Capitaline

Analyst Meet / AGM 23-Feb-17

Conference Call

Castrol India

2017 is expected to be a challenging year

Castrol India conducted conference call to discuss the financial results and performance of the company for the quarter ended December 2016. Senior Management of the company addressed the Concall.
Highlights of the Concall

Castrol India reported 11% increase in its bottom-line to Rs 155.8 crore in Q4CY'16 on a 1% decrease in topline to Rs 782.2 crore compared to corresponding previous year period. For CY'16 Net Sales of the company was up 2% at Rs 3370.4 crore compared to corresponding previous year while Bottomline rose 10% to Rs 674.9 crore.

The company has declared a final dividend of Rs.4.50/- per share (2015: Rs.5/- per share) and a Special Dividend of Rs.2/- per share (2015: Nil per share) for Financial Year 2016.These are in addition to the interim dividend of Rs.4.50 per share (2015: Interim Dividend Rs.4/- per share) paid on August 18, 2016. All dividends for the Financial Year 2016 aggregate to Rs.11/- per share (2015: Rs. 9/- per share).

Overall volume increased a mere 2% to 47,000 KL in Q4CY16 compared to Q4CY'15 due to demonetization and 4% for 2016. Volumes came 8-10% below expectation in November 2016, which recovered marginally in December.

The fourth quarter was particularly affected by demonetization which impacted lubricants consumption as well as sale of vehicles and this impact is expected to continue in the early part of 2017.

The company expects the volatility to increase in the first half of 2017, with rising input costs and the continued impact of demonetization

Personal mobility and power brands along with industrials clocked double digit growth this quarter. CV (Commercial vehicles) were more impacted by demonetization than PV (passenger vehicles), though the segment saw market share growth. Further, marine volumes dipped due to pressure on marines globally. However, Castrol has posted double digit growth in CV in its power brands wherein it invests.

Volume breakup for CY16 was 12% industrial, 1% marine, 40% personal mobility (32% Motorcycles, 8% Passenger car motor oil) and 47% Commercial vehicle oil

The company expects personal mobility share in general and passenger car motor oil in particular to increase

The company shall review and increase prices when necessary, to maintain margins.

Base oil price has risen by around 20% in the past 8 months and management expects this to sustain in the near term due to short supply. Input costs are also increasing due to rising base oil prices

2017 is expected to be a challenging year but the company remains optimistic about the Indian lubricant market and its business growth.

The company also continues to strengthen its relationships with its key account customers and has recently renewed a strategic five year agreement with Tata Motors passenger car division

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