Oct 28, 2016 11:39 AM IST | Source: CNBC-TV18

Bullish on volume growth for next few quarters: Castrol India

In an interview with CNBC-TV18, Omer Dormen, MD of Castrol India said that the company saw 5-6 percent volume growth in the first nine months of the year and remains bullish on volume growth for the next few quarters.

Castrol India reported a tepid set of earnings for the September ending quarter where its revenue fell 3 percent to Rs 761.7 crore year-on-year (YoY) and net profit fell 2.3 percent to Rs 139.8 crore (YoY).

In an interview with CNBC-TV18, Omer Dormen, MD of Castrol India said that the company saw 5-6 percent volume growth in the first nine months of the year and remains bullish on volume growth for the next few quarters.

Below is the verbatim transcript of Omer Dormen’s interview to Sonia Shenoy, Latha Venkatesh and Anuj Singhal on CNBC-TV18.

Sonia: The market has been a bit tough and that has reflected in your earnings as well. The revenues are down this quarter by about three percent. How challenging do things look for the next six months?

A: Actually when we look at the first nine months Castrol India is delivering still strong set of results. If you look at the first nine months the net is up by 9 percent which is driven by strong set of volumes and again that is a first in the last 5-6 years. So, we have grown volumes by 5-6 percent in the first nine months which is a great record.

If you look at Q3, July-September quarter was effective by an extended monsoon in July. But I am happy to see with the interventions that we made August and September were quite strong and we had a strong rebound in terms of volumes which were average on five percent growth again on those two months.

So, the outlook at the back of good monsoon and also strong commercial vehicle sales and vehicle sales we expect volumes to continue growing and in line with our strategy we will continue investing behind our personal mobility and power brand and we are still bullish about the volume growth for quarters to come.

Anuj: I find Castrol India to be much more Indian company to be than some of our own Indian companies and of course there is a long association with Castrol for a lot of bikers. What about the overall earnings per share (EPS) number growth from here on because that is something which has disappointed your investors a bit, some of your peers have done slightly better. Going forward what kind of growth trajectory do you see for Castrol India?

A: We don't look at only quarters.

Anuj: In the long run, in the yearly numbers, I am not talking about quarter to quarter numbers.

A: Yes, we will continue delivering in line with our expectation and that was driven by as we always said by our focus on power brands as well our personal mobility space. And the vehicle sales that we are seeing this year in terms of motorcycle sales as well as passenger car sales actually is quite good evidence why we have been focussing on these markets and it is also good evidence that we will continue growing in these sectors.

Sonia: How is competition shaping up, you guys still have a very high market share of over 20 percent in some key segments like commercial vehicles but are you facing any kind of competition and what is the market share currently?

A: If you look at the first nine months we have managed to hold on to our market share which meant that we grew with the market but in personal mobility actually if you look at the passenger car we managed to increase our market share. We have had some loss in the areas that we don't focus which is the old gen commercial vehicles and that is once again in line with our strategy. Overall we are holding to our market share of around 20 percent.

Sonia: So, just give us an outlook for the next couple of years, what could the revenue growth be and what would the margin profile for the company look like over the next couple of years?

A: We don't usually share the outlook for the future years but what I can say is the indications and the leading indicators are really positive and if you match them with the Castrol strategy which is focussing on power brands as well as the personal mobility.

So, that means we are really in a strong position with our strong Castrol brand to take advantage of the growth in line with the growth in the Indian market. So, Castrol is in a really great shape in terms of taking advantage of what is happening around us.

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