FKT, UMW Record Mixed Results

Malaysian lubricant supplier UMW reported that its profit before taxes dipped slightly in 2016, while Indonesias PT Federal Karyatama boosted its lubricant sales volumes by 7 percent.

UMW Group

Malaysian supplier UMW Groups lubricants profits before tax dropped slightly in 2016, to 19.5 million ringgit (U.S. $4.5 million), but its subsidiary in China posted a record year in turnover and sales. The company will focus more on its lubricant blending and distribution segment after the divestment of its oil and gas companies.

The lube groups customers had stocked up their purchases in 2015, which resulted in lower sales in 2016, the company said in its annual report. In addition, the appreciation of the U.S. dollar against the Malaysian ringgit increased base oil costs. To improve margins, the company implemented aggressive cost-reduction measures. The lubes division reported revenue of 204 million ringgit.

While the overall lubricant market in Malaysia remains soft, our lubricants business continues to show resilience and our presence in China continues to show strong signs of growth despite a slowdown in Chinas economy, the report continued.

UMWs subsidiary in China, Lubritech Ltd., posted a record year for both turnover and earnings, resulting in revenue of 178 million ringgit, the report noted. Increased sales volume from key customers and customer-focused programs and promotions were the main reasons for its growth. The company is the sole supplier of factory fill lubricants for Chinese state-owned automotive manufacturer, First Automobile Works, which, in addition to its own marques, assembles vehicles for Mazda, Volkswagen and Audi. Lubritech claims to be the largest distributor of Spanish lubricants brand Repsol outside of Spain.

As UMW makes a series of corporate changes toward divesting its oil and gas business, it will refocus its growth trajectory on three core divisions: automotive (under which it manufactures, markets and distributes several Japanese passenger and commercial vehicle makes); industrial equipment (its entity for supplying heavy duty logging, construction, industrial, mining and agricultural equipment); and manufacturing and engineering, which includes automotive parts and components manufacturing along with lubricant blending and marketing.

Apart from an expected recovery of global crude oil prices, hence higher base oil costs, [the company] expects a challenging 2017 with the stronger US dollar and other key currencies expected to play a major factor, said the report.

Against this backdrop, the company plans to leverage on its network to increase market share for its Grantt lubricant brand in Malaysia and to develop new markets in Southeast Asia where there has been an increase in the number of distributors making the switch to Grantt. UMW manufactures passenger car motor oils, automotive transmission fluids and industrial oils under the Grantt brand.

Malaysias automotive sales are expected to increase 1.7 percent, or 590,000 units, in 2017 and the first two months of 2017 are already 6 percent ahead of the same period of 2016, the company added.

Photo: UMW Group

PT Federal Karyatama

PT Federal Karyatamas lubricant sales volume increased 7 percent to 55,750 metric tons in 2016. FKT said it benefited from an intensifying effort to expand its distribution network, which includes adding more branded workshops for the aftermarket segment and improving business-to-business marketing of its Federal Mobil passenger car motor oils.The company has over 3,200 branded workshops selling Federal Oil products and more than 10,000 independent outlets in Indonesia.

In 2017, as part of the listed MPM Groups automotive spare parts business, FKT will focus on the development of a comprehensive aftermarket network.

PT Putra Mustika Prima is the groups spare parts and lubricant distribution company. It is a major supplier of spare parts for two-wheelers with manual transmissions, but Indonesia has growing numbers of automatic bikes with continuously variable transmissions. PMP will focus on aiding FKT to develop the racing and automatic market, through its network. In addition, PMP plans to increase its distribution network in Central Java, where 70 percent of the countrys auto spare parts business sales occur.

With 28 distributors, FKT claims to have a 20 percent share of the motorcycle lubricant market. To maintain its market share, in March 2016, FKT reformulated Federal Oil products for scooters and sport motorcycles, and introduced the full-synthetic FM Rexton 0W-20 for automobiles. The company also obtained certification for Indonesias lubricant standard, SNI, for all its products last year ahead of the official compulsory implementation.Its newly built, 88,500 tons per year blending facility in Krakatau Industrial Estate Cilegon will be ready for commercial operations in the second half of this year.

According to the Association of Indonesian Automotive Industries, just over 1 million cars were sold in 2016 for an increase of 5 percent over the prior year. Motorcycle sales increased 8 percent to just about 6 million units in 2016, according to data released by the Indonesian Motorcycle Industry Association.