Castrol sees benefit of falling crude from next year

The continued momentum in the personal mobility segment drove sales of the company to an 11% increase at Rs 799 cr during July-Sept 2014 quarter

Falling crude oil prices are likely to bring down costs of automobile lubricant makers only next year though some impact may be visible in the quarter ending on December. Castrol India, that holds less than a quarter of India’s lubricant market share, sees a continued surge in personal mobility segment of its business.

According to Ravi Kirpalani, managing director, Castrol India Limited, both base oil used in lubricants and crude oil price tend to move in the same direction after a lag.

“We expect to see some impact in October-December quarter and then some benefit in January-March 2015,” he told Business Standard.

A more stable cost of goods is expected in the near future. However, the Rupee continues to remain volatile and despite positive market sentiment, the commercial vehicle business continues to remain challenging. The continued momentum in the personal mobility segment drove sales of the company to an 11 per cent increase at Rs 799.5 crore during July-September 2014 quarter, while pushing up its profit by 13 per cent to Rs 117.9 crore.       

“This is a strong performance driven by the continued momentum in the personal mobility segment where we have been showing good growth over the last several quarters, driven primarily by our key brands – Castrol Activ in the two-wheeler segment and Castrol MAGNATEC in the passenger car segment.”

Our Personal mobility business continues to show good momentum. In this quarter the growth in the personal mobility business  has offset decline in the commercial mobility segment.

In terms of profitability, contribution of personal mobility is now half. The ratio is, however, changing, he said.

Despite sluggish growth in manufacturing and industrial production in the country during the first three quarters of the year, Castrol’s industrial business has shown both volume and gross margin growth.

With private sector fuel retailers expected to reenter the market, Castrol is looking at tying up again with Reliance Industries Ltd and Essar. “As and when private fuel retailers like RIL and Essar revive their outlets, we will work with them,” said Kirpalani though he said the contribution of sales through retail outlets has declined over the years with the market moving to workshops and high street. A large part of demand would also come from rural areas and small towns.

“For us growth will continue to come from personal mobility segment and high quality products. We weigh our performance on how our brand is viewed, customer satisfaction and our reach through distributor network,” he said.