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Castrol: Well oiled quarter

Jul 23, 2004

Introduction to results
Castrol, the private sector lubricants major, declared its 2QFY05 results today. Strong growth in auto sales and robust industrial activity has resulted in a topline growth of 16% YoY while the bottomline has grown by 15%. Castrol has declared an interim dividend of Rs 4 per share during the 1HFY05.

(Rs m) 2QFY04 2QFY05 Change 1HFY04 1HFY05 Change
Net sales 3,106 3,607 16.2% 5,552 6,490 16.9%
Other income 49 27 -44.1% 107 98 -8.0%
Expenditure 2,516 2,899 15.2% 4,415 5,397 22.3%
Operating profit (EBDITA) 590 708 20.1% 1,137 1,093 -3.8%
Operating profit margin (%) 19.0% 19.6%   20.5% 16.8%  
Interest 6 5 -25.0% 17 11 -38.2%
Depreciation 35 36 2.8% 70 71 1.4%
Profit before tax 597 695 16.3% 1,156 1,110 -4.0%
Tax 189 223 18.3% 390 370 -5.0%
Profit after tax/(loss) 409 471 15.4% 767 739 -3.5%
Net profit margin (%) 13.2% 13.1%   13.8% 11.4%  
No. of shares (m) 123.6 123.6   123.6 123.6  
Diluted earnings per share (Rs)* 13.2 15.3   12.4 12.0  
P/E ratio (x)         14.1  
(* annualised)            

What is the company's business?
Castrol is the largest private sector lubricants player with nearly 20% market share of the Rs 60 bn lubes market. The company operates in the bazaar segment and has recently tied up with OEMs (original equipment manufacturers) such as M&M and Tata Motors. It has a presence in industrial lubricants business also but the major chunk of revenues come from the auto and agricultural (tractors) segment.

What has driven performance in 1QFY05?
Sales:  The topline growth of 16% YoY during the quarter is largely due to robust auto sector growth. The company has been successful in improving realizations by way of high value products. Castrol aims at introducing premium brands in the auto segment as the Indian auto sector is witnessing change in terms of quality of engines and fuels. The company plans to cater to the mass market with its parent, BP's products.

The numbers have been restated and we shall put up a detailed analysis as and when we get the restated numbers.

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