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Higher raw material prices hurt Castrolís margins - Views on News from Equitymaster
 
 
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  • Apr 21, 2000

    Higher raw material prices hurt Castrolís margins

    Castrol, the premier private sector lubricant manufacturer in the country has been facing intense competition from the other private players such as Elf, Shell, Pennzoil who have made an entry into the country after liberalisation.

    Apart from competition from the private players, the public sector oil companies such as Indian Oil, Hindustan Petroleum and Bharat Petroleum have also become aggressive in the lubricant market since the margins from petrol and diesel were under pressure last year due to the governmentís inability to raise end product prices.

    (Rs m) 1QFY1999 1QFY2000 Change
    Sales 2,499 2,807 12.3%
    Other Income 48 117 144.1%
    Expenditure 1,977 2,335 18.1%
    Operating Profit (EBDIT) 522 471 -9.7%
    Operating Profit Margin (%) 21% 17%  
    Interest 6 11 83.9%
    Depreciation 23 27 17.3%
    Profit before Tax 541 550 1.7%
    Other Adjustments      
    Tax 109 109 0.1%
    Profit after Tax/(Loss) 431 440 2.1%
    Net profit margin (%) 17.3% 15.7%  

    This has been prevented the company from raising prices commensurately to compensate for a 60% rise in base oil prices (due to higher crude oil prices), Castrolís main raw material. This is reflected in the drop in the operating margins from 21% in the first quarter of last year to 17% in the first quarter of the current year.

    This situation is likely to persist in the second quarter too although a lot depends on the behaviour of international crude prices which affect base oil prices.

     

     

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