Chevron Lubricants Lanka PAT up 58%

It is anticipated that the Northern and Eastern markets will see brisk expansion in 2010. Already infrastructure is being upgraded and trading activity is being expanded.

It is likely that the transport system too will grow in tandem, with more investment in upgraded personal and commercial transport vehicles.

This anticipated development has the potential to create new revenue streams for Chevron Lubricants Lanka, said its Managing Director Kishu Gomes.

We will undoubtedly face new challenges in 2010.

At the same time, we are geared and ready to reap the benefits from the changes that are taking place in Sri Lanka and look forward to improved investor confidence.

We will continue with our proven business model, fortifying it where necessary with the right strategies.

On the global platform, 2010 is expected to see the global recession levelling out and we are hopeful that this will translate into renewed vigour in our export markets, thereby spurring sales from our industrial sector.

He said the year in review was a milestone year for Sri Lanka as three decades of conflict was brought to an end.

We see opportunities for our Company to play an important role in Sri Lanka's future development and growth.

Our business model is designed to create value for all our stakeholders - we hope to further strengthen this model in 2010.

Gomes attributed the Company's strong performance during the year to a number of factors; the innovative thinking of our team, global synergies, relatively lower raw material prices, flexibility to react strategically and expeditiously to market shifts and the collective resilience enabled us to complete a successful and profitable year once again.

Given the tough environment in which we operated this year, our performance has been exceptional. Not only were we able to deliver a strong financial performance, but we continue to operate an incident-free business.

For the third consecutive year, the industry experienced a market decline - a 7% drop due to cautious spending and escalating raw material prices in the 4th quarter. Competition in the marketplace has reached high levels with eight new players entering the already crowded market during the year.

Despite the tighter market conditions, the Company recorded a revenue of Rs. 8,691 million due in most part to our ability to anticipate market challenges and respond prudently.

The Company's Profit After Taxes (PAT) showed a 58% growth over last year at Rs. 1,495 Million.

The global economic downturn had an adverse effect on the manufacturing industry in Sri Lanka thereby hurting revenue from industrial operations.

The growth in the number of vehicles was also remarkably low, with high duties acting as a deterrent and this in turn translated into a lower than anticipated demand for lubricants. Global synergies lead to continued gains.

Our global synergies have always enabled us to achieve economies of scale that have a positive reflection on our bottom line; a trend that has been particularly significant this year.

We experienced the benefits of the global purchasing of most raw materials as well as the technology support from the Chevron network. The price of raw materials declined during the 1st and 2nd quarters of 2009 and these gains were transferred to our customers via a downward price revision.

The commitment at all levels of the Company to closely scrutinise and manage costs while maintaining our superior level of quality has paid good dividends.

The end of the conflict in Sri Lanka has brought about renewed hope and confidence; however, tangible gains from the newly achieved peace has not yet been fully felt in the lubricants industry.

Although inflation has been at record lows, we are yet to witness a significant shift in buying power among consumer segments across the board.

The newly liberated North and the East have become more accessible but the demand for lubricants anticipated from these regional markets has failed to materialise to the levels expected.

2009 saw a milestone in our operating model.

We introduced a new comprehensive distribution channel which enables us to offer our customers the dual advantages of convenient access and competitive pricing.

This channel shift has also enabled the creation of many entrepreneurial and employment opportunities.

Product adulteration remains a strong concern for the Company and an unhealthy trend for the industry as well as the country as a whole.

The phenomenon has been exacerbated by the pressing economic conditions in the country.

We believe that a strong regulatory framework is crucial to counter this unhealthy trend of product adulteration and to maintain consumer confidence.

Chevron Lubricants Lanka has always prided itself on its commitment to social responsibility and to this end, we remain committed to supporting the Government's efforts to properly regulate and enforce the law so as to preserve product integrity across the industry.