Lubricants major, Castrol, has reported a nearly 4% topline growth during the September quarter. However, at the net profit level, the company continues to be hit and has reported a disappointing 27% decline during the quarter.
Operating Profit (EBDIT)
Operating Profit Margin (%)
Profit before Tax
Profit after Tax/(Loss)
Net profit margin (%)
No. of Shares
Diluted Earnings per share*
The decline in profits is largely a result of strengthening of the raw material costs, as compared to last year. The crude prices have strengthened in the past few months. Consequently, the company's raw material costs were up a significant 49% during the quarter. Material costs as a percentage of sales stood at over 66% (as compared to over 46% in the corresponding period last year).
Consequently, operating profits were down nearly 29% and operating margins fell sharply to below 15% levels. The fact that the company's revenues have not picked up enough steam despite the buoyancy in the auto sector, points to the competitive environment prevailing in the segment. Castrol has always been perceived as a premium brand commanding brand loyalty. But lately, PSUs have started pushing their own lubricant brands aggressively.
as % of net sales
Also, the company is mainly present in the bazaar segment and is not available at the petrol pumps and other retail outlets. This seems to have hampered the company's prospects.
The stock is largely lacklustre and is trading at Rs 193 levels, a P/E of 17x annualised 9mFY04 earnings. The increasing competition in the lube segment and Castrol's inability to enhance its distribution network are likely to continually cast a shadow on its prospects.
Castrol India Ltd has announced results for the second quarter of the current year ended December 2016. The company has reported a year on year (YoY) growth of 5.2% in the net sales while net profits for the quarter grew 12.1% YoY during the quarter.
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