Castrol reported 17% fall in profits on softening margins and fall in sales volumes

Castrol, the lubricant major reported 17% fall in net profit to Rs 47.0 crore despite 13% rise in sales to Rs 539.6 crore in the quarter ended December 2008.  The profits fell as operating margins tumbled down by 410 basis points to 13.8% during this period. 
 
On the back of slowdown in industrial production, fall in crude prices, volatility in commodity materials the market turned more challenging and resulted in drop in real consumption and de-stocking. These apart from contracting volumes together have affected the margins and bottomline of the company.  
 
Castrol has indicated that the demand in the first half of CY 2009 is likely to remain sluggish. This is expected to negatively impact the volumes of the company in the short term. However a good agriculture season and the benefit of raw material cost reduction will help grow gross margins.