Lubrizol Corp. reported Friday that its profit for the first three months of 2005 increased 29 percent from the same period of 2004, thanks largely to last years acquisition of Noveon International. Valvolines income for the period was unchanged, with higher prices counter-balancing a decrease in sales volumes, its parent company said Monday.
Lubrizol posted net income of $48.5 million for the first quarter, up from $37.5 million for the first quarter of 2004. Most of the improvement stemmed from last Junes $1.8 billion acquisition of Noveon. The former specialty chemical company now accounts for most of Lubrizols former industrial segment. Now called the Specialty Chemical segment, it had operating income of $51.6 million, up from $5 million.
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Operating income for the Lubricant Additives segment rose 10 percent to $68.7 million, with management explaining that improvements in pricing and product mix were partially offset by lower shipment volumes. Like other lubricant additive suppliers, Lubrizol has increased prices during the past year in response to rising costs for raw materials, energy and transportation.
We made good progress responding to raw material cost increases, President, Chief Executive Officer and Chairman James L. Hambrick said. Even though we implemented multiple rounds of price increases, our pricing actions lagged raw material cost increases throughout 2004. We briefly closed the gap in the first quarter of 2005, but raw material costs have continued to rise. To counteract these recent increases, we have moved forward again with price increases as quickly and aggressively as we have over the last year.
Hikes in the prices of its own products pushed revenues for the Lubricant Additives segment to $525 million, an increase of 7 percent despite the decline in volumes. Management said volumes fell because of a previously announced loss of an engine oil account and because a few customers reduced inventories as they planned to switch to engine oil formulations that meet the new ILSAC GF-4 passenger car motor oil specification.
Volume was not as strong in some areas as we anticipated, but I am not disappointed considering that we are addressing raw material cost increases and are shifting our strategy to focus on higher-value products, Hambrick said. In Lubricant Additives, some of our customers have commented to us that North American trucking activity was healthy in the quarter, while passenger car motor oil sales were soft. Our market share has been stable sequentially. So far, demand appears to be stronger in the second quarter.
Lubrizol is based in Wickliffe, Ohio, and is the largest supplier of lubricant additive packages.
Ashland, which is based in Covington, Ky., said Valvoline had operating income of $24 million during the three months ended March 31 – the second quarter in the companys fiscal year – unchanged from the same period of 2004. Lubricant sales volumes slid 11 percent to 42.2 million gallons, but sales revenue dipped just 0.3 percent to $323 million.
Management said Valvoline maintained profits by raising its own prices and by continuing to shift product mix toward premium products. Premium lubes accounted for 24.1 percent of Valvolines U.S. branded sales volumes in this years second quarter, up from 21.4 percent during the year-ago period.