Fuchs Chief Says Oil Companies ‘Losing Interest’ in Lubricants
Fuchs Petrolub AG (FPE) Chief Executive Officer Stefan Fuchs said the global lubricants industry will change as some oil companies switch focus while private equity and emerging-market energy companies invest in the sector.
Some of the “classic” oil companies are “losing interest” in lubricants, Fuchs said on a call, without giving names. Fuchs’s competitors include Infineum, a joint venture created by Exxon Mobil Corp. (XOM) and Royal Dutch Shell Plc (RDSA) in 1999, and Chevron Corp. (CVX)’s Oronite.
The $9 billion purchase of Lubrizol Corp. by Warren Buffett’s Berkshire Hathaway Inc. (BRK/B) marked private equity interest in lubricants. Financial sponsors are becoming more active in the industry, Fuchs said. They join cash-rich oil and petrochemical companies from Asia that are seeking expansion, he said.
“The lubricant world is changing,” said CEO Fuchs. “There are big vertically integrated companies from the developing markets that want to grow globally. They are the sleeping giants that have enormous financial resources in the new markets.”
Exxon and Shell considered a sale of their Infineum operation in 2007. More recently, lubricant operations of oil companies have attracted investment, with new plants being built as growth in demand outpaces gasoline trends. Global demand for lubricants totals 35 million tons, led by surging sales in the Asia-Pacific region, Fuchs said in a presentation.
Fuchs, the world’s largest independent lubricants maker, is concentrating on higher-margin products and building new facilities, the CEO said. Acquisition targets are being monitored, he added.
“We will look at targets but they have to make strategic and financial sense,” Fuchs said. “We’ll have to wait and see how the market changes and what opportunities there are. Our balance sheet leaves us a lot of room.”
The company’s capital expenditure was 22.3 million euros ($29 million) in the first quarter, with spending on a new technology center in Mannheim, a factory in Russia and the modernization of a site in the U.S., it said in a first-quarter earnings report today.
Majority owned by the Fuchs family, the company today reported first-quarter earnings before interest and tax of 72.5 million euros, ahead of a 68.7 million-euro analyst estimate. Sales of 448.4 million euros also beat estimates.
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