Chevron feels squeeze in lube sales as Dec. profit narrows

Chevron Lubricants Lanka PLC (Chevron), the local unit of the American multinational, saw its bottom line narrowing during the December quarter amid flat revenue but closed the financial year in a positive note, the interim financial showed.  
The downstream lubricant operator in Sri Lanka reported an earning of Rs. 2.89 a share or Rs.692. 9 million for the quarter ended December 31, 2016, down 3 percent from a year ago. 
The top-line remained virtually unchanged at Rs.2.95 billion. For the financial year ended December 31, 2016, Chevron reported an earning of Rs.14.51 a share or Rs.3.48 billion, an increase of modest 13 percent. 
This is on the back of a 5 percent growth in annual revenues to Rs.12.1 billion.  It appears that the competition is rising in a market where the growth has been sluggish.  The Cabinet of Ministers gave its approval in August 2016 for a Treasury’s proposal to liberalize the lubricant market for anyone to import and sell lubricant products at a time when the existing 13 players fighting for a 58 million litre market. Sri Lanka’s lube market is Rs.23.5 billion in value and grew by only 3.6 percent in 2015, data by the industry regulator Public Utilities Commission showed.

Chevron is the market leader in the Lankan lubricants market. But its market share declined to 47.58 percent in 2015 from 49.30 percent in 2014 while the Indian Oil Corporation Limited upped its market share  to 14.86 percent from 12.59 percent in 2014.
Ceylon Petroleum Corporation, the largest downstream oil player in the market, also saw its market share declining to 9.19 from 10.54 percent. Chevron is the largest and one of the three lube blenders in Sri Lanka.
While the slowdown in vehicle imports could have an adverse impact on the lube industry, the pickup in construction activities and the likely reliance on more lube intensive thermal power for electricity generation could soften the impact. 
As of December 31, 2016, Chevron Ceylon Limited held 51 percent stake in Chevron Lanka. 
Wasatch Frontier Emerging Small Countries Fund, which held 4.7 million shares or 1.96 percent stake as the second largest shareholder of Chevron Lanka as at September 30, 2016, didn’t feature among the top 20 shareholders of the company as at December 31, 2016.