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by Shirajiv Sirimane

The Managing Director of Caltex Lubricants Lanka Limited, Kishu Gomes said that they are making a strong bid to be a major player in the Petroleum sector which is to be liberalised soon. He said that the Petroleum terminal company is expected to be valued in mid May and the government will invite bids for a third player.

Gomes who is the youngest Managing Director of the multi-national Caltex chain said that they will study the bid and make a summation to the government.

He said that there is tension growing that some companies would have an undue advantage by delaying the valuation of the terminal company.

He said that Caltex is planning to add value to the market by way of other service offerings to the retail market. "We are hoping to introduce new branded products and maintain strict environmental conditions which have been a trade mark in our Caltex global chain. Super Markets in Filling stations is also one of our aims."

Sri Lanka has a high Petroleum Product Demand growth with the total demand approximately 70,000 barrels per day. The growth has mostly come in from fuel used for power generation. Retail market growth has been much slower and thinly distributed with around 650 outlets.

Cabinet approval has been granted for the following proposals with regard to the liberalisation of the Petroleum sector.

* All the existing terminals, depots and pipelines including the aviation terminals will be bundled into one terminal company. CPC and IOC will have 50% stake each until the third operator is brought into the market. CPC will ultimately have only 1/3 of the ownership.

* Refinery will be owned and managed by CPC as a separate business Unit.

* CPC, IOC and the third player will each have 1/3 of retail outlets and will compete in a level playing field with strong pricing, Health, Environment, Safety (HES) and product quality standards fixed by the Regulator.

* Transport units will be divested and excess staff will be retrenched.

* Voluntary Retirement Scheme (VRS) for the existing staff.

Indian Oil company (IOC) signed an MoU with the Ceylon Petroleum Corporation (CPC) to enter the retail market last June and the IOC commenced operation through 95 CPC Filling Sheds in Sri Lanka.

The IOC is hoping to include extensive training and systems operation resulting in increased sales to developing their reseller network.

Caltex delivered excellent results last year with profits well ahead of the budget. The bulk of earnings growth primarily came in from saving in raw material purchases under the global purchasing agreement and rebates on service and other charges, which contributed approximately Rs. 100 million in savings.

This is reflected in the company's gross profit margin in their annual report published recently.

The local restructuring program, which is fully reflected in the operating expenditure, saw a 6% decline in operating expenditure.

The contribution from interest income stood at Rs. 180 million, a growth of 37% Year on Year (YoY). The raw material prices were also stable but the trend started to reverse towards the latter part of the year.

However, with the relatively stable Rupee, Caltex managed to maintain its pricing structures for its key product lines, Lanka and Caltex giving the benefit to the end consumer. As a result, revenue showed a marginal growth stemming from volume growth.

The Company generated a free cash flow of Rs. 1 billion during the year, while the accumulated cash position stood at Rs. 2 billion by the year-end FY 2002.

Core operations of the company delivered a Return On Capital Employed (ROCE) of 46% while overall ROCE stood at a healthy 25% Caltex had paid three interim dividends amounting to Rs. 219 million and with the proposed final dividend of Rs. 5 per share, the total dividend will amount to Rs. 369 million.

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Copyright 2001 The Associated Newspapers of Ceylon Ltd.
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