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Castrol’s first-half profits negatively impacted by India’s GST

Castrol India Limited announced that its profit before tax during the first half of 2017 declined by 17% to INR482.2 crore (USD75.2 million), while profit after tax had declined by 16% to INR316.8 crore (USD49.4 million) compared to the same period a year ago, primarily because of lower volumes due to the impact of Indiaโ€™s newly introduced goods and services tax (GST) and the lingering effect of demonetisation.

โ€œThe external environment during the first half of the year has been extremely challenging with the lingering effect of demonetisation particularly impacting commercial vehicle oil volume, transition to the GST era and sudden unexpected increase in base oil prices due to a major supply/demand imbalance in the Asia region, all impacting the companyโ€™s performance, especially during the second quarter of the year. Despite these strong headwinds, we delivered volume growth in the personal mobility segment, power brands and industrial segment and retained our overall market shares,โ€ said Omer Dormen, managing director, Castrol India.

Dormen said that while Castrol India is confident about the long term benefits of GST, โ€œthe uncertainty around its implementation severely impacted the market in the short term especially in June.โ€

โ€œWe reflected the entire GST rate benefits in our consumer prices from 1 July and furthermore, supported our distributors and customers in the month of June for a smooth transition. We continued focusing on doing the right things with a long term vision to create enduring value while we provided full support to our trade partners taking into account all the costs relating to GST transition in June itself.โ€

Castrol India has recently renewed a distribution agreement with Essar Oils for sale of Castrol lubricants through Essarโ€™s retail network. The company also made some significant inroads in the industrial lubricants segment with its new product Castrol Hysol XBB.

As part of its commitment to deliver technically superior products to customers and consumers, the company has established a new state-of-the-art technology laboratory within its complex in Silvassa. The laboratory is currently in the commissioning phase and is scheduled to be fully operational by the third quarter.