Gulf Oil Lubricants India Ltd. reported its third-quarter standalone net profit surged 59 percent year on year to a record Rs 42.5 crore (Rs 425 million, or U.S. $6.6 million), as higher volumes boosted sales.

Revenue from operations increased 34 percent to approximately Rs 356 crore in the quarter ended Dec. 31, the lubricant maker said in a regulatory filing this week.

This is mainly due to the excellent volume growth that we have seen across our business, Managing Director Ravi Chawla said on a conference call with analysts. The base effect of demonetization also helped, he noted.

The seller of a wide range of automotive and industrial lubricants reported that quarterly volumes rose 22 percent year on year to a record 24.5 million liters, driven by growth in diesel engine oils, motorcycle engine oils and passenger car motor oil.

Gulf Oil recorded around 35 percent growth in motorcycle engine oils and upwards of 15 percent growth in passenger car motor oil and diesel engine oils, Chawla said. The company also witnessed high growth in infrastructure as well as industrial distributor segment.

The Mumbai-based company said that growth momentum continued in original equipment manufacturer dealerships, with growth of more than 35 percent across various product categories, including commercial vehicles, two-wheelers and tractor OEM dealerships. The improved demand conditions in the bazaar channel for Gulf and co-branded product ranges also helped the volume growth, it added.

The company, part of Hinduja Group, said that it started supplying to OEMs like Kobelco and for Bajaj Autos certain overseas markets during the quarter.

Chief Financial Officer Manish Kumar Gangwal said the company increased prices across various product categories by 3 percent to 4 percent in January, especially in the bazaar segment, due to a rise in base oil prices. He noted the recent price hike will be sufficient to mitigate the impact of higher base oil prices as long as crude oil remains around U.S. $70/barrel.

The lube supplier said its on-ground activation continued as Gulf engaged with young consumers and football enthusiasts at biker-meets, college events and football screenings. The company also conducted oil change camps in rural areas in the farming segment and in franchise workshops across India. It noted that its retailer loyalty program called Gulf Unnati continued to gain traction among top retail partners as they showed a double-digit growth during the quarter.

Other income jumped 35 percent to Rs 7.2 crore during the quarter, while total expenses rose 10 percent to Rs 298 crore. In the April to December 2017 period, the companys net profit rose nearly 36 percent to Rs 117.2 crore, while revenue from operations increased 20 percent to approximately Rs 959 crore.

Chawla noted that the Indian economy is expected to continue growing, and he contended that the company is well positioned to tap the opportunity presented by that growth after opening a new blending plant near Chennai. Gulf Oil opened its new blending plant in Ennore, a coastal neighborhood of Chennai in southern India, in December 2017, with capacity to make 50,000 metric tons of lubricants per year. With its Chennai plant, Gulf Oil aims to tap opportunities for partnerships with OEMs based around Chennai and also to serve the needs of consumers in the southern part of the country, which accounts for approximately 30 percent of its sales volume.

Savita Oil Technologies

Indias Savita Oil Technologies reported that its petroleum products segments third-quarter standalone operating profit surged 86 percent annually to Rs 56.6 crore (Rs 566 million or U.S. $8.8 million), compared to a year earlier.

The segment – which supplies transformer oils, white oils, liquid paraffins, automotive and industrial lubricants, coolants and waxes – reported revenues of approximately Rs 459 crore in the quarter that ended Dec. 31, up 11 percent.

For the April-December 2017 period, Mumbai-based Savita reported that the petroleum segments profit before taxes and finance costs increased 42 percent to Rs 117.8 crore.

Revenues rose nearly 15 percent to Rs 1,337.2 crore, the seller of Savsol-branded lubricants said in a regulatory filing last week.

Chevron Lubricants Lanka

Chevron Lubricants Lanka PLC reported a 21 percent decline in profit year over year, to Sri Lankan rupees 549 million (U.S. $3.5 million) in its fourth quarter.

Despite 17 percent lower administrative expenses, operating profit for the three months ended Dec. 31 stood at Rs 737 million, down 16 percent from Rs 881 million in the same period of the prior year.

In interim financial statements released to the Colombo Stock Exchange on Feb. 1, the Sri Lankan lubricant market leader reported full-year net profit of Rs 2.5 billion, down 27 percent from 2016.

Fourth quarter lubricant sales revenue declined 5 percent to Rs 2.8 billion. For full year 2017, Chevron reported a 9 percent drop in revenue to Rs 11.1 billion.

Although Chevron Lubricants Lanka officials were not available for comment, industry observers believe intense price competition in the market is one reason for the decline in Chevron Lankas earnings.

The profitability of all companies is declining due to the mismatch between input costs and the cost of end products, B.B. Patra, a senior vice president with Indian Oil Co.s Lanka IOC subsidiary, told Lube Report. Raw material costs have increased, but the selling price of finished products have not increased as much, he explained. Competition among the 13 licensed players in Sri Lanka has intensified, with several players, such as Lanka IOC and Laugfs Lubricants, launching aggressive marketing strategies. As a result, he continued, their market shares are growing while others are decreasing. The Sri Lankan market is moving from a monopoly to an oligopoly, and with the governments intention to license three or four new players in the first quarter of 2018, one or two lubricant players may have to shut down their establishments, he concluded.