Capitaline

Analyst Meet / AGM 03-Jun-17

Conference Call

Castrol India

Price hikes taken in December helped sustain gross margins

Castrol India conducted conference call to discuss the financial results and performance of the company for the quarter ended March 2017. Senior Management of the company addressed the Concall.
Highlights of the Concall

Castrol India reported 4% increase in its bottom-line to Rs 179 crore in Q1CY'17 on a 3% increase in topline to Rs 882.2 crore compared to corresponding previous year period mainly on account of higher realization (price hike undertaken in Dec'16) and marginal volume growth

Q1CY17 performance was led by volume growth in personal mobility segment (+5% YoY).

Volume remained flat YoY at 50.2 million litres although industry volumes de-grew by 5% impacted by aftereffects of demonetization, which resulted in lower off-take in the CV segment. Personal mobility lube sales increased 5% yoy, now 44% of the overall volumes. Industrial segment volumes grew in double-digits

The company indicated the possibility of transitional impact on demand environment during 2QCY17/3QCY17 due to the implementation of GST. The lower GST rate on base oil and lubricants at 18% from current effective blended tax rate of 27-28% including 14% excise duty and differential VAT rate across states, will be passed on to end-consumers

Price hikes taken in December helped sustain gross margins in Q1CY17. Further, there was another price hike in May to offset the impact of rising base oil prices. Competitors have also taken price hikes recently

Electric cars are unlikely to be a threat to the lubricants business in the coming decade

Base oil prices have risen to $752/tonne currently (average of $685/tonne in Q1CY17 and $566/tonne in Q1CY16). The company aims to mitigate the impact by raising prices appropriately.

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