Valvoline’s Earnings Jump; Lubrizol’s Fall


The fiscal quarter ended Sept. 30 yielded quite different results for two lubricant industry heavies. Valvoline closed out its best fiscal year with fourth quarter operating income that was 29 percent higher than the same period a year ago. Lubrizol Corp., meanwhile, saw its third quarter earnings drop 33 percent year-to-year.

Valvoline parent company Ashland Inc., which begins its fiscal year Oct. 1, reported yesterday that the automotive consumer products marketer had record operating income of $87 million in fiscal 2003, up from $77 million a year earlier. Much of the improvement came during the final quarter; the company had operating income of $31 million during this years final period, compared to $24 million in its fourth quarter of 2002.

Management said the quarterly results were due largely to an 11 percent jump in sales volumes of premium products and an increase in distributor sales to the do-it-for-me market. The Valvoline Instant Oil Change quick-lube chain also had a record quarter, thanks to an 11 percent rise in premium lube changes and a 16 percent increase in revenues from services for transmissions and cooling, fuel and air quality systems. Valvolines international segment also had its best quarter, increasing volumes in key markets and benefiting from more favorable currency exchange rates.

Valvolines sales revenues for 2003 grew 7.2 percent to $1.2 billion, despite the fact that lubricant sales volumes dipped 2.8 percent to 193.5 million gallons. Ashland Chairman and Chief Executive Officer James J. OBrien said Valvoline was a highlight of 2003 for the company, which is based in Covington, Ky.; it also owns divisions that build roads and that market and distribute chemicals, as well as a 38-percent stake in Marathon Ashland Petroleum.

Valvoline is our best example of the type of performance we are working to create in all of our businesses, OBrien said, adding that the division continued to benefit from its highly successful strategy to emphasize premium products and services.

Lubrizol warned last week that its third quarter results would be disappointing and indeed the Wickliffe, Ohio, company reported yesterday that consolidated earnings were $24.3 million, or 47 cents per share, compared to $35.6 million in the year-ago period. The company took a pre-tax charge of $400,000 during this years third quarter for therestructuring of a plant in Bromborough, England, but said the earnings decline was due more to lower shipment volumes and higher raw materials costs.

Sales revenues from the companys Fluid Technologies for Transportation segment fell 5 percent to $382.3 million, as shipment volumes dropped 13 percent. Orders suffered from loss of business, as well weak lube demand worldwide. Average raw materials costs for the segment were 11 percent higher than in the same period of 2002.

The Fluid Technologies for Industry segment did better, posting a 15 percent increase in revenue to $117.8 million. Three-fifths of the gain came from acquisitions. Most of the organic growth came from sales of coating and anti-foam additives and personal care ingredients.

The disappointing earnings for the third quarter point to economic weakness in the lubricant industry, Chairman and Chief Executive Officer W.G. Bares said. Demand for finished lubricants has been soft most of the year, but dropped more in mid-summer in North America, Europe, parts of Asia and the Middle East.

The weak fundamentals in the lubricant additive industry reaffirm our commitment to use cash flow for expansion into higher growth fluid technology markets, including industrial performance chemicals, coating additives, personal care products and advanced fluid systems.

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