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| Sunday, 23 March 2003 |
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2002 - most successful for Caltex Lanka Caltex Lubricants Lanka Ltd (CLLL) has recorded a net profit of Rs 811 million for 2002, up from Rs 482 million recorded in the previous year. The removal of the 20 per cent income tax surcharge has helped improve the after tax profit substantially. The net turnover has recorded a 12 per cent increase over the previous year, mainly due to increased volumes and changes in the sales mix. Though export volumes increased by 74 per cent, specially on contract blending, they still account for only two per cent of volume and three per cent of revenue. The company has paid three interim dividends amounting to Rs 219 million. With the proposed final dividend of five rupees per share, the total dividend will amount to Rs 369 million. Chairman CLLL Martin B. Southern said: "2002, our first year of operation as a truly global company under Chevron Texaco Global Lubricants, was the most successful year in CLLL's history. The merger of Chevron, Texaco and Caltex has provided significant synergies and delivered greater benefits to the bottom line of the business. The purchasing synergies achieved through a global supply agreement for our key raw materials was a significant contributor to the results." Last year the company also focused on improving the reliability, efficiency and safety performance of its manufacturing plant as a part of the goal to attain world class performance. It also undertook many activities including the restructuring of plant operations which, combined with the successful implementation of other business improvement initiatives, increased customer services and reduced costs. He stated that local market conditions and the political environment were beneficial for business and helped the company record improved earnings. Caltex Lanka CEO Kishu Gomes stated that the cross-functional teams appointed to spearhead various key initiatives achieved most objectives, key initiatives and restructuring plans in 2002. The major initiative was the reduction of manhours to achieve benchmark levels across Caltex entities in Asia Pacific. The restructuring program at the plant and other cost reduction initiatives saved about Rs 48 million for the company. He said most of the earnings growth came from savings in raw material purchases under the global purchasing agreement and rebates on services and other charges which contributed for about Rs 100 million in savings. It is reflected in the gross profits. The local restructuring program saw a six per cent decline in operating expenditure. Contribution from interest income was Rs 180 million, a 37 per cent growth Year On Year. Raw material prices were stable, but the trend started to reverse towards the latter part of the year. However, with the relatively stable rupee, CLLL has managed to maintain its pricing structures for its key product lines. The company generated a free cash flow of one billion rupees during the year while the accumulated cash position stood at two billion rupees by year end. Core operations delivered a Return on Capital Employed of 46 per cent while overall ROCE stood at 25 per cent. Gomes said that the operational environment has improved significantly compared to 2001 due to the Government's effort to seek a permanent solution to the North-East conflict. The ceasefire agreement has brought relief to people and restored investor confidence. Improvements in fiscal and monetary policy have ushered in a conducive operating environment. This has helped the lubricant market to recover in line with the country's growth in GDP. There were significant developments in the retail fuel sector with the changes that have been made regarding the Government's energy policy. He said: "However, the Government's decision to invite the Indian Oil Corporation (IOC) undermines the transparency of the liberalisation process. As a direct result, CLLL stands to lose on the purchase agreement it signed with the government for exclusivity for lubricants distribution through the Ceylon Petroleum Corporation retail channel till 2004. An agreement has been signed between the Government and the IOC, allowing the latter to enter the retail fuel market. A third operator should be sought in a more competitive and transparent manner without any delay. The Public Enterprise Reforms Commission should consider the track record of the third operator who could add value to the country and ensure supply reliability, technology transfer, health and safety standards and improved customer service levels". Apart from loosing its exclusivity in the retail channel, the company anticipates some significant challenges in the dynamics of the lubricant industry in Sri Lanka. Trends in base oil prices have reversed due to uncertainty in the Middle East which could have an impact on the cost of production. "Therefore, this year is going to be very challenging for both the company and the industry. But we are very confident that the company is well positioned to take on all these new challenges," the company said. |
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