OPM was down 860 bps to 24.1% leading to a 34% fall in operating profits to Rs 209.5 crore as cost of material consumed as a percentage of net sales increased 820 bps to 44.1% in the quarter ended June 2017 from 35.9% in the corresponding previous year period while employee benefit expenses rose 120 bps to 5.5%, and other expenses rose 90 bps to 20.7% while purchase of stock in trade decreased 160 bps to 5.9%.

Other Income decreased 10% to Rs 15.5 crore in Q2CY17 from Rs 17.3 crore in Q2CY16 while interest cost was negligible at Rs 0.1 crore and depreciation fell 21% to Rs 11.8 crore. As a result PBT was down 33% to Rs 213.1 crore. The effective rate of tax rose to 35.3% from 35.1% leading a 33% decrease in PAT to Rs 137.9 crore.

For H1CY'17 Net Sales of the company was down 4% at Rs 1752.6 crore compared to corresponding previous year while bottomline fell 16% to Rs 316.9 crore. OPM fell 440 bps to 27% leading a 17% fall in operating profits to Rs 472.8 crore. Other income decreased 6% to Rs 34 crore while interest cost was down 64% to Rs 0.4 crore and depreciation up 3% to Rs 24.1 crore. PBT as a result fell 17% to Rs 482.3 crore. Effective rate of taxes fell to 34.3% from 35% leading a 16% decrease in PAT to Rs 316.9 crore.

Commenting on the results, Omer Dormen, Managing Director, Castrol India Limited, said: "The external environment during the first half of the year has been extremely challenging with the lingering effect of demonetization particularly impacting commercial vehicle oil volume, transition to the GST era and sudden unexpected increase in base oil prices due to a major supply/demand imbalance in the Asia region, all impacting the company's performance, especially during the second quarter of the year. Despite these strong headwinds, we delivered volume growth in the personal mobility segment, power brands and industrial segment and retained our overall market shares.

"Whilst we are confident about the long term benefits of GST, the uncertainty around its implementation severely impacted the market in the short term especially in June. We reflected the entire GST rate benefits in our consumer prices from 1 July and furthermore, supported our distributors and customers in the month of June for a smooth transition. We continued focusing on doing the right things with a long term vision to create enduring value while we provided full support to our trade partners taking into account all the costs relating to GST transition in June itself."

During the first half of the year, we continued investing in our key strategic drivers, further strengthening our lead brand Castrol Activ through TV advertising and digital activation. We also ran an innovative mobile campaign in agri segment for Castrol CRB Plus, reaching out to over six million tractor owners. Our focus on increasing distribution reach continued with significant success in customer acquisition and expansion."

Despite the challenging external environment, we are progressing in line with our strategy. We see a positive impact of GST implementation in the long term and are confident that the actions we continue to take, will deliver results. Looking ahead, we expect that the Indian economy and the lubricant market will continue to recover, driven by the positive economic measures, improved COGS and increased vehicle sales and freight movement.

Castrol India is in a strong position to benefit from growth prospects on account of its strong brands, enduring relationships with key stakeholders and highly committed staff.

The scrip is currently trading around Rs 390 on the BSE