Eastern Feasted on Base Oil Trading

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Eastern Feasted on Base Oil Trading

Eastern Lubricants Blenders Ltd.’s profit jumped more than ten-fold for its fiscal year ended in mid-2021, thanks to a resumption of its sporadic base oil trading activity, according to a recent filing on the Dhaka Stock Exchange.

Profits dried up again in the following quarter, however, as prices for base oils rose and its trading of them ceased again.

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Based in Chittagong, Bangladesh, Eastern Lubricants is a subsidiary of state-owned Bangladesh Petroleum Corp. and historically has focused on supplying blended lubricants to three sister subsidiaries – Padma Oil, Meghna Petroleum, and Jamuna Oil Co. That business has dwindled over the years as the trio lost market share to private lube suppliers, so Eastern has looked for ways to supplement its income.

Base oil trading has been profitable sometimes but sporadic. For the fiscal year ended June 30, 2020 it recorded zero base oil sales. In its annual report for fiscal year 2020-2021, filed Dec. 26, it reported base oil sales revenue of 333 million taka (U.S. $3.9 million). The segment netted a profit before tax of Tk 63.5 million, making it the only part of Eastern’s business to earn a significant profit. Lubricating oil sales had a Tk 14.9 million loss before taxes, and grease sales were slightly in the red.

The company has also begun selling batteries and bitumen in recent years, and both of those activities earned negligible profits in 2020-2021.

Overall the company posted a net profit of Tk 51 million in 2020-2021, up from Tk 4.5 million in 2019-2020. Revenue rose on a similar scale, from Tk 44.5 million to Tk 422 million. Most of the increase was from base oil and bitumen sales.

New Delhi-based The Business Standard reported Eastern officials saying that margins on the company’s base oil sales benefitted from the fact that it contracted purchases early in 2020 when prices were low and then sold over the course of the year as prices climbed.

For the first quarter of its fiscal year 2021-2022, which ended Sept. 30, the company again reported zero revenue from base oil sales. Bitumen sales remained higher and made a small net gain, so overall the company’s gross loss for the period shrank to Tk 3 million compared to Tk 3.1 million during the first quarter of 2020-2021. Revenue jumped from Tk 4.3 million to Tk 42.8 million.

Eastern blended just 1,032 metric tons of lubricating oils and greases for the full fiscal year ended June 30, 2021, down from 1,576 tons the previous year. The figure for the most recent year represented a capacity utilization rate of just 7%. Twenty-five years ago the plant had more capacity and produced 22,000 tons.

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