The country's largest lubricant company MJL Bangladesh, formerly known as Mobil Jamuna Lubricant, has experienced a drop in its sales for the first time in three years.
The company said a slide in automobile sales, the closure of some private power generation units, and the presence of low-quality lubricants on the market are major reasons for the decline in its sales.
MJL Bangladesh, is an authorised manufacturer and dealer of American multinational oil and gas corporation Exxon Mobil, and a joint venture between the state-owned Jamuna Oil Company and EC Securities Limited, a subsidiary of the East Coast Group.
The journey of blending lubricants in Bangladesh started in 1998 when the Exxon Mobil Corporation decided to set up Mobil Jamuna Lubricants Limited in partnership with the Jamuna Oil Company.
Its revenue earnings from lubricants went down by nine percent to Tk526.37 crore in the first three quarters of the 2019-20 financial year.
An official of the company, seeking anonymity, told The Business Standard that the situation worsened due to the Covid-19 pandemic.
"The country's economy, as well as manufacturing and private power sectors, are facing a slowdown. Further, the transport sector is the most affected by the pandemic. All these have harmed the business," he added.
The official said competition is increasing daily for the presence of a large number of companies in the lubricants business.
Business performance of lubricants
MJL, with a 26 percent market share, is a major player in the country's lubricant business.
Though the company's sales slipped in the first three quarters of the last financial year, its year-on-year lubricant sales increased by nine percent.
An MJL official said quick rental power plants and automobiles are the two major customers of the company.
"Both the sectors are currently experiencing a slowdown. Moreover, some local importers are bringing in low-quality lubricants. Import of the substandard and cheap products is on the rise, hurting the popular brands," he added.
Power producers are the biggest private sector clients of lubricants. The quick rental plants constitute 30 percent of the total lubricant demand in the country.
According to the Bangladesh Road Transport Authority, automobile sales dropped by eight percent in the last fiscal year, and dull sales also continued due to the pandemic.
The automobile sector constitutes nearly 60 percent of the total demand for lubricants.
Market for lubricants
According to MJL Bangladesh, the market size of lubricants was Tk1,000 crore in 2009 and it expanded to Tk3,000 crore until last year.
The lubricant business in the private sector is nearly two decades old. Until 2000, only the state-owned oil companies were allowed to import, blend and distribute lubricants. The government liberalised the market and banned non-additive lubricants in 2001 to ensure minimum standards.
A top five lube companies account for about 55 percent of the total market. They are: Navana Petroleum Limited (Caltex/Chevron), MJL Bangladesh Limited (Exxon Mobil), Trade Services International (Total), Rahimafrooz (Bangladesh) Ltd (BP PLC), and Ranks Petroleum Limited (Royal Dutch Shell PLC).
According to market research by MJL Bangladesh, Mobil is by far the market leader with a 26 percent share, followed by: BP with 12 percent, Total with eight percent, FUCHS with seven percent, Shell with three percent, Castrol with three percent, Caltex with two percent, GULF with one percent, and Servo with one percent.
The remaining 37 percent is covered by around 100 low-quality and low-cost brands.
MJL business relies on subsidiaries
MJL Bangladesh's revenue slightly increased to Tk1,620.61 crore despite a decline in the lubricants business.
The company said most of the revenue comes from its subsidiaries – Omera Petroleum Ltd and Omera Cylinders Ltd. Both are engaged in the LNG business.
However, consolidated net profit of MJL increased by three percent to Tk161.31 crore and its earnings per share was Tk4.92.
The company official said net profit increased riding on rent from oil tankers.
MJL was listed with the Dhaka Stock Exchange in 2011. Its paid-up capital is Tk316.75 crore.
Sponsors and directors of the company hold 71.53 percent, institutional investors 19.06 percent, foreign investors 0.29 percent, and general investors 9.12 percent of the shares.
The company's closing price per share was Tk64.90 on Tuesday at the Dhaka Stock Exchange.