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| Sunday, 16 June 2002 |
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Caltex looks ahead for smoother year Opening up some of the currently closed sectors especially power and petroleum for private sector participation is encouraging, states Managing Director of Caltex Lubricants Lanka Ltd. Kishu Gomes in the latest annual report of the company. "We expect a stronger performance in 2002. Initiatives we have taken to reduce our cost base should enhance our profitability within the next 12 months," the report said. The strategy of the company to concentrate on controllable variables in the cost structure has been well executed and the company will strive to convert fixed costs into variable costs by restructuring the cost base. Plant restructuring is under way with excess staff being offered a voluntary retirement scheme and reassignment of responsibilities for those remaining with the company. These initiatives will result in an annual saving of Rs 50 million by FY 2002. The lubricant market witnessed an eight per cent decline in volumes for the first time since Caltex returned to Sri Lanka in 1994 due to weaker consumer demand, longer oil drain intervals and a slowdown in growth in the motor vehicle population, broadly in line with the slowdown in GDP growth and consumer demand in other sectors and products. The power crisis also took a significant toll on volumes with the closure of many small to medium-scale industries. The impact was minimised with the government relying more on thermal-based power supply where lubrication is still needed. The continuous rupee depreciation and the introduction of the import surcharge also contributed to the difficult operating environment. Although revenue grew by 11 per cent to Rs 3.5 billion, as a result of price increases, the company's gross profit margin declined to 36 per cent from 38 per cent in the previous year due to the inability to pass the cost of such developments to end consumers. The company's operating expenditure rose by about 33 per cent due to an 'on off' provision of Rs 73.6 million spent on a voluntary retirement scheme while net earnings declined by about 14 per cent to Rs 481.7 million. "The company's performance can be considered satisfactory given the adverse market conditions which it operated in," said Mr Gomes. "We maintained our dividend pay-out policy over 47 per cent for the year which amounted to Rs 228 million. In a bearish market, the stock price was outperforming," he added. The company maintains a 96 per cent market share and has added new third party depots in Anuradhapura, Ratnapura and Batticaloa. The retail lube shop concept was introduced to outstations to provide solutions to the agriculture and fisheries sectors. Gomes has stated that export sales and the supply of marine lubricants showed a steady increase during the year. Caltex entered the Sri Lankan market in 1994 with the acquisition of a 51 per cent stake in Lanka Lubricants Ltd. Shares of the company were listed in the Colombo Stock Exchange in 1996. Caltex is involved in blending, importing, distributing and marketing lubricating oils and greases. Over 95 per cent of the products sold by the company are blended locally at its Kolonnawa blending plant. During the fourth quarter of 2001, the parent companies of Caltex merged to form ChevronTexaco, making it the second largest US-based energy company and the fifth largest in the world. The board of directors of Caltex Lanka are M.B. Southern, Kishu Gomes, M.T.L.Fernando, Ken Balendra, Lalith Gunasinghe, Daham Wimalasena and Anura Perera. |
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