H2 volumes will be as good as or better than H1: Gulf Oil

Gulf Oil Lubricants has witnessed a strong second quarter thanks to the drop in crude oil prices globally. The company saw an all-time high net profit of Rs 23.62 crore.

In Q2, the company saw strong volume growth of 6 percent and a 4 percent total income growth to Rs 249 crore.

In an interview with CNBC-TV18, Ravi Chawla, MD, Gulf Oil Lubricants said the pricing has been stable in terms of raw material cost which resulted in a positive second quarter in terms of volume growth.

However, he added there has been no additional discounting in Q2 as the discounts have been stable compared to Q1.Below is the transcript of Ravi Chawla’s interview with Anuj Singhal and Latha Venkatesh on CNBC-TV18. Anuj: Clearly, the benefit of lower crude oil is visible in your numbers, but do you think you will continue to have this kind of pricing freedom and we will continue to enjoy higher margins now that we have seen that crude prices have more or less settled in the current zone? A: Rightly the last quarter, whatever pricing we saw is continuing to be stable in terms of the raw material cost, but for us, the quarter two has turned out to be a positive quarter because we saw strong volume growths of close to six percent and this has really helped us to post record profit after tax (PAT) of nearly Rs 24 crore which is the highest ever and the volume growth has also helped us.Revenue though is up only 4.1 percent because some of the low pricing has been passed on in the market and to customers, but a strong volume growth especially for the business to business (B2B) factory fuel segment and the motorcycle segment for us has helped us to post profit before tax (PBT), earnings before interest, taxes, depreciation and amortisation (EBITDA) increase of nearly 20 percent at Rs 38.6 crore. So, that has been the positive feature for quarter two which is normally a monsoon quarter. Latha: So, what is the sense? Have you to give any price discounts or have you wanted to give price discounts because you have the advantage now? A: We have the competitive scenario. In each of the segments, there is a certain positioning we occupy in terms of pricing. So, we will obviously keep our positions. The discounts have been stable as compared to quarter one, so there is no additional discounts and we hope that that will also continue in the future. So, there has been no additional discounting in quarter two. Anuj: I believe that you hope to increase the EBITDA from Rs 16.8 per litre to Rs 22.4 per litre. Again, does the competitive environment allow you this kind of an EBITDA margin expansion? A: You have seen in quarter one most of the companies who have listed the results, the results are announced, the margins have gone up. Our EBITDA margins have increased two percent over last year quarter and we are at 15.6. So, that has been a little above the quarter one. So, these margin trends, we have seen the industry has delivered overall. Latha: So, what do you think will be your second half volume and value growth? A: Our H1 volume is at 5 percent growth. Industry, we believe is getting into positive territory, though the tertiary numbers are not showing positive. But industry which was flat to negative mainly because commercial vehicle oils in the transport segment are a large chunk, we would estimate the industry is starting to show 1-2 percent positive growth. Against that, we are at 5 percent H1 and quarter two has been close to 6 percent. Our strategy has been to try to get two to three times the market growth. So, that would be our outlook going forward. Hopefully economy will improve in terms of mining sector. Other conditions which basically means more traffic movement. Personal mobility is doing well, two-wheelers, scooters and motorcycles. So, second half, we hopefully will have that positive input. Latha: At the moment, are you witnessing it on the ground? You said that you are actually seeing personal vehicle demand going up. Is there any segment that is already showing that it is waking up from its stupor? A: We are seeing the two-wheeler segment and the car segment has shown positive improvement over last year.