German lubricant maker Fuchs Petrolub SE posted a first-quarter 6% decline in earnings after tax and a 16% increase in sales, citing several factors for the mixed results, including COVID-19 lockdowns in China, global inflation and supply chain problems, as well as the war in Ukraine.
Profit after taxes decreased to €67 million (U.S. $70.4 million) in the first quarter. First-quarter sales reached €808 million, an increase driven by the price adjustments, the company said in its April 29 news release.
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“Compared to the previous year, it should be noted that the start of 2021 was exceptionally good, as a result of post-pandemic catch-up effects and tailwind regarding raw material costs,” said Stefan Fuchs, chairman of the company’s executive board.
Fuchs Petrolub is the world’s largest independent lubricant supplier.
The company cited growth in China over the last two years as a strong driver that subsided in the first quarter of 2022.
“China’s extensive pandemic-related lockdowns are weighing on the local and therefore also on the global economy,” Fuchs said. “In addition, we expect high raw material price increases and cost inflation to continue to weigh on us for the rest of the year. Furthermore, the supply chain problems that have existed for 18 months will be heightened by the geopolitical crises. Particularly, we are concerned about the availability of raw materials.”
The company is cautious for the near-term future, saying full-year development is difficult to assess due to high external uncertainties, referring to the imminent embargo for import of Russian oil to Europe and an uncertain outlook for the global economy caused by the coronavirus surge in China.
The war in Ukraine and sanctions against Russia have not had a significant impact on business in the first quarter “as these two entities play a negligible role in the overall results of the group and the direct impact on Fuchs is small,” the company said.
However, Europe is bracing itself for the impact of the looming embargo for import of Russian oil and gas and, like all companies on the continent, Fuchs is affected by unfavorable energy prices and market conditions.
“We currently operate in a volatile environment,” the company said. “Geopolitical tensions, including the war in Ukraine and the sanctions against Russia, heighten the uncertainties.”
For the first quarter, revenues were up in all regions. For Europe, the Middle East and Africa, sales revenues were at €481 million, up 15% from the first three months of 2021. The Asia-Pacific region increased sales revenues by 11% to €237 million. North and South America recorded the highest sales revenues growth, 27% to €141 million. The entire region benefited from price increases and positive currency effects, the company said
If there is no further aggravation of the situation, the company expects sales revenues of between €3 billion and €3.3 billion for all of 2022. Earnings before taxes are expected to be at the same level as in 2021 at around €380 million.