Castrol India and South Korean refiner S-Oil both reported large increases in profits and revenue for the quarter ending March 31, compared to the same quarter in 2020. These reflected an improved business environment compared to the same quarter last year, when the onset of the COVID-19 pandemic and accompanying lockdowns began impacting business.
S-Oil reported a 63% increase in operating income to ₩188.9 billion (U.S. $170.6 million) for the first quarter, compared to ₩116.3 billion in the same quarter in 2020.
Revenue for the quarter was up 21% at ₩526.3 billion won, improving from ₩433.9 billion.
S-Oil makes API Group II and Group III base oils at its plant in Onsan, South Korea.
In its earnings presentation, the company said its base oil spread – the product price spread between base oil and high sulfur fuel oil prices in Asia – strengthened in the first quarter as supply tightness continued due to lower utilization rates of global refineries and to regular maintenance of refineries, with base oil demand recovering.
S-Oil anticipates the base oil spread to remain robust in the second quarter as the supply shortage is expected to remain intact due to continuous lower run rates at global plants.
Castrol India reported net profit of Rs 243.6 crore (Rs 2.4 billion or U.S. $32.3 million), a 95% increase from Rs 125.2 crore in the same period last year, the lubricant maker said in a regulatory filing.
The Mumbai-based lubricant supplier’s revenue from operations rose 66% to Rs 1,139 crore, up from 688 crore.
The company said its strong first quarter results built on a resilient second half performance in 2020, and the improved results compared to a year earlier reflected how the onset of the COVID-19 pandemic result business slowdown began in March 2020. “Focused investments, interventions and actions taken in the second half of 2020 towards brand building with increased marketing and advertising spends, new product introductions as well as corrective pricing have yielded a positive impact on overall topline growth,” Sandeep Sangwan, managing director for Castrol India, said in the company’s earnings press release. “This has been aided by improving demand trends especially in tractor and SUV sales in 1Q 2021.”
Sangwan noted that the second wave of the COVID-19 pandemic in India is resulting in a market slowdown in various parts of the country. “In addition, supply disruptions on account of base oil and raw materials availability, logistics challenges and rupee disruption are likely to adversely impact demand and supply,” he said. “The management is keeping a close watch on the situation and responding with appropriate actions as needed.”