Spring 2003 was not financially refreshing for Lubrizol Corp. or Valvoline, as both companies recorded year-to-year declines in earnings for the quarter ended June 30.
Lubrizol announced yesterday that net income for its second quarter fell 15 percent from the same period of 2002, to $29.4 million, due to lower volumes and higher raw materials costs. Valvoline said the third quarter of its fiscal year (which begins Oct. 1) yielded operating income of $24 million, a drop of 4 percent from a year earlier due to lower volumes.
On a per-share basis, Lubrizols profit dropped to 57 cents, a dime lower than in the second quarter of 2002. Half of the decline was the result of a $3.5 million charge for restructuring of the companys plant in Bromborough, England, and a job buy-out program at its joint venture in India.
The Wickliffe, Ohio-based additive company said the lower volumes and higher raw materials costs were partially offset by its own price increases and favorable currency exchange rates. Its Fluid Technologies for Transportation segment, which serves primarily the automotive lubricant market, suffered a 3 percent decline in revenue, to $393.1 million. Currency exchanges boosted revenue by 5 percent and the companys price increases and an improved product mix added another 4 percent. But segment volumes dropped 9 percent, mostly because of the loss of a single customer. Those factors, combined with a 13 percent increase in raw materials costs, resulted in an $81.7 million contribution to income, an increase of less than 1 percent from last year.
The Fluid Technologies for Industry segment enjoyed a 17 percent jump in revenue, to $113.7 million, with organic growth accounting for approximately two-thirds of the improvement. Still, the segments contribution to income was down 14 percent to $15.9 million, mostly due to costs associated with an April fire at its Gateway Additives plant in Detroit.
Company officials said they were satisfied with the results, given the market environment.
Im particularly pleased that we successfully raised prices to address raw material increases in our FTT [Fluid Technologies for Transportation] business and that FTT maintained contribution income, even though the market for lubricants has been weaker than normal, Chairman and Chief Executive Officer W.G. Bares said.
Looking forward, Bares said management expects high raw materials costs and the weak economy to continue. He said the company is working to control costs and aims to continue buying industrial additive businesses.
[O]ur significant efforts to close more acquisitions in FTI continue to be well below our expectations and remain high on our agenda, he said.
Valvoline parent company Ashland Inc., of Covington, Ken., said the motor oil and automotive consumer products marketer had revenue of $305 million during the third quarter ending June 30, down from $307 million during the same period of 2002. Lubricant sales volumes slid from 53.7 million gallons to 49.2 million gallons. Officials said the company increased its market share of motor oil sales, although it did not provide statistics.
Premium products as a percent of the companys U.S. lubricant sales continued to grow, rising from 17.2 percent to 19.8 percent. Management said Valvoline Instant Oil Change had a record quarter thanks to a 20-percent increase in non-oil change revenue. International operations improved due to better volumes in key markets and strengthening foreign currencies.