Chevron Lubricants Lanka records strong 2Q despite forex losses

Sri Lanka’s lubricant market leader Chevron Lubricants Lanka PLC recorded strong top and bottom-line performances for the quarter ended on June 30, 2022 (2Q22), though it incurred over a Rs.1.2 billion foreign exchange loss, due to the rupee depreciation against the US dollar. 

The company reported earnings of Rs.3.50 per share or Rs.834 million for the quarter under review, compared to earnings of Rs.1.92 per share or Rs.461.2 million reported for the same period, last year.

The company’s lubricant sales rose 124 percent year-on-year (YoY) to Rs.6.1 billion while the cost of sales rose 86 percent YoY to Rs.3.3 billion. 

The operating profit for the period was Rs.2.1 billion, up 268 percent.
However, the company incurred a massive finance cost of Rs.1.259 billion for the quarter, compared to Rs.578.8 million a year ago. 

Out of that, Rs.1.25 billion was booked as a transaction and translation loss stemming from the company’s foreign exchange dealings, as a result of the sudden devaluation of the rupee against the US dollar. 

“Due to the acute foreign currency liquidity shortage in the country’s banking system, the company carried a considerable proportion of US dollar-denominated trade and other payables, which were being settled based on the availability of US dollars through its banks. 

Trade and other payables as at March 31, 2022 were revalued at an exchange rate of 299 (LKR/USD) based on the foreign exchange rate reported by the Central Bank of Sri Lanka.

However, consequent to the Central Bank of Sri Lanka allowing greater flexibility in exchange rates, the LKR further depreciated against the US dollar. 

The foreign exchange rate reported by the Central Bank of Sri Lanka as at June 30, 2022 was 367.12 (LKR/USD). As a result, the company recorded a net foreign exchange transaction (realised) and translation (unrealised) loss amounting to Rs.1,250,793,090 for the interim period between April 01 and June 30, 2022,” the notes to the interim accounts stated.  

Meanwhile, for the six months ended on June 20, 2022, the company reported earnings of Rs.1.78 billion, down 11 percent form a year ago on a sales revenue of Rs.4.8 billion, up 143 percent YoY.

According to lubricant market shadow regulator Public Utilities Commission of Sri Lanka, Chevron Lubricant Lanka held over 50 percent market share in the first quarter of 2022, despite the entrance of new players into the market. 
As at June 30, 2022, Chevron Ceylon Limited held a 51 percent stake in the company. The second single largest shareholder Barca Global increased its stake in the company during the three months to 5.39 percent, from 4.19 percent.