Valvoline Inc. (NYSE: VVV), a leading supplier of premium branded lubricants and automotive services based in Lexington, Ky. U.S.A., sold 14.6 billion gallons of finished lubricants in the third quarter ending June 30, 2017, up 5% over the previous quarter for its international segment. However, sales in its Core North American market were down 3% during the quarter, to 25.8 billion gallons.
For the quarter, the international segment represented 29.5% of the company’s gross profit, compared to 25.8% for its Core North American market.
However, premium lubricants (branded products) represented 45% of sales for its Core North American market, compared to only 27.7% for its international segment, which should generate higher margins for Valvoline.
Rising base oil costs, the key raw material for finished lubricants, were a headwind during the quarter. Valvoline said it expects to see unit margin improvement in the fourth quarter, after price increases and other actions have been implemented to offset these cost increases, though it said that “the full benefit of these actions” will only be realised with the new fiscal year.
Earnings before interest, taxes, depreciation and amortization (EBITDA) from operating segments declined USD8 million as compared to the prior year period, with benefits from volume and mix offset by increased raw material costs and increased selling, general and administrative expenses (SG&A), partially due to stand-alone public company costs.
The third quarter was highlighted by the final separation from parent Ashland on May 12, 2017, when Ashland distributed all of its 170 million share ownership in Valvoline to its shareholders.
Valvoline delivered EBITDA from operating segments of USD112 million, higher than the company’s guidance for the quarter. These better than expected results were driven by strong same store sales (SSS) in Valvoline Instant Oil Change (VIOC), growth in premium product mix and continued volume gains in international markets.
“The quarter reflected solid execution against a number of our core priorities, namely strong same-store sales growth for VIOC, solid volume gains in International, and continued premium penetration and DIY [do-it-yourself] market share growth in Core North America. In addition, we demonstrated our commitment to disciplined capital management by returning excess capital to shareholders through the repurchase of Valvoline shares,” said Valvoline Chief Executive Officer Sam Mitchell.
“I continue to be confident in our ability to protect unit margins and fully expect to see progress in Q4, positioning us well across our operating segments as we enter the new fiscal year.”