Rs 1.9b lubricant facility to be set up soon

By Sanjeevi Jayasuruya

Sri Lanka’s largest lubricant industry player, Chevron Lubricants Lanka (LLUB) will invest an estimated Rs 1.9 b in the construction of a new lubricant blending plant at Lindel Industrial Zone, Sapugaskanda.

Kishu Gomes

The construction of the new facility is a part of the company’s plan to relocate operations when the lease agreement with Ceylon Petroleum Storage Terminals Limited ends in July next year. Instead of making the new plant a replica of the old one, there will be more capital injected into the plant in terms of modern equipment, Chevron Lubricants, Managing Director Kishu Gomes told the Sunday Observer Business. The plant when completed will be a state-of-the-art lubricant plant. It will cater to the anticipated growth in the lubricant industry in the next 10 to 15 years, he said.

The Maldives and Bangladesh operations have recorded growth and they contribute positively to the company’s bottom line. With the increased capacity at the new plant, local operations too could be up-scaled, he said. The local lubricant industry has recorded a compound growth of four percent on a year-on-year basis. In 2011 it recorded eight percent growth compared to the previous year. It expects to retain the four percent growth this year.However, the business environment is very challenging as rupee depreciation, inflation and volatility in the global market pose a threat in the stability of the operating environment, Gomes said. LLUB, which dominates the local market with approximately 57 percent of market share, will use internally generated funds to construct the plant. It is expected to fully relocate its operations in the second quarter of 2014.

It is also anticipated that the blending operations would be disrupted for about one-two months. The new plant is to be depreciated over a period of 15 years.

Plans to relocate the plant were first recorded in March last year on the heels of LLUB’s highest earnings in its history in 2011, with a reported profit of Rs 2 b.

The company’s profit forecast for 2013 stands at Rs 2.47 b and Rs 2.67 b for 2014 representing a growth of 10 and 8 percent respectively.

According to the company’s most recent financial statements, LLUB made a profit of Rs 1.72 b during the first nine months ended September 30, 2012 against Rs 1.44 b during the corresponding period in 2011.