US base oil price hikes may delay Ashland margin recovery

12 April 2011 21:25  [Source: ICIS news]

TORONTO (ICIS)--The recent round of US base oil price increases could delay Ashland’s efforts to recover margins in its Valvoline automotive lubricants business, analysts said on Tuesday.

Analysts at the investment firm Jefferies pointed to base oil price increases by Holly Refining and Chevron, respectively, and said they expected ExxonMobil and other large producers to follow suit.

“The recent rise in base oil prices, coupled with other raw material pressures, will likely prompt Ashland to implement another round of price increases,” the analysts said in a research note to clients.

“A key issue on [Ashland’s] upcoming earnings call will be whether Valvoline's margin recovery should be considered delayed to the fourth quarter,” they added. Ashland's fiscal 2011 fourth quarter ends on 30 September.

According to Jefferies, Ashland purchases an estimated 170m gal/year (643m litres/year) of mostly Group II and III base oil.

Media representatives at Covington, Kentucky-based Ashland were not immediately available for additional comment.

ICIS reported this week that US paraffinic base oil producers, including ExxonMobil, are increasing prices, largely because of higher crude oil costs.

In Europe, ExxonMobil informed its base oil customers of $60/tonne (€41/tonne) price increases across its Group I range, effective from 23 April.

Ashland is due to brief analysts on its fiscal 2011 second quarter ended 31 March on 26 April.

($1 = €0.69)

For more on Ashland and other producers visit ICIS company intelligence

By: Stefan Baumgarten
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