased from the previous [first] quarter, while inventory-related losses decreased as crude prices increased, the company said in its earnings conference call.

During the second half of this year, the base oil business is expected to remain impacted by global economic slowdown and new and additional capacity, it said. We’ll continue efforts to improve profitability through cost savings and sales volume increases, the company added.

An SK Lubricants official said, as for Group II, a significant amount of new capacity is slated for next year on top of this year’s additions. So, the outlook is not that bright. But on the Group III market, the new supplies coming online will be quite limited by 2021 or 2022. Also, in light of various environmental regulations and trends towards low-viscosity products, we do expect the overall market backdrop to improve for Group III.

Castrol India

Castrol India Ltd. reported an 11.3 percent year-on-year rise in its second-quarter net profit, as revenue increased and total expenses declined.

Net profit rose to Rs 182.7 crore (Rs 1.83 billion or U.S. $26.5 million) for the quarter that ended June 30, up from Rs 164.2 crore in the same period last year, the lubricant maker said in a regulatory filing.

Revenue from operations increased 2.2 percent to Rs 1,039.6 crore. Total expenses fell about 1 percent to Rs 772.2 crore during the quarter.

For January to June 2019, net profit rose 6.3 percent on year to Rs 367.7 crore. Revenue from operations grew 3.7 percent to Rs 2015.8 crore over that time.

We have made solid progress against our strategy, and this continued focus has helped us deliver strong financials driven by growth in personal mobility – especially in two-wheelers – focused channel management and robust efficiency measures, Managing Director Omer Dormen said in a statement.

He noted the company is excited about the new opportunity in India, the worlds third-largest lubricant market, following French auto manufacturer Group Renaults decision to select Castrol as its global engine oil service fill partner from Jan. 1, 2020.

The Mumbai-based firm also expressed confidence about its readiness for Indias upcoming Bharat Stage VI automobile emissions standards.

We have been able to launch our BS VI ready range of products for all categories of automotive engine oils, supporting the governments low carbon agenda, Dormen said.

India plans to leapfrog from the current BS IV automobile emissions standard directly to BS VI in April 2020, skipping BS V to curb the nations air pollution. BS VI is equivalent to the European Unions Euro 6 standard and is expected to force engine design changes that require more advanced engine oils.

Castrol, which recently signed a strategic collaboration with global technology company 3M, plans to launch a new product range through this tie-up for the vehicle care market, Dormen said. The products will be offered through Castrols distribution network, he noted.

Gulf Oil

Gulf Oil Lubricants India Ltd., a Hinduja Group company, reported a net profit of Rs 48.73 crore for the three months ended June 30, up 21.4 percent from the year-earlier period. Revenue from operations increased by 12.9 percent to Rs 440.7 crore.

Despite the slowdown in the auto industry, we reported a strong performance in our revenues and core lubricant volumes, Ravi Chawla, managing director of Gulf Oil Lubricants India, stated. This is due to the execution of strategic initiatives backed by strong marketing and sales promotion programs. Chawla said campaigns based around crickets India Premier League and the International Cricket Council World Cup, through which the company engaged with trade and influencers as well as end consumers, paid rich dividends.

Chawla noted that the Gulf Rural Stockist program continued to grow, with a focused approach to reach Indias rural areas in an organized way. Growing our base of [business-to-business] customers across industries, infrastructure, mining, port-related, marine segments, and with [original equipment manufacturers] has been another critical factor to increase usage of our brand and our market share. This further helped our company achieved the results in this quarter.

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