Release Date: October 28, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Castrol India Ltd (BOM:500870, Financial) reported a 9% increase in revenues for the third quarter of 2024, indicating strong financial performance.
- The company achieved an 8% volume growth in the third quarter compared to the previous year, with significant growth in the commercial vehicle segment.
- Castrol India's strategic focus on expanding its distribution network has resulted in a national footprint exceeding 136,000 outlets.
- The company has made significant progress in sustainability, increasing recycled content in plastic bottles to 50% and shifting to renewable energy sources in its plants.
- Castrol India Ltd has launched new products, including rust preventive products and auto care ranges, expanding its portfolio beyond traditional lubricants.
Negative Points
- Despite the revenue growth, there was an 8% decline in revenues compared to the sequential quarter, indicating potential volatility.
- The company's margins are expected to remain within a range of 22% to 25%, with no significant margin improvement anticipated despite lower crude prices.
- The impact of geopolitical tensions on raw material costs remains uncertain, posing a potential risk to future financial performance.
- The company's investment in the data center liquid cooling market is still in the pilot phase, with commercialization and revenue generation yet to be realized.
- Employee benefit expenses have increased significantly, partly due to restructuring costs, which may impact profitability if not managed effectively.
Q & A Highlights
Q: What is the expected volume growth for Castrol India in the OEM sector considering current auto industry trends?
A: Sandeep Sangwan, Managing Director, mentioned that the volume growth is expected to be around 4-5% for the year. The business is more dependent on the aftermarket rather than new vehicle sales.
Q: How are raw material prices, particularly base oil, affecting margins, and what is Castrol India's involvement in the data center industry?
A: Deepesh Baxi, CFO, explained that base oil costs have been largely flat over the past nine months. The company manages pricing to maintain margins within a 22-25% range. Regarding data centers, Castrol is exploring opportunities in liquid cooling and immersion cooling, with pilot projects underway.
Q: What is the current cash position of Castrol India, and how is the company planning to utilize it?
A: Deepesh Baxi stated that the company has about 1,200 crores on the balance sheet. The cash is intended for strategic investments and shareholder value creation, with ongoing discussions at the board level.
Q: How is Castrol India addressing sustainability and carbon footprint reduction?
A: Deepesh Baxi highlighted initiatives such as using recycled plastic in packaging, renewable energy usage in plants, and transitioning to natural gas for boilers. These efforts are part of the company's commitment to sustainability.
Q: What are Castrol India's plans for product development in response to the evolving automotive market, particularly with the rise of electric vehicles (EVs)?
A: Sandeep Sangwan noted that while EVs are growing, the internal combustion engine (ICE) market will continue to expand. Castrol is well-positioned to supply fluids to major OEMs and is prepared for growth in both ICE and EV segments.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
