'Cost reduction could mitigate currency devaluation impact'
Sanjeevi JAYASURIYA
Currency devaluation has posed challenges for certain sectors and
this has called for vigorous cost reduction strategies to mitigate the
negative impact. The
|
Chevron Lubricant
Lanka Managing
Director and CEO
Kishu Gomes |
reduction in absolute value perspective is large in
the downward revision in the growth forecast for this year. However, the
sound macro economic environment in place will support the business
growth despite the adverse external factors, Chevron Lubricant Lanka
Managing Director and CEO Kishu Gomes told Daily News Business. As the
country is heavily dependent on imports, currency devaluation may lead
to rise in inflation thus raising the cost of production by having a
negative impact on disposable income. Our venture being a non petroleum
producing entity, profitability will affect in the long run, he said.
The recent increase in fuel prices which directly affect the
transport sector will in-turn reduce the demand for lubricants as there
is a co-relation between consumption and price. This will have a
negative impact on the lubricant industry where a new plan of action is
necessary. We are faced with stiff competition from 13 competitive
players in the market and the North and the East market growth was slow
during last year. However, increase in the vehicle population, reduction
in taxes supported by Maldives and Bangladesh wealth intensification
drove volumes and margin growth, he said. The company's strategies
enabled it to save operational expenses and the reduction in the
corporate tax from 35 percent to 28 percent also complemented this
effort.
However, this year will pose huge challenges as currency
stabilization plays a crucial role in company performance and the
increase in the fuel prices will cut down on vehicle movement. The
lubricant market will be further affected by the rising inflation and
reduction in disposable income.
These serious and new challenges were not anticipated at the
beginning of the year. 'Despite the unfavourable conditions we expect
positive market growth where we will be able to better company
performance this year too. We need to adopt new strategies to overcome
changes in the landscape to re-shape the country's lubricant industry,
'Gomes said. |
