Photo courtesy of Valvoline
Valvoline Inc., a leading global supplier of premium branded lubricants and automotive services based in Lexington, Kentucky, U.S.A., reported sales growth of 8% to USD653 million for its first fiscal quarter ended December 31, 2020.
“Our strong results in Q1 mark a great start to the fiscal year and continue to demonstrate the resiliency and adaptability of our business,” said Valvoline CEO Sam Mitchell. “We delivered this impressive performance while remaining focused on the health and safety of our employees, customers and business partners.”
All comparisons in this press release are made to the same prior-year period unless otherwise noted.
“Profitability improved across all segments versus last year. Quick Lubes operating income growth of 13% and EBITDA growth of 21% were driven by strong top- and bottom-line performance and robust unit additions. Core North America’s operating income and EBITDA were each up 2% demonstrating continued resilience in the current challenging environment. Broad-based top-line growth and margin improvement led to a 70% increase in International operating income and a 64% increase in segment EBITDA,” Mitchell said.
Valvoline’s International segment experienced exceptional growth in sales and profitability during the quarter with solid performances across all regions, including strong results in Latin America and China. Volume also grew in unconsolidated joint ventures, particularly in India where the business saw a robust recovery from Covid-19 impacts, in addition to continued strength in the China joint venture.
Sales growth with improved gross margin rates — driven by favorable geographic and product mix — as well as an increased contribution from unconsolidated joint ventures contributed to the significant growth in profitability.
International sales increased by 16% to USD164 million during the fiscal quarter, as lubricant volume increased 14% to 16.8 million gallons.
Lubricant volume from unconsolidated foreign joint ventures increased 25% to 13.5 million gallons.
Operating income of USD34 million increased USD14 million or 70%; adjusted EBITDA increased USD14 million or 64% to USD36 million.
Meanwhile, in its core market North America, Valvoline’s sales and lubricant volume declined 5% to USD235 million and 1% to 21.2 million gallons, respectively.
Operating income increased USD1 million or 2% to USD47 million; adjusted EBITDA increased USD1 million or 2% to USD51 million.
Gross margin rates benefited from continued favorable channel and product mix which was partially offset by unfavorable price-cost lag. Improved gross margin rates and lower expenses drove the increase in segment profitability versus the prior-year period.
Actions taken to optimize promotional performance as well as effective marketing support continue to drive solid progress in the retail channel. Total retail channel volume in the quarter increased in the low-single-digits range led by branded products. Retail channel volume growth was more than offset by lower installer channel volume, which declined in the high-single-digits range year-over-year, reflecting a slower recovery from Covid-19.
The Quick Lubes segment started the fiscal year with strong top- and bottom-line growth. Total sales grew by 17% to USD254 million; same store sales (SSS) grew 6.0% system-wide, 6.1% for company-owned stores and 6.0% for franchised stores.
Operating income increased USD5 million or 13% to USD43 million; adjusted EBITDA increased USD10 million or 21% to USD58 million.
Quick Lubes ended the quarter with 1,533 total company-owned and franchised stores, a net increase of 71 during the period, and contributing to an increase of 126 versus the prior year.
Year-over-year growth in total sales and profitability in the quarter were driven by same store sales and the addition of 126 net new stores, an increase of 9%. The increase in units includes the addition of 54 acquired stores, 42 company-owned and 12 franchised, from transactions closed during the quarter. An additional 72 net new stores were added to the network versus the prior-year period, including 49 company-owned stores, primarily newly built units, and 23 franchise locations, as investments to grow the retail services system continue.