Indian blender Savita Oil Technologies saw profit in the final three months of last year fall to the lowest in more than two years even as sales rose to a record high.Profit fell in response to base oils inventory and foreign exchange-related losses, slashing operating profit margin to the lowest in almost seven years.The losses highlighted the risk that lubricant blenders faced because of the difficulty with managing the value of supplies between their procurement and the time when they are sold as finished products.Base oils producers faced a similar time risk between production and sale of their supplies.The risk highlighted why blenders cut back procurement plans when base oils prices fall. They resume buying when they are comfortable that prices have bottomed out.The moves exacerbate the fall in demand and subsequent price-volatility.Savita Oil’s operating profit of 344.49mn Indian rupees ($4.2mn) in the three months to end-December fell from Rs902mn during the third quarter of the year and by 52pc from year-earlier levels.Profit fell as a 28pc rise in costs from year-earlier levels outpaced the blender’s 21pc increase in sales..The 6pc rise in sales from the third quarter lagged even more the 14pc rise in costs during the same period.Costs surged even as base oil prices fell during the second half of last year.Average Asia-Pacific Group II base oils prices in second-half 2022 fell by more than 20pc from their peak levels last June.The lower prices benefitted blenders that had and that maintained low stocks.The lower prices forced blenders with existing stocks that they had procured earlier to mark down their value for accounting purposes.Savita Oil’s raw material costs accounted for more than 87pc of its total costs in the third and fourth quarters of the year, despite the sharp drop in regional base oils prices during that time.Its raw material costs had averaged around 82pc of total costs in the first half of last year, despite the rising base oils prices during that period.The surge in costs cut Savita Oil’s operating profit margin to less than 4pc in the fourth quarter. The margin fell from 10.8pc during the previous three months to the lowest since the beginning of 2016.Savita Oil, whose customers include Mahindra and Johnson & Johnson, said it had built an independent distribution network for its industrial lubricants in recent quarters.With this network in place, it was targeting a rise in industrial lubricant sales volumes in the next financial year starting in April..Apar’s Q4 lube profit extends fall
Indian blender Savita Oil Technologies saw profit in the final three months of last year fall to the lowest in more than two years even as sales rose to a record high.Profit fell in response to base oils inventory and foreign exchange-related losses, slashing operating profit margin to the lowest in almost seven years.The losses highlighted the risk that lubricant blenders faced because of the difficulty with managing the value of supplies between their procurement and the time when they are sold as finished products.Base oils producers faced a similar time risk between production and sale of their supplies.The risk highlighted why blenders cut back procurement plans when base oils prices fall. They resume buying when they are comfortable that prices have bottomed out.The moves exacerbate the fall in demand and subsequent price-volatility.Savita Oil’s operating profit of 344.49mn Indian rupees ($4.2mn) in the three months to end-December fell from Rs902mn during the third quarter of the year and by 52pc from year-earlier levels.Profit fell as a 28pc rise in costs from year-earlier levels outpaced the blender’s 21pc increase in sales..The 6pc rise in sales from the third quarter lagged even more the 14pc rise in costs during the same period.Costs surged even as base oil prices fell during the second half of last year.Average Asia-Pacific Group II base oils prices in second-half 2022 fell by more than 20pc from their peak levels last June.The lower prices benefitted blenders that had and that maintained low stocks.The lower prices forced blenders with existing stocks that they had procured earlier to mark down their value for accounting purposes.Savita Oil’s raw material costs accounted for more than 87pc of its total costs in the third and fourth quarters of the year, despite the sharp drop in regional base oils prices during that time.Its raw material costs had averaged around 82pc of total costs in the first half of last year, despite the rising base oils prices during that period.The surge in costs cut Savita Oil’s operating profit margin to less than 4pc in the fourth quarter. The margin fell from 10.8pc during the previous three months to the lowest since the beginning of 2016.Savita Oil, whose customers include Mahindra and Johnson & Johnson, said it had built an independent distribution network for its industrial lubricants in recent quarters.With this network in place, it was targeting a rise in industrial lubricant sales volumes in the next financial year starting in April..Apar’s Q4 lube profit extends fall
