OPM fell significantly by 280 bps to 16.6% leading to a 8% fall in operating profits to Rs 119.7 crore as advertisement expenses as a percentage of net sales rose to 8.6% in the quarter ended September 2012 from 6.3% in the corresponding previous year period along with carriage insurance and freight charges which rose to 3.1% from 2.8% and purchase of traded goods to 5.2% from 5.1% offset by fall in cost of materials consumed to 54.6% from 54.9%, staff cost to 4.4% from 4.6% and other expenses to 7.3% from 7.5%.

Other Income fell 13% to Rs 14.8 crore in Q3CY12 from Rs 17 crore in Q3CY11 while interest cost was negligible at Rs 0.1 crore and depreciation rose 6% to Rs 6.6 crore. As a result PBT was down 9% to Rs 127.8 crore. The effective rate of tax remained rose to 32.9% from 32.2% leading a 10% decrease in PAT to Rs 85.7 crore.

Segment wise PBIT margins were down in both the segments. Automotive PBIT margins fell 190 bps to 16.6% while non-automotive segment was down 840 bps to 15.7%.

Commenting on the results, Ravi Kirpalani – COO and Automotive Director, Castrol India Limited, said: "Automotive volumes grew by 3%, faster than the market, enabled by strong marketing programmes targeted towards consumers, trade and influencers. However, the increase was offset by decline in the industrial and marine volume, which was impacted by the overall industrial slowdown. As a result of this, total volumes were flat versus the same quarter last year.

According to Mr. Kirpalani, "cost of goods continued to grow significantly despite softening of base oil prices due to continuing rupee depreciation, putting margin under pressure. The adverse impact of the Rupee depreciation was Rs. 58 crore during the quarter under review. Improved sales mix and pricing actions helped recover the cost increase. The gross profit improved by over Rs. 9 crore despite the difficult environment.

Mr. Kirpalani said: "Despite the tough environment and pressure on margins, we continued to invest in brand and marketing activities. The quarter under review saw the relaunch of our leading brand in the motorcycle segment – Castrol Activ, with new Actibond technology. Supported by a 360-degree campaign, the brand continues to grow well ahead of the market and has further strengthened its position as the leading motorcycle engine oil in the country. As Performance Partner of the International Cricket Council, the company had the opportunity to leverage the ICC World Twenty20 2012 Championship held in Sri Lanka. Key stakeholders had the opportunity of a unique live match viewing experience in Sri Lanka as well as at big screen match viewing experiences at seven centers across India. Response to this initiative was extremely positive and has helped us further strengthen our relationships with partners, customers and consumers. The ‘Anmol Ratn' trade loyalty programme targeted at key retailers continued to show strong results.

For 9MCY'12 Net Sales of the company rose 6% to Rs 2352.5 crore compared to corresponding previous year while bottomline fell 12% to Rs 329.50 crore. OPM fell 390 bps to 19% leading a 12% fall in operating profits to Rs 445.90 crore. Other income fell 8% to Rs 64.5 crore while interest cost was down 27% to Rs 1.1 crore and depreciation down 1% to Rs 18.6 crore. PBT as a result fell 12% to Rs 490.7 crore. Effective rate of taxes rose to 32.9% from 32.8% leading a 12% fall in PAT to Rs 329.50 crore.

Outlook as per company

The next few quarters are likely to be challenging. The Indian Rupee remains volatile and crude prices have strengthened recently. This will continue to put our margins under pressure. Moreover, the sluggish economy, and slow automotive and industrial growth will continue to dampen lubricant demand growth.

In the longer run, however, we remain optimistic about the prospect for lubricant market growth in India. Castrol India is in a strong position to participate in this growth owing to its strong brands, enduring relationships with key stakeholders and continued commitment of our staff.

The promoter's shareholding remains unchanged at 71.03% as on 30 th September 2012 compared to quarter ended March 2012.

The scrip is currently trading around Rs 318.65 on the BSE