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Analyst Meet / AGM
09-Nov-17
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Conference Call
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Castrol India
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Hopeful of achieving higher volumes in CY 17 than in CY16
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Castrol India conducted conference call to discuss the financial results and performance of the company for the quarter ended September 2017. Managing Director Omer Dormen and Director Finance & Chief Financial Officer Miss Rashmi Joshi addressed the call
Highlights of the Concall
- Q3CY17 total volumes grew 7.5% YoY as against a fall of 10% in Q2CY17 led by GST destocking. Growth was led by strong double digit volume growth in personal mobility segment (passenger Car Motor Oils-PCMO) and power brands, while some recovery was seen in commercial vehicle operation (CVO).
- Personal mobility segment with around 45]50% volume contribution grew strongly in double digit in Q3CY17, while industrial segment having around 13]15% contribution and CVO segments (around 40%) remained under pressure. Power brands have also done well and grew in double digits (around 60% of share).
- 9MCY17 Volumes fell 2% YoY due to pressure in CVO segment, which declined 9%. Other segments grew in single digit.
- Personal mobility segment continues to rise over the past 8]10 quarters (other than Q2CY17). It is split 66:34 between motorcycles and cars, both of which are growing well. While motorcycle grew more strongly in Q3CY17, cars have shown a more consistent growth in recent past. The segment grew in single digit in 9MCY17.
- CVO was most impacted by demonetization and GST related disruption and remains under pressure, though some recovery was seen in Q3CY17. CVO segment declined 9% in 9MCY17.
- Market has bounced back after GST]related disruption in Q2CY17 and continued uncertainty in July. The impact was much shorter in B2B segment while B2C was slower to ramp up. However, restocking has reached pre]GST levels.
- Base oil prices increased in Q2CY17 (25]30%) due to global shortage, though it has been stable since then, which led to the recovery in margin. However, crude oil price has started moving up and base oil price generally follows with a lag of a quarter.
- Gross profit per KL jumped 8% YoY and 5% QoQ led by stable exchange rate and base oil price during the quarter and improving product mix (profitable Personal mobility segment growing faster). In the longer term, prices are adjusted with movement of base oil prices, though with some lag.
- Castrol entered into new exclusive supply partnerships with Piaggio and extended existing OEM partnerships with VW group and Volvo cars.
- Organized market has grown in volume during the quarter, gaining share from the unorganized segment. Castrol gained market share even within the organised segment
- The company feels that electric and hybrid vehicles have still a long way to go and cars will substantially still run on combustion engines in the short to medium term.
- The company also undertook a strong outreach programme connecting with over 100,000 mechanics through the Castrol Super Mechanic contest.
- The company is hopeful of achieving higher volumes in CY 17 than in CY16 despite sharp decline in Q2CY17, backed by weak Q4CY16 due to demonetisation.
- The company expects no big capex requirement in the next 2 years and only maintenance capex will be incurred.
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