The Investment column: Sparkling Far East props up Burmah

Reporting on the same day as Manchester United, it was appropriate that Jonathan Fry should describe 1996 results at Burmah Castrol, where he is chief executive, as a game of two halves. For Burmah that meant disappointment in the developed world of Europe and North America, where the engines of growth are grating alarmingly, but another sparkling showing from the developing regions of South America and Asia, where they are purring smoothly.

Burmah has been a champion of the Far East for years now - about 75 in the case of India, where it hung on through the dark years of state ownership - and it is now reaping the benefit of liberalised markets in spades. Having overtaken North America in profit terms, the region looks set to leapfrog Europe by the millennium to become the group's biggest earner.

That is just as well because it is an uphill struggle in the old first world to persuade consumers that lubricating oil is anything other than a commodity product and with Mobil attempting to get its recent marriage to BP off to a loving start, price competition is intense. In some ways Burmah has become the Guinness of the petroleum sector, its Castrol suffering the same problems as Johnnie Walker - stagnant markets, a price war to establish market share and the need to back the sales effort with ever- increasing amounts of marketing spend.

Elsewhere the Foseco speciality chemicals acquisition at the beginning of the 1990s nudges ever closer to Mr Fry's neck-on-the-block promise of 10 per cent margins by this year. It should just about make it in time, after last year's 8.3 per cent, but it takes the sort of cheerful optimism that Burmah's ebullient boss specialises in to view that deal as anything but ill-timed, just ahead of recession in the steel and construction markets it serves. It is no wonder that big deals are firmly off the agenda, despite halved gearing at just 22 per cent, until his retirement next year.

The biggest problem facing the company in the short term, however, is the strength of sterling, which took the shine off last year's figures, but threatens to knock a pounds 20m hole in profits this time if the pound stays at current levels. As a result of that, and the reversal of this year's one-off tax benefit from paying a greater proportion of the final dividend as a foreign income payout, profits will have to rise by about 13 per cent simply to stand still at the earnings line.

Assuming they achieve that, the shares, up 16.5p to 1,014p, trade on a prospective price earnings ratio of 14. A good long-term hold thanks to the company's enviable toe-hold in the Far East but the shares, down from a peak of 1,167p last October, won't excite in the short run.

Start your day with The Independent, sign up for daily news emails
Property
pets
Arts and Entertainment
tvThe C-Word, TV review
Arts and Entertainment
The Ridiculous Six has been produced by Adam Sandler, who also stars in it
filmNew controversy after nine Native American actors walked off set
Sport
Danny Jones was in the Wales squad for the 2013 World Cup
rugby leagueKeighley Cougars half-back was taken off after just four minutes
ebooks
ebooksA celebration of British elections
  • Get to the point
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

Recruitment Genius: Claims Administrator

£16000 - £18500 per annum: Recruitment Genius: This is an excellent opportunit...

Recruitment Genius: Senior SEO Executive

£24000 - £28000 per annum: Recruitment Genius: A Senior SEO Executive is requi...

Recruitment Genius: Online Customer Service Administrator

£16000 - £18000 per annum: Recruitment Genius: An Online customer Service Admi...

Recruitment Genius: Digital Marketing Executive

£18000 - £22000 per annum: Recruitment Genius: This global, industry leading, ...

Day In a Page

'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

Bread from heaven

Dutch survivors thank RAF for World War II drop that saved millions
Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

How 'the Axe' helped Labour

UK will be 'run for the wealthy and powerful' if Tories retain power
Rare and exclusive video shows the horrific price paid by activists for challenging the rule of jihadist extremists in Syria

The price to be paid for challenging the rule of extremists

A revolution now 'consuming its own children'
Welcome to the world of Megagames

Welcome to the world of Megagames

300 players take part in Watch the Skies! board game in London
'Nymphomaniac' actress reveals what it was really like to star in one of the most explicit films ever

Charlotte Gainsbourg on 'Nymphomaniac'

Starring in one of the most explicit films ever
Robert Fisk in Abu Dhabi: The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers

Robert Fisk in Abu Dhabi

The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers
Vince Cable interview: Charging fees for employment tribunals was 'a very bad move'

Vince Cable exclusive interview

Charging fees for employment tribunals was 'a very bad move'
Iwan Rheon interview: Game of Thrones star returns to his Welsh roots to record debut album

Iwan Rheon is returning to his Welsh roots

Rheon is best known for his role as the Bastard of Bolton. It's gruelling playing a sadistic torturer, he tells Craig McLean, but it hasn't stopped him recording an album of Welsh psychedelia
Russell Brand's interview with Ed Miliband has got everyone talking about The Trews

Everyone is talking about The Trews

Russell Brand's 'true news' videos attract millions of viewers. But today's 'Milibrand' interview introduced his resolutely amateurish style to a whole new crowd
Morne Hardenberg interview: Cameraman for BBC's upcoming show Shark on filming the ocean's most dangerous predator

It's time for my close-up

Meet the man who films great whites for a living
Increasing numbers of homeless people in America keep their mobile phones on the streets

Homeless people keep mobile phones

A homeless person with a smartphone is a common sight in the US. And that's creating a network where the 'hobo' community can share information - and fight stigma - like never before
'Queer saint' Peter Watson left his mark on British culture by bankrolling artworld giants

'Queer saint' who bankrolled artworld giants

British culture owes a huge debt to Peter Watson, says Michael Prodger
Pushkin Prizes: Unusual exchange programme aims to bring countries together through culture

Pushkin Prizes brings countries together

Ten Scottish schoolchildren and their Russian peers attended a creative writing workshop in the Highlands this week
14 best kids' hoodies

14 best kids' hoodies

Don't get caught out by that wind on the beach. Zip them up in a lightweight top to see them through summer to autumn
Robert Fisk in Abu Dhabi: The acceptable face of the Emirates

The acceptable face of the Emirates

Has Abu Dhabi found a way to blend petrodollars with principles, asks Robert Fisk