Capitaline

Analyst Meet / AGM 02-May-19

Conference Call

Castrol India

Expanding Silvassa plant

Castrol India conducted conference call to discuss the financial results and performance of the company for the quarter ended March 2019. Managing Director Omer Dormen and Director Finance & Chief Financial Officer Miss Rashmi Joshi addressed the call
Highlights of the Concall

Castrol India modest 5% growth in revenues to Rs 980 crore in Q1CY19 was led by a healthy 7.6% increase in unit realizations offset by 2.1% yoy decline in volumes against a 9% dip in overall lubricant industry volumes.

Increase in average realisation was on account of price hikes and conscious efforts to change product mix in favour of premium products

Castrol's volumes declined at a pace lower than the industry due to single-digit growth in its personal mobility segment, commercial vehicle oils and industrial lubricants declined amid a general economic slowdown.

The company expects demand scenario in Q2CY19 to be better than Q1CY19 and anticipates a strong rebound in commercial activity, which would drive up demand for industrial and commercial vehicle oils after the general elections.

Gross margin was largely stable at 53.2%, supported by price hikes, strategic sourcing and a favourable product mix. EBITDA margin was also stable at 29% leading to EBITDA growth of 3% YoY. The company continued its investments in brand building (ad expenditure was arund 3–4% of sales) and in channel expansion. PAT grew about 2% YoY.

Base oil cost was slightly favourable in the current quarter. The company expects it to firm up in Q2CY19 following the recent surge in crude oil cost. The cost of additives, another raw material, is also expected to be under pressure in Q2CY19

Gross profit per KL and EBITDA per KL increased 7% YoY and 5% respectively. The company reiterated its strategy of focusing on increasing the market share over improvement in unit profitability.

Auto contributed 86% of portfolio, and industrial and marine the balance 14% of sales.

Castrol Activ range of two-wheeler engine oils was completely refreshed with formulation changes. Two additional variants – Castrol Activ Stop-Start and Castrol Activ Cruise – were launched, which provide 3X protection across all stages of riding.

The company had announced an expansion investment plan of Rs 140 crore for its Silvassa plant. This investment, spread over the next two years, will scale up capacity there by 50%. The capex is aimed at blending and filling. Construction of the phase 1 of the plant has commenced. This capex will be over and above the Rs 70–80 crore of the maintenance capex.

Castrol inked a strategic partnership with Ford for supply of engine and transmission oils to their dealerships in India. They are also working jointly to develop and co-engineer products to further enhance performance efficiency of Ford vehicles.

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