Sri Lanka Chevron Lubricants’ net profits up, but Chief Executive warns of tougher times ahead

Sri Lanka’s Chevron Lubricants reported net profits of LKR422 million (US$14.1 million) in the second quarter, up by 26 % from a year earlier. Sales rose by 1.4% in the second quarter to LKR2.56 billion (US$19.3 million). Cost of sales fell by 3.6%, resulting in a 12.5% growth in gross margins. Between the January to June period, earnings were up by 42%, to LKR1.19 billion (US$8.99 million). Despite these gains, the company’s Chief executive, Kishu Gomes warned shareholders that an economic slowdown began to hit the company toward the end of the second quarter, and that if the conditions persists, “the full impact of it will be felt going forward.” In the second half of 2011, Sri Lanka ran into a balance of payments crisis because state energy firms borrowed heavily from banks in order to manipulate prices. The Central Bank kept rates down by printing money and although corrective measures were taken in February this year, the rupee fell from 110 to more thanover 130 during the period, all while interest rates increased. The transport sector took a hit when the government raised taxes on vehicle imports: “The current volatile economic environment and the consequent poor market sentiments can have an adverse impact on the industry growth compounded by industry specific challenges such as high fuel cost, increased duty on vehicle importation and the European market volatility,” Gomes said. “Recent severe drought experienced in the north western and eastern regions of the country may have an impact on our volume in the short term,” he added. Gomes also said that the volatility in the European market is affecting industrial lubricant exports. (July 23, 2012)