LIOC to commission SL’s first grease manufacturing plant this year

• Company seeks to enhance revenues from other sources as auto fuel sales weighs on profits 

Lanka IOC PLC (LIOC), which has expansive petroleum downstream operations in Sri Lanka, will soon commission the country’s first grease manufacturing plant as part of the company’s strategy towards enhancing its revenues from other segments to keep its key auto fuel losses from significantly upending the overall financial performance.

The 30,000 metric tonne plant being built in Trincomalee where LIOC has its lubricant blending operation has the capacity to meet the entire local demand. The Ministry of Foreign Affairs has already approved the work permits for skilled employees from India, who will provide with the technical expertise to commence the plant’s operations. 

Grease plant is part of LIOC’s strategic moves towards further expanding its petroleum downstream operations as the company looks to increase volumes in its lubricants, bitumen and bunkering operations to enhance contribution to the group’s revenues and profits and thereby mitigate the adverse impact coming from its auto fuel losses due to administered prices. The absence of cost reflective pricing has caused both the LIOC and the market leader, the State-owned Ceypetco to incur heavy losses as their financial fortunes are at the mercy of which directions the global fuel prices move. 

As globe oil prices fast recovered to around US$ 70 a barrel this year from its pandemic lows of around US$ 17 a barrel at the height of the pandemic in April last year, the authorities were forced to raise fuel prices this June in a bid to keep the losses to a minimum.   “The losses being incurred in the auto fuel segment necessitated us to manage all other verticals prudently to generate profits”, said Manoj Gupta, the Managing Director at LIOC in his annual review of operations to the firm’s shareholders. LIOC reported earnings of Rs.882.6 million for the financial year ended March 31, 2021, up from Rs.421.8 million in the previous financial year despite revenues coming down by 19 percent to Rs.66.7 billion due to pandemic-induced restrictions on mobility. 

The company directed its focus on lubricants and bitumen segments in the last financial year as it expanded its distributor network for lubricants, while acquiring key industrial customers. The company said it remains optimistic of the new grease plant to generate returns.

“I am happy to announce that despite the challenges in importing the raw materials in this present situation, we will be commissioning the plant in the year 2021,” Gupta added.  

In LIOC’s first fiscal quarter ended June 30, 2021, the company reported earnings of Rs.273.1 million compared to a loss of Rs.795.5 million in the year earlier quarter. The sales rose by 57.9 percent to Rs.16.9 billion from a year ago.