Valvolines total revenue for fiscal 2004 increased 5 percent to $1.3 billion dollars, despite a drop in sales of branded lubricants. Management attributed that volume decline to the fact that the U.S. market shrank during the 12-month period. Nevertheless, operating profit jumped from last years $87 million to $105 million in fiscal 2004, powered largely by the higher margins for premium products. In addition, the company recorded better results for its quick-lube chain, Valvoline Instant Oil Change, thanks to increased revenue from services other than oil changes.

Ashland said it expects continued improvement in Valvolines performance. Officials said they have seen no sign yet of premium product sales topping out.

We expect this percentage to continue to grow, Ashland Chief Financial Officer Marvin Quinn told stock analysts during a conference call this week. Overall, Valvoline expects modest profit growth in 2005, assuming that it is able to continue passing on lube stock price increases.

Ashland officials also reported that discussions with the Internal Revenue Service concerning its exit from the Marathon Ashland Petroleum joint venture are going slower than the company had hoped. Early this year Ashland reached a tentative agreement to sell its 38 percent interest in the joint venture to Marathon, but the deal requires shareholder approval and a favorable ruling from the IRS with respect to tax treatment.

Ashland originally said it hoped to have a decision from the IRS by the end of this year, but stated Monday it will probably not be received until early 2005. MAPs refining assets include a Group I base oil plant in Catlettsburg, Ky., with capacity to produce 6,700 barrels per day.