Castrol reports 14.8% jump in profit due to rise in other income and price realization

Castrol reports 14.8% jump in profit
Castrol, producers and marketers of synthetic and conventional motor oil and lubricants, reported a revenue growth of 14.8 per cent during the March 2011 quarter as compared to previous year. Out of the March quarter's revenue growth, just 2 per cent came from volume growth while the remaining 12.8 per cent growth came from price realizations and a jump in other income.

The cricket World Cup season also increased the company's advertising and other expenditures1 for the quarter. However, operating profit margins declined by 320-basis points against the year-ago level on the back of rising crude oil prices, as the lubricant manufacturer"s key raw material is a derivative of crude oil.

The resultant operating profit was just 1.2 per cent higher. The raw material cost as a proportion to net sales moved to a two-year high of 52.8 per cent.

In spite of all this, the company posted a decent 16.6 per cent growth at the net profit level due to a three-fold jump in other income to Rs 27.8 crore. Higher cash balance and interest rates brought in higher interest income while the company chose to write back Rs 12 crore of provisions made earlier.

Amidst rising raw material prices, the company is improving efficiencies to bring down the remaining costs and increasing earnings through price hikes, new products launches and upgrading consumers to superior products. 

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