The Hindu Business Line : Castrol in cost-cutting drive as crude oil prices escalate

CASTROL India is trying to neutralise the rise in costs because of increase in global crude oil prices through a series of cost reductions and expects to maintain the bottom-line for 2004 as that of last year.

"Base oil prices have gone up 33 per cent which affected our costs. But we expect to maintain the same results for 2004 as of last year at least," the Managing Director, Mr Naveen Kshatriya, told newspersons after announcing the launch of Castrol BikeZone, a service workshop for two-wheelers.

Castrol India imports most of its requirements of its base oil. The consumer business, consisting of supplying lubricants and support services to all vehicles, constitutes 75 per cent of Castrol's business, while industrial lubes, and commercial and marine businesses make up the rest.

The company has tie-ups with most automobile and two-wheeler manufacturers, including Maruti Udyog and TVS.

Mr Kshatriya said that the company has taken steps to reduce costs wherever possible and has been able to reduce fixed-cost operations by around 5 per cent. During 2003, Castrol's fixed cost was around Rs 300 crore.

He also said that Castrol India had tried to reduce cost escalation with more effective marketing spend and on packaging. It has passed on some of the cost increase to customers.

The company has increased marketing spend by 10-20 per cent during 2004 compared with 2003.

In the retail sector, its market share is around 27 per cent. Mr Kshatriya said that he did not know of any plans of BP Castrol to increase its stake in the Indian company from the existing 71 per cent.

Though the net for the second quarter ended June rose 15 per cent, for the first six months net profit was the same as last year.

For the second quarter, Castrol India posted a 15 per cent increase in net profit to Rs 47.14 crore while total income rose 17 per cent to Rs 363.46 crore.

For 2003, Castrol's net profit dipped 10.16 per cent to 137.88 crore while total income rose marginally to Rs 1,190.29 crore.

Castrol BikeZones will be set up on franchisee basis with the first one being opened in Bangalore.

Mr Kshatriya said that 45 such workshops would be set up in the rest of the country over the next 6-8 months. They will ensure that motorcyclists and scooterists get quality personalised service, clean menu-driven pricing and complete transparency.