BLUECHIP: Castrol well oiled for future

The view from the bridge at Burmah Castrol must look fairly enticing. Figures for the last five years have been excellent: profits have more than doubled, sales continue to rise, and the dividend has increased without fail. So it must remain something of a mystery to the captain and his crew that their progress seems to count for little among investors.

After hitting a peak of 1,146p in late 1996, the shares have been becalmed as the market has roared away. The reason for the decoupling is sterling; Burmah makes over 90 per cent of its sales overseas, and currency translation costs have reduced profits from those territories.

With sterling looking less confident of its perch at the top of the pile of European currencies, there is a real possibility that the shares will receive an instant boost simply by a fall in sterling. In any case, currency considerations do not reflect at all on the underlying performance of the business, which continues to make solid progress.

The group is now a world leader with its lubricants division, headed by the ubiquitous Castrol brand, where pounds 120m was spent worldwide promoting the name - including pounds 15m for stickers on Williams Formula 1 racing cars.

Lubricants is sometimes condemned as a low growth market, with some justification. Operating profits between 1995 and 1996, for example, fell in Europe from pounds 103.2m to pounds 93.6m, and from pounds 74.2m to pounds 71.5m in North America. Against that, Asia Pacific saw profits rise to pounds 75.4m from pounds 70.9m. Latin America, Africa and the Middle East also turned in good performances for the Castrol brand. Chemicals, which contributes almost a quarter of profits, also has its difficulties. However, there is no denying that the chemicals side, founded on the acquisition of Foseco in 1990 for pounds 270m, has repaid shareholders handsomely. Jonathan Fry, the chief executive, reckons the business would be worth at least pounds 800m if it were to be sold today. With the shares stagnating, they have also picked up the added attraction of a high yield, and currently offer 4.2 per cent - not bad, when the All- Share yield is 3.4 per cent.

Last month, the group made a couple of small disposals, in the shape of two adhesives companies, with the pounds 40m-odd proceeds neither here nor there. While titchy, the deal could also allay worries in the City that Burmah held ambitions to expand Foseco to a larger chunk of the group's pounds 3bn-plus turnover. That would also release some demand for the shares in the months ahead. Interim figures are due in September, and while the market is not expecting a stellar performance, they could still impress. For those with a longer-term view, the shares offer good value.

Voices
voices
Life and Style
Upright, everything’s all right (to a point): remaining on one’s feet has its health benefits – though in moderation
HealthIf sitting is bad for your health, what happens when you stay on your feet for a whole month?
Arts and Entertainment
Peter Griffin holds forth in The Simpsons Family Guy crossover episode
arts + ents
Sport
Laura Trott with her gold
Commonwealth GamesJust 48 hours earlier cyclist was under the care of a doctor
PROMOTED VIDEO
Arts and Entertainment
Gal Gadot as Wonder Woman
arts + entsFilmmaker posted a picture of Israeli actress Gal Gadot on Twitter
News
Bryan had a bracelet given to him by his late father stolen during the raid
people
Arts and Entertainment
Chris Pratt stars in Guardians of the Galaxy
arts + ents
Arts and Entertainment
Pedro Pascal gives a weird look at the camera in the blooper reel
arts + entsPrince Oberyn nearly sets himself on fire with a flaming torch
News
Danny Nickerson, 6, has received 15,000 cards and presents from well-wishers around the world
newsDanny loves to see his name on paper, so his mother put out a request for cards - it went viral
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Sport
France striker Loic Remy
sportThe QPR striker flew to Boston earlier in the week to complete deal
News
Orville and Keith Harris. He covered up his condition by getting people to read out scripts to him
People
Arts and Entertainment
Zoe Saldana stars in this summer's big hope Guardians of the Galaxy
filmHollywood's summer blockbusters are no longer money-spinners
Arts and Entertainment
O'Shaughnessy pictured at the Unicorn Theatre in London
tvFiona O'Shaughnessy explains where she ends and her strange and wonderful character begins
Life and Style
Workers in Seattle are paid 100 times as much as workers in Bangladesh
fashionSeattle company lets customers create their own clothes, then click 'buy' and wait for delivery
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Application Support Analyst / Junior SQL Server DBA

£40000 - £45000 per annum: Ashdown Group: An established professional services...

Senior Risk Manager - Banking - London - £650

£600 - £650 per day: Orgtel: Conduct Risk Liaison Manager - Banking - London -...

The benefits of being in Recruitment at SThree...

£18000 - £23000 per annum + Comission: SThree: SThree, International Recruitme...

Test Analyst - UAT - Credit Risk

£280 - £300 per day + competitive: Orgtel: Test Analyst, Edinburgh, Credit Ris...

Day In a Page

A new Russian revolution: Cracks start to appear in Putin’s Kremlin power bloc

A new Russian revolution

Cracks start to appear in Putin’s Kremlin power bloc
Eugene de Kock: Apartheid’s sadistic killer that his country cannot forgive

Apartheid’s sadistic killer that his country cannot forgive

The debate rages in South Africa over whether Eugene de Kock should ever be released from jail
Standing my ground: If sitting is bad for your health, what happens when you stay on your feet for a whole month?

Standing my ground

If sitting is bad for your health, what happens when you stay on your feet for a whole month?
Commonwealth Games 2014: Dai Greene prays for chance to rebuild after injury agony

Greene prays for chance to rebuild after injury agony

Welsh hurdler was World, European and Commonwealth champion, but then the injuries crept in
Israel-Gaza conflict: Secret report helps Israelis to hide facts

Patrick Cockburn: Secret report helps Israel to hide facts

The slickness of Israel's spokesmen is rooted in directions set down by pollster Frank Luntz
The man who dared to go on holiday

The man who dared to go on holiday

New York's mayor has taken a vacation - in a nation that has still to enforce paid leave, it caused quite a stir, reports Rupert Cornwell
Best comedians: How the professionals go about their funny business, from Sarah Millican to Marcus Brigstocke

Best comedians: How the professionals go about their funny business

For all those wanting to know how stand-ups keep standing, here are some of the best moments
The Guest List 2014: Forget the Man Booker longlist, Literary Editor Katy Guest offers her alternative picks

The Guest List 2014

Forget the Man Booker longlist, Literary Editor Katy Guest offers her alternative picks
Jokes on Hollywood: 'With comedy film audiences shrinking, it’s time to move on'

Jokes on Hollywood

With comedy film audiences shrinking, it’s time to move on
It's the best of British art... but not all is on display

It's the best of British art... but not all is on display

Voted for by the British public, the artworks on Art Everywhere posters may be the only place where they can be seen
Critic claims 'I was the inspiration for Blanche DuBois'

Critic claims 'I was the inspiration for Blanche DuBois'

Blanche Marvin reveals how Tennessee Williams used her name and an off-the-cuff remark to create an iconic character
Sometimes it's hard to be a literary novelist

Sometimes it's hard to be a literary novelist

Websites offering your ebooks for nothing is only the latest disrespect the modern writer is subjected to, says DJ Taylor
Edinburgh Fringe 2014: The comedy highlights, from Bridget Christie to Jack Dee

Edinburgh Fringe 2014

The comedy highlights, from Bridget Christie to Jack Dee
Dame Jenny Abramsky: 'We have to rethink. If not, museums and parks will close'

Dame Jenny Abramsky: 'We have to rethink. If not, museums and parks will close'

The woman stepping down as chair of the Heritage Lottery Fund is worried