Gulf Oil Lubricants India’s Q4 Profit Hit by Labour Code Charge
Net profit falls to lowest since 2023 as labour code charge offsets record revenue and sales volumes
Gross margin rises to highest since early 2022 on firm demand, steady commodity prices
India lubricants demand growth extends into the current quarter
Gulf Oil Lubricants India (GOL) saw profit fall to a two-year low in the fourth quarter as exceptional costs linked to India’s new labour code offset record-high revenue and sales volumes.
The blender’s net profit fell to 771.1 million Indian rupees ($8.50 million) in the three months to end-December, dipping by 21% year on year and for the first time in eleven quarters.
Profit was pulled down by a IR226.4 million exceptional charge related to a new labour law that came into effect in November.
Excluding those one-off factors, GOL’s gross profit rose 12% and for an eight straight quarter, supported by stronger lubricants revenue and higher sales volumes.
Key Highlights
· Fourth-quarter sales climbed 10% year on year, outpacing a 9% increase in raw material costs and extending its rise every quarter since the second half of 2020.
· Rising sales growth mirrored sustained strength in India’s lubricants demand, which expanded in the final three months of the year for the fourth time in five quarters.
· Raw material costs accounted for less than 50% of total costs, dipping below that threshold for the first time since early 2020, aided by easing base oils prices.
· Average Group II base oils prices in Asia slipped in the three months to end-December for a third straight quarter, partially offsetting the continued depreciation of the Indian rupee.
· The blender’s gross profit margin rose to 49.6%, up from 48.3% during the previous quarter to the highest level since early 2022.
· Fourth-quarter net profit margin fell to 7.7%, slipping to the lowest since second-half 2022, reflecting the impact of the labour-law charge.
Market Outlook
India’s lubricants consumption continued to rise at the start of this year, supporting GOL’s expectations of sustained demand growth in the current quarter.
“GST rationalisation for ICE vehicles has improved the affordability providing a renewed sense of optimism among the consumer, creating additional growth opportunities,” Managing Director Ravi Chawla said.
A continued focus on rural and agricultural markets will remain a key driver in sustaining the company’s growth trajectory, he said.
