Chevron Lubricants Lanka PLC, one of the highest dividend paying companies quoted on the Colombo Stock Exchange, has seen its after-tax profit for 2008 dip below the billion rupee mark but remains hopeful that with raw material prices declining and additional supply sources emerging in the Asia-Pacific region, the company will be able "to deliver reasonable shareholder value."

Chevron’s Managing Director Kishu Gomes, said in the company’s just released annual report that volumes in both retail and industrial markets had dipped during the year, particularly in the fourth quarter. This was attributed to the impact of the economic downturn.

"Decline in commodity prices impacted growers – especially small holders – as well as the reduction in the order book for export industries as a result of declining demand in world markets, all adversely affected the consumption of lubricants," he reported.

The company’s Chairman, Mr. Kevin M. Kelly, told shareholders that the Ministry of Petroleum had informed them that cabinet approval had been granted to extend for a further five years from July 2009 the lease agreement on the land where their blending plant is located.

The company’s main operations involved blending, importing, distributing and marketing lubricating oils, greases and special products.

The Chevron Corporation is active in more than 180 countries and is engaged in every aspect of the oil and gas industry, including exploration and production, refining, marketing and transportation; manufacturing and sale of chemicals and power generation.

Kelly noted that they had been operating in a market that has over the past two years continued to decline. Competition too had grown with eight new players entering the field growing it to fifteen market players.

Gomes complained that product adulteration had become a serious issue for industry players and consumers and hoped that the Public Utility Commission and the Ministry of Petroleum and Petroleum Resources will ensure that steps are taken to curtail such activities.

"Meanwhile, the growing grey market will only serve to de-fragment the already declining lubricants industry and tougher actions are needed to prevent the growth of this segment through an effective monitoring mechanism," he said.

Gomes also said that government tender procedure adopted by certain public sector institutions benefited importers of lubricants at the expense of manufacturers. He hoped that the concerned authorities will take corrective measures in the interest of local manufacturers and encourage local production.

The year under review saw Chevron growing revenue 3% to Rs.8.9 billion from Rs.8.65 billion a year earlier although the profit after-tax was down 12% to Rs.0.95 billion from the previous year’s Rs.1.08 billion.

Chevron has a stated capital of Rs.600 million and retained earnings of Rs.1.55 billion in its books.

Net assets per share were up 17% to Rs.35.86 during the year with the company’s share traded at a high of Rs.118.25 and a low of Rs.81.75 during the year under review against a trading range of Rs.97.50 and Rs.76 a year earlier.

Dividends paid during the year were down 16% to Rs.10.50 per share from Rs.12.50 the previous year.

Chevron Ceylon Limited with 51% is the company’s controlling shareholder followed by the Life Fund of the Sri Lanka Insurance Corporation with 9.39% and two foreign funds. Local institutional shareholders in the top 20 list include Cargo Board Development Company, Renuka Hotels, the EPF and ETF, Eagle Insurance and the DFCC Bank.