Fuel prices eat into LIOC profits
Lanka IOC Plc will focus on the lubricant business with the reduction
of their diesel and petrol profit margins, Chairman K. Ramakrishnan
"Due to the escalation of international petrol and diesel prices it
has become un-economical for them to be in the diesel and petrol
business. Therefore, our profits are gradually eroding, prompting us to
divert our attention on the lubricant business," Ramakrishnan told at a
press conference to announce the income statement of the company.
LIOC Chairman K. Ramakrishnan Picture by Saliya Rupasinghe
He said the contribution towards the company's profits of both diesel
and petrol together came down to 31 per cent from 80 per cent last year
with the focusing on the lucrative lubricant business.
Therefore, uncertain conditions prompted us to diversify into other
sources such as lubricants, bunkering and other sources, he said.
Currently, Lanka IOC sells more than 400,000 litres of lubricants under
the Servo brand for a month that feeds the 15 per cent of the total
market share. Therefore, the company expected to grow up to litres
450,000 of lubricants to the market. This will account 18 per cent of
The company had invested Rs 1.4 billion for the lubricant plant at
Trincomalee oil farm sometime ago but has no plans to invest in the
future with the focusing on the lubricant business, he said.
Ramakrishnan said the company was able to record Rs 180 million earnings
out of earnings during last year.
The reason being the company to be less focus on lubricant oil
business due to the escalation of the international oil prices and
removal of the Government subsidy on fuel, he said. Lanka IOC enjoys 19
per cent on diesel and petrol market in the country with 100 odd fuel
stations used to sell their other products especially lubricants.
Ramakrishnan said Sri Lanka is the lowest in the region where taxing
on diesel and petrol is concerned. This is six per cent from diesel and
36 per cent from petrol business. The company has adopted good
accounting policies and methods of computing as disclosed in the audited
financial statement for the financial year ended March 31, 2007.
An amount of Rs 795,971 million Value Added Tax receivables has been
written off in the accounts for the year ended March 31, 2008 in view of
the status of the company not being a processor, he said. The company
was able to record a revenue of Rs 44,760 billion in turnover is
expected to go down this year due to the volatile market conditions but
however, profit margins will retain, he said.