Automotive segment's sales increased by 16% to Rs 650.7 crore in quarter ended June 2010 with its contribution to total sales stood at 87%. The segment's PBIT witnessed an increase of 13% to Rs 193.7 crore which formed 87% of the total PBIT. Non Automotive segment's sales increased by 23% to Rs 93.3 crore in quarter ended June 2010 with its contribution to total sales stood at 13%. Non Automotive segment's PBIT witnessed an increase of 23% to Rs 28.6 crore which formed 13% of the total PBIT.

OPM of the company fell marginally by 20 bps to 30.2% leading a 15% growth in operating profits to Rs 224.70 crore as consumption of raw materials as a percentage of net sales rose to 46.5% in the quarter ended June 2010 from 40.7% in the corresponding previous year period. Purchase of traded goods increased to 1.5% from 0.9%, staff cost decreased to 3.3% from 4.8% while carriage, insurance and freight charges inched up to 3.1% from 3.0%. However Advertisement expenses decreased significantly to 4.9% from 7.0% and other expenses fell to 10.1% from 11.6%.

Commenting on the results, Mr. Naveen Kshatriya - Vice Chairman, Castrol India, said, "Castrol India has delivered an outstanding performance by focusing on its long term strategy of profitable volume growth, improving margins and attacking cost inefficiencies. The company's performance was aided by a buoyant economy and sustained investment in its brands. In the first half of 2010, our marketing activities were led by an integrated marketing program built around Castrol's global 2010 FIFA World Cup sponsorship and local activation programs for consumers and customers. The company has grown margins through a combination of premium product mix, improved propositions and pricing actions to offset inflation in raw material costs.

During the quarter under review, the company initiated several marketing programmes aimed at connecting with consumers. The Castrol Power1 "Meet Ronaldo campaign" targeted at youth, received good consumer response, positively impacting this high performance motorcycle oil brand. The company also intensified its activities in rural markets with the Sanjeevani programme aimed at directly contacting farmers in 35,000 villages to explain the benefits of Castrol CRB Plus for tractors. In the Independent Workshop segment, the company focused its activities on new account acquisition and up trading consumers to high performance, synthetic lubricants.

In the half year ended Jun 10, the company's net sales increased by 22% to Rs 1398 crore. Its automotive segment's sales grew by 22% to Rs 1271.1 crore while its non automotive segment's sales increased 26% to Rs 180.9 crore. Its OPM increased by 190 bps to 28.8% lifting its operating profit by 31% to Rs 402.70 crore.

Segment wise, the PBIT margin of its automotive segment increased by 140 bps to 28.3%. The PBIT margin of its non automotive segment spurted by 320 bps to 30%.

Its other income slipped by 11% to Rs 19.2 crore. Also its interest cost reduced by 27% to Rs 1.10 crore. Its depreciation cost fell by 11% to Rs 11.8 crore. Thus its PBT grew by 30% to Rs 409 crore. On accounting its tax provision, it's PAT improved by healthy 31% to Rs 267.50 crore.

Outlook

The company expects the economy to maintain the growth momentum with a likely positive monsoon. However, the growth could potentially be impacted due to high inflation and possible high interest rates.

However with crude at approx $75 -$80/barrel it expects raw material prices to harden, which is likely to impact its margins. Despite this risk, it remains confident of sustainable growth in the financial performance.

Castrol India's confidence is underpinned by superiority of its products, strong customer relationships, continued focus on improving the operational efficiency and sustained investment in brand and organizational capability building.

The promoter's shareholding remains unchanged at 71.03% as on 30 th June 2010.

The scrip is trading around Rs 456 on the BSE.