Commenting on the results, Naveen Kshatriya, Vice Chairman - Castrol India Limited & Vice President Asia & Pacific, BP Lubricants, said, "Castrol India has delivered an extraordinary performance with PAT increasing by 60% in the quarter. This performance is attributable to the consistent execution of our long term strategy and is underpinned by ‘in year focus' on margins, attacking cost inefficiencies and reducing working capital. The business has gained from lower base oil prices, although other key input materials continue to remain at high levels. All this has helped deliver strong bottom line and cash flow. Results during the first nine months reflect our ability to deliver a sustainable winning performance even in a challenging environment. Given the upturn in the economy and the resultant growth of the lubricant market in India over the next few years, Castrol India will continue to focus and prioritise on its core lubricant product business".

Mr. Kshatriya further said, "We have held volumes in the current quarter reflecting the underlying robustness of our strategy and intrinsic brand strength which has enabled us to leverage the early indications of an upturn in the economy. The margin improvement has been achieved through a combination of premium product mix, retaining unit realization and favourable cost of materials. We have also worked aggressively on cost efficiency and cost effectiveness programs to make every rupee count and further improve our profitability. We continue to focus heavily on safety in operations".

Quarter Performance

The company's operating income grew by flat 2% to Rs 566.70 crore in Sep 09 quarter due to marginal performance at its automotive segment and decline in its non automotive segment. Its automotive sales, that contribute 85% to total sales, grew by fractional 4% to Rs 481.10 crore while its non automotive segment's sales declined by 10% to Rs 84.20 crore.

Nevertheless, lower base oil prices, premium product mix, retention of unit realization and cost effective measures boosted its operating profit margin (OPM) by whopping 890 bps to 25.4% translating to robust 57% growth in its operating profit to Rs 143.80 crore. In terms of cost, as % to sales net stock adjusted, its raw material cost crashed by 1770 bps to 46%. The remaining costs grew i.e. other expenditure by 620 bps to 22%; staff cost by 110 bps to 5% and cost of traded goods by 10 bps to 1%.

Segmentwise, the PBIT margin of its automotive segment grew by 840 bps to 23% leading to impressive growth of 63% in its PBIT to Rs 111.60 crore. The PBIT margin of its non automotive segment spurted by 1240 bps to 33% thereby lifting its PBIT by robust 45% to Rs 27.60 crore.

The profit growth was maintained at PBT level at 56% to Rs 143.20 crore thanks to interest cost and depreciation cost. The interest cost slipped by 14% to Rs 0.60 crore while its depreciation cost only rose by 16% to Rs 7.10 crore. Its other income grew by flat 1% to Rs 7.10 crore. On account of 190 bps decline in its effective tax rate, its net profit was lifted by robust 60% to Rs 95.60 crore.

Nine Month Performance

In the nine month ending Sep 09, the company's topline grew by fractional 2% to Rs 1715.60 crore. Its automotive sales grew by marginal 5% to Rs 1480.70 crore while the non automotive sales slipped by 13% to Rs 228 crore. With spurt in its OPM by 660 bps to 26.7%, its operating profit was boosted by healthy 36% to Rs 457.30 crore.

Segmentwise, the PBIT margin of its automotive segment grew by 660 bps to 26% boosting its PBIT by 42% to Rs 380.50 crore. The PBIT margin of its non automotive segment spurted by 800 bps to 29% thus lifting its PBIT by 21% to Rs 66.10 crore.

At non operating front, its other income was flat at Rs 23.20 crore (against Rs 23.30 crore in Sep 08 quarter). Interest cost slipped by 22% to Rs 2.10 crore and its depreciation cost grew by 7% to Rs 20.40 crore. Thus its PBT grew by healthy 36% to Rs 458 crore. On account of 140 bps decline in effective tax rate, its PAT was boosted by 38% to Rs 300.30 crore. On accounting PPA, its net profit was further lifted by 39% to Rs 300.30 crore.

Outlook

Commenting on the outlook for the year, Mr. Kshatriya said, "We expect the economy to continue to gain momentum and with demand revival, we hope to gain volumes. However, as crude has moved up circa USD 80/barrel from its lows of USD 40 / barrel early this year , our raw material prices are hardening and going forward this is likely to impact margin. Despite this and the impact of the poor monsoon this year, we remain confident of sustainable growth in our financial performance. Our confidence is based on superiority of our products, strong customer relationships, continued focus on improving the operational efficiency and sustained investment in brand and organizational capability building, supported by the unflinching commitment of our employees, our business partners and our loyal consumers."

The promoter's shareholding remains unchanged at 71.03% as on 30^th Sep 2009. The promoters' have pledged ‘nil' shares of the company as on 30^th June 2009.

The scrip is trading around Rs 549.75 on the BSE.