US blender Valvoline’s Q1 profit falls

US lubricant blender Valvoline saw its profit fall in the first three months of the year as labour and product costs outweighed higher sales.

Operating profit of $117mn in the first three months of the year fell by 11pc from the same period a year earlier to its lowest since first-half 2020.

Gross profit edged up by 1pc to $250mn.

Operating profit fell as the 26pc rise in sales to $886mn in the first quarter lagged the 40pc rise in costs during the same period.

The trend mirrored a similar pattern among blenders throughout the world. The blenders have raised their prices in response to higher costs. Base oil prices surged in the first quarter of the year as supply tightened and crude prices extended gains.

But blenders typically face a lag of at least a month between higher feedstock costs and an adjustment in lube prices to reflect those higher costs. The repeated rise in feedstock costs has prolonged the lag factor.

Like other blenders, Valvoline expected profitability to improve in the third and fourth quarters of the year as it reflected those price increases.

Strong demand has so far given blenders more leverage to implement such prices-increases.

The higher costs cut Valvoline’s gross profit margin to 28.2pc in the first three months of the year. The margin was down from 35.2pc the same time a year earlier and the lowest in at least seven years.