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Analyst Meet / AGM
01-Aug-19
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Conference Call
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Gulf Oil Lubricants
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Maintained target of achieving 2–3 times of industry volume growth
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Gulf oil Lubricants held conference call to discuss the performance for the quarter ended June 2019. Managing Director- Mr. Ravi Chawla, Chief Financial Officer- Mr. Manish Kumar Gangwal and Company Secretary- Mr. Vinayak Joshi of the company addressed the concall.
Highlights of the Concall
- Net revenues increased 12.89% at Rs. 440.68 crore in Q1FY20 compared to Q1FY19 while PAT grew by 21.43% YoY to rs 48.73 crore aided by better product & segment mix, realisation improvement and lower input costs.
- Lubricant industry witnessed softness during the quarter due to pressure across auto sector and overall economic sentiments leading to industry growth volumes estimates at a flat to marginally negative level.
- Gulf Oil Lubricants achieved an overall volume growth of around 7.5% YoY during the quarter (Core Lubricants volume growth at near double digit). There has been double digit growth in personal mobility, Infrastructure, OEM dealerships and certain Industrial business segments. The Diesel Engine Oils segment saw slightly lower growth, also due to lower Factory Fill volumes and this segment reported single digit growth during the quarter.
- Strong volume growth was led by strong marketing and sales promotion programs undertaken this quarter. Ad spends stood higher at 7.5% of sales due to higher spends during World Cup and IPL. It expects ad spends to be 6-7% of sales for the full year.
- The company added 3,000 outlets during the quarter and now has a distribution network of more than 70,000 outlets, which is growing at 13-15% per annum.
- The Chennai plant started full operations in April and is operating at 60% currently. Freight savings from this plant have been offset by higher initial fixed overheads.
- Receivable position deteriorated as the company tried pushing sales in the two-wheeler market. Gross working capital days stood at 105.
- The company has already launched BS VI compliant lubricants at OEM level and plans to launch similar range at the retail level. The company stated that product performance is better and requires higher grades of base oil.
- The company expects lubricant industry to grow for the next 10-15 years and is contemplating strategies in the EV segment.
- Dividend payout (excluding DDT) stood at 40%. Major capacity expansion plans are over and taking in to account future incremental working capital needs, the company could reconsider its dividend payout policy going ahead.
- The two-wheeler batteries business has seen a volume growth of 25% yoy to reach revenue of Rs 15 crore for Q1 FY20 (Rs 54 crore during FY19). The company is contemplating setting up of an assembly line. The margins in the business are similar to the core business of lubricants. Currently, it is focusing on two wheelers and is contemplating an assembly line unit which could entail Rs 70-75 crore capex.
- The company maintained its target of achieving 2–3 times of industry volume growth (double digit) and guided it will maintain margin in the 16–18% range as the base oil price is expected to be steady at the current level.
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