Chevron Lubricants Lanka PLC (Chevron), the local unit of the American multinational, posted a June quarter (2Q16) net profit of Rs.802.0 million, almost flat from the same period last year, the interim results showed. The earnings per share edged up to Rs.3.34 from Rs.3.32.
Chevron, the leader in the Lankan lubricant market, also had a flat top line in the June quarter as the revenue didn’t change from Rs.2.8 billion it recorded a year ago. It appears that the competition is rising in a market where the growth has been sluggish. Thirteen lube players are competing for Sri Lanka’s 54 million-liter lube market, which is facing a risk of further fragmentation ahead of moves to further liberalize the virtually stagnant market.
According to the Public Utilities Commission (PUC) – the shadow regulator for lube market in Sri Lanka – these 13 parties are authorized to import, export, sell, supply and distribute lubricants out of which two parties – Chevron and Lanka IOC PLC – have lube blending facilities.
Chevron leads the market with a 49.3 percent share by end-2014, down from 52.6 percent a year ago, while Lanka IOC PLC and state-owned Ceylon Petroleum Corporation had a share of 12.6 percent and 12 percent, respectively.
The government last year proposed to further liberalize the Lankan lube market to encourage the companies to venture into more value-added products with high investment.
They further proposed to remove lube from the Board of Investment’s negative list.
But Chevron Chief Executive Dr. Kishu Gomes warned the move would reduce the duty gap between the imported and locally manufactured products in the industry.
This will increase the competition and as a result, will discourage new investments in lubricant manufacturing plants in Sri Lanka and result in more finished products imports.
Chevron in December 2014 commissioned its US $ 15 million state-of-the-art lube blending plant and warehouse complex in Sapugaskanda, which has the capacity of producing 45 MML per annum of finished lubricants in a single shift.
Meanwhile, for the six months ended June 30, 2016, Chevron posted a net profit of Rs.1.78 billion, up 16 percent from the same period last year.
The earnings per share rose to Rs.7.45 from Rs.6.42.
The revenue rose by a dismal 6 percent to Rs.5.9 billion.
The slowdown in vehicle imports, construction activities and higher utilization of less lubricant-intensive coal power and hydropower in the power generation mix, have an adverse impact on the company’s sales and the lube industry as a whole.
As of June 30, 2016, the parent, Chevron Ceylon Limited held a 51 percent stake in the company. The Employees’ Provident Fund held a 0.84 percent stake being the 13th largest shareholder.