Castrol India’s operating profit margin rebounded in the second quarter to its highest since 2024 as price increases and higher sales offset surging base oils costs
The results echoed FUCHS's own strong half-year results, although FUCHS cautioned its performance could not be extrapolated into the second half
Asia's Group II base oils prices have averaged even higher so far in the third quarter, sustaining cost pressures even as India's lubricants demand softened in June
Castrol India's operating profit margin rebounded in the second quarter as price increases and higher sales more than offset a sharp rise in base oil costs and supply disruptions.
Operating profit rose 44% year on year to 4.76 billion Indian rupees ($50 million) in the three months to end-June, the highest in more than 16 years.
The operating margin widened to 25.4% from 20.9% in the first quarter and above the company's five-year average of 23.3%, as a 25% rise in sales outpaced a 20% increase in costs.
Raw material costs rose 35% year on year as Asia's Group II base oils prices climbed to their highest level in more than a decade.
Three months ago, Castrol India warned that those cost pressures were still working their way through the business. Instead, second-quarter margins rebounded.
Castrol India said it had implemented two rounds of price increases during the first half of the year, while leveraging its diversified supplier base to manage the volatility.
"This agility enabled us to respond effectively while continuing to deliver strong business performance," Managing Director Saugata Basuray said in a statement.
The company, whose brands include Castrol GTX and Castrol CRB, said it remained prepared to introduce further price adjustments if required.
Market Repercussions
Castrol India was able to pass through much of the sharp increase in base oil costs during the second quarter while maintaining healthy margins and rising sales.
The performance echoed FUCHS’ strong first-half earnings, suggesting end-users continued accepting higher lubricant prices as they prioritised security of supply.
The outlook is less certain. Base oils prices have remained elevated into the third quarter even as demand already slowed at the end of the second quarter.
FUCHS cautioned that its own strong first half, driven partly by pre-buying tied to the Middle East conflict, could not be extrapolated into the second half. Castrol India said it remained cautious in view of inflationary pressures and volatile market conditions.
India's own base oils and lubricants demand fell in June, with buyers drawing down stock rather than restocking. The same pattern repeated itself elsewhere, from Japan to Italy and Brazil, as buyers grew comfortable enough with supply to stop building inventories.
The next test for the sector will be whether margins remain elevated once inventory benefits fade and customers become less willing to absorb additional price increases while raw material costs remain high.