castrol india ltd - Myiris.com

MORNING INSIGHT October 25, 2012
Cost Ratio Analysis (% of (Net sales + Inventory)
Sep-12 Sep-11 YoY (%) QoQ (%)
RM & Service cost 54.6 54.9 (0.3) 0.9
Staff cost 4.4 4.6 (0.2) 0.4
Purchase of FG 5.2 5.1 0.1 0.7
Advertisement Exp. (Net Sales) 8.5 6.4 2.0 0.7
Carriage, Freight & Insurance 3.1 2.8 0.3 0.2
Other Expenses 7.3 7.5 (0.2) 0.3
Source: Company
Quarterly Result Analysis -
� In Q3CY12, the net revenue has fallen by 15.5% QoQ but up by 7.1% YoY to
Rs. 7.2 Bn mainly on account improved sales mix and pricing actions taken by
the Company.
� Raw material cost: In Q3CY12, raw material cost has decreased by 14.7%
QoQ but was up by 2.3% YoY to Rs.3.89 Bn. Lube oil is a derivative of crude oil
and Brent crude prices has decreased in Q3CY12 however the benefit was partly
offset by weak rupee. Raw material cost to sales ratio has increased by 0.9%
QoQ to 54.6%.
� Trading activity - purchase of finished goods: In Q3CY12, finished goods
purchased by the Company has fallen by 3.9% QoQ but up by 4.8% YoY to
Rs.372 Mn.
� Carriage, Freight & Insurance (CIF): CIF is dependent on imports of raw material.
The Company has increased its volumes and as a result its CIF cost has also
increased. In Q3CY12, carriage, freight & insurance cost has fallen by 10.9%
QoQ but was up by 14.5% YoY to Rs.221 Mn.
� Advertisement Expenses: In Q3CY12, advertisement expense has increased by
40.9% YoY but down by 7.4% QoQ to Rs.610 Mn. In Q2CY12, the Company in
order to promote new products has carried extensive and intensive marketing
campaigns, resulting in higher advertisement expenses.
� Employee Cost: Staff cost has fallen by 8.6% QoQ and 2.5% to Rs.310 Mn
partly due to base effect.
� Other Expenses: In Q3CY12, other expense has fallen by 12.7% QoQ but marginally
up by 0.4% YoY to Rs.523 Mn.
� Operating margin: Overall operating margin fell by 280bps YoY and 330bps
QoQ to 16.6% in Q3CY12. Its margin was down sequentially basis due to rise in
raw material cost to sales ratio. (Lube oil prices).
� Depreciation: In Q3CY12, depreciation cost has increased by 6.5% YoY and
10% QoQ to Rs. 66 Mn. Total capital employed by Castrol has increased by
13.3% QoQ and by 0.7% to Rs. 7.33 Bn.
� Other Income: In Q3CY12, other income has fallen by 12.9% YoY and by 8.6%
QoQ to Rs.148 Mn.
� Finance/Bank charges has fallen to Rs.1.0 Mn from Rs. 9 Mn on YoY. As on 30th
Sep'12, Castrol is a zero debt company.
� Castrol's PAT margin has fallen by 220bps YoY and by 230bps to 11.9% in
Q3CY12.
� The Company's profit after tax (PAT) was fallen by 29.1% QoQ and 9.9% YoY
to Rs. 857 Mn mainly on account of 1). Lower sales volume, 2). Lower realization,
and 3). Higher depreciation.
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