P-QS, Others Post Upbeat Financials


Second quarter financial reports from the lubricants industry continued to roll out the past week. Pennzoil-Quaker State reported that earnings were up sharply from the same period of 2001. Milacron Inc. put a positive spin on lower earnings for its metalworking fluids and tools business. Sunoco reported a sharp increase in volume of base oil sales.

The report from Pennzoil-Quaker State Co. may be its last quarterly statement. If so, the Houston company is going out on a high note, announcing a $33 million turnaround. The company had net income of $28.6 million, or 36 cents per share, for the period ending June 30, compared to a loss of $5.3 million, or 7 cents per share, during the same period of 2001.

No extraordinary charges were reported for the second quarter, but the results for the second quarter of 2001 included $14.9 million in nonrecurring after-tax charges plus a $2.5 million loss from discontinued operations.

Total revenue fell 1.8 percent, to $590.4 million, but officials attributed that to reduced sales of low-margin and unbranded products.

We are pleased with the continued improvement and strong operating results across all of our business units, President and Chief Executive Officer Jim Postl said. These results reflect the dramatic transformation that we have undertaken over the last three and a half years to focus on our core businesses, lower costs and enhance service to our customers.

Pennzoil-Quaker State reported operating income of $52.1 million for its Lubricant segment, up from $32.7 million of recurring operating income during the second quarter of 2001. According to management, the improvement was based on better motor oil margins, a 64 percent increase in sales of premium products, and lower sales and administrative expenses. Pennzoil and Quaker State brands claimed a combined U.S. passenger car motor oil market share of 35.6 percent over the past 12 months.

Operating income from the Consumer Products segment grew 23.6 percent to $12.7 million, thanks mostly to lower amortization costs. The International segment had operating income of $4.5 million, up 21.6 percent. Revenue for the segment fell 11.2 percent, to $58.7 million, due to scaling back of low-margin operations and channels.

Operating income for quick-lube subsidiary Jiffy Lube International Inc. grew 17.4 percent to $9.1 million. Supply Chain Investment, principally the companys 50 percent stake in the Excel Paralubes base oil refining joint venture, earned $11.3 million, an increase of 37.8 percent that was attributed to increased production.

Pennzoil-Quaker State said it continues to progress on its bid to be purchased by Shell Oil Products U.S. The companys shareholders are scheduled to vote on the proposal tomorrow. The deal is also being reviewed by the U.S. Federal Trade Commission. Shell has said it expects to complete the purchase within the next couple months.

Cincinnati-based Milacron said that continuing operations of its Metalworking Technologies segment – the company sold its metalcutting tools businesses – earned $2 million in the second quarter, up from $1.9 million during the same period of 2001. The segment is one of the worlds largest metalworking fluids businesses and also sells grinding wheels and round cutting tools.

As was the case for its overall business – including the Plastics Technologies segment – Milacron emphasized that results from the second quarter improved from the first of 2002. Operating earnings from continuing Metalworking Technologies operations were $300,000 during the first quarter. Second quarter sales of $42 million were down from $44 million for the year-ago period but up from $39 million the previous quarter.

Officials said the downturn in manufacturing activity, which has hurt all aspects of the business, appears to have reached its nadir. But they added that they do not foresee a rapid rebound.

While it appears that the recession in the manufacturing sector has bottomed out, we have yet to see convincing signs of a recovery, Chairman, President and Chief Executive Officer Ronald D. Brown said. Orders from our continuing businesses were flat compared to the first quarter and, in fact, have been at roughly the same level for the past several quarters.

Since visibility is poor, we are not counting on a significant pickup in demand for the rest of this year. Nevertheless, thanks to our aggressive cost-reduction efforts, we expect to narrow our loss in the third quarter and approach break-even in the fourth.

From Philadelphia, Sunoco reported that it sold 15,100 barrels per day of lubricants during the second quarter, up from 9,400 b/d during the same period of 2001. The figures included base oils, specialty oils, process oils, waxes and extracts.

Related Topics

Market Topics