Chevron Lubricants Lanka profits halve in 4Q amid marginal top line growth

Chevron Lubricants Lanka PLC, Sri Lanka’s lubricant market leader, saw its earnings halving in the final quarter of financial year 2022, as the firm experienced tepid growth in lube sales, while costs escalated.

For the quarter ended on December 31, 2022 (4Q22), the company reported a revenue of Rs.4.6 billion, down 2 percent year-on-year (YoY), as Sri Lanka’s economy slowed significantly, while the ban on vehicle imports continued. 

However, the firm was able to keep its cost of sales flat at Rs.2.9 billion and as a result, the gross profit rose 6 percent YoY to Rs.1.7 billion.

However, a sharp rise in administrative costs erased those gains and the company reported an operating profit of Rs.972.9 billion for the quarter under review, down 10 percent YoY. The administrative costs surged 81 percent YoY to Rs.405 million. Most likely as a result of higher interest rates and currency translation losses, the finance cost of the company during the quarter rose 972 percent YoY to Rs.108.7 million.

The increased taxes also resulted in the company’s income tax expense to rise 184 percent YoY to Rs.594.3 million. The earnings for the period stood at Rs.1.80 per share or Rs.431 million, compared to earnings of Rs.3.78 per share or Rs.906.2 million a year ago. Meanwhile, for the year ended on December 31, 2022, the company reported a net profit of Rs.3.6 billion, down 7 percent YoY on a revenue of Rs.24.5 billion. According to analysts, lubricant sales are expected to go up in the coming months, with more demand coming from the thermal energy generating sector, as Sri Lanka recently ended power cuts and is likely to heavily rely on diesel and other fossil fuels to ensure 24/7 electricity.

Also, with the foreign currency crunch gradually easing, the government may review the ban on vehicle imports, particularly after securing the envisaged International Monetary Fund bailout. Chevron Ceylon Limited owns 51 percent of Chevron Lubricants Lanka PLC.