LMD 100 Q&A
LANKA IOC
Q: How would you describe the state of business in the country?
A: Sri Lanka is facing several economic crises – forex reserves have declined to a historical low, tourism has been adversely affected, rating agencies have reduced the country’s credit rating and external debt has increased.
Despite this, we are ahead with the COVID-19 vaccination roll out. There is also optimism that measures taken by the government and Central Bank of Sri Lanka will help revive the economy.
Lanka IOC’s (LIOC) purchases and imports are settled in US Dollars whereas most sales are in Sri Lankan Rupees. In the prevailing climate, banks are tightening the opening of letters of credit to settle import bills and loans, which is a major challenge.
The company has always been committed to serving the nation and maintaining an uninterrupted supply of fuel. Petroleum pricing is very sensitive to the economy, which can be mitigated to some extent with a stable pricing mechanism.
Q: What is your assessment of the level of social awareness in the corporate sector?
A: CSR is an enabler of business, brand loyalty and social growth, and it’s a good tool to serve the community. Maintaining social awareness is imperative for corporates and the potential for action is limitless.
LIOC contributes to the economy by creating jobs, boosting skills and improving industry standards while embarking on CSR initiatives targeting the underprivileged. These entail conducting free medical and blood donation camps, and wheelchair, ambulance and monetary donations to name a few.
We donated Rs. 5 million to the COVID-19 Healthcare and Social Security Fund, and coordinated with the police in Colombo, Ceylon Petroleum Storage Terminals and state hospitals to provide sanitisers.
Lanka IOC also presented essential items to visually challenged females, the Lady Ridgeway Hospital for Children and the National Cancer Institute.
Q: What are LIOC’s medium-term priorities?
A: Given the losses that have been incurred in the auto fuels segment due to selling below the purchasing cost, our focus is on strengthening market leadership in other value added segments – such as lubricants, bunker fuel, bitumen and so on – while fulfilling the country’s energy requirements.
LIOC is on the verge of commissioning Sri Lanka’s first grease plant with a capacity of 3,000 tonnes a year to meet local demand, reducing the nation’s foreign exchange outflow considerably.
We also aggressively promote renewable and sustainable energy sources, with the solarisation of retail outlets and the Trincomalee terminal, as well as the installation of electrical vehicle charging stations at five outlets.
Despite the challenges, we pursued network infrastructure investments with the belief that such enhancements enrich brand equity and deliver a superior customer experience in the long term.
Q: How has the company performed recently?
A: The petroleum industry has witnessed volatility in demand patterns and global fuel prices during the pandemic. LIOC recorded major inventory losses in the first quarter of financial year 2020/21.
Despite the adverse conditions, the company performed well in operational and financial aspects, due to its proactive focus on high yielding verticals – such as lubricants and bitumen exports – cushioning the impact of losses from auto fuels and bunkering. This strategy has yielded sustainable performance levels.
Efficient treasury and portfolio management enhanced our performance. LIOC focussed on cost optimisation, infrastructure modernisation, profitability, technological developments and sustainability with emphasis on promoting renewable energy.
Q: What are the major challenges facing the industry?
A: Over the years, LIOC has been committed to supporting the country’s energy requirements despite the obstacles.
A key challenge we’ve faced is the price differential and losses in the auto fuels segment. And in fiscal year 2020/21, the increase in import duties, surcharges and levies compounded the impact of low demand induced by extended lockdowns.
Business continuity planning was crucial in supporting operations to provide uninterrupted service. LIOC went beyond the call of duty to serve the country and its people with unequivocal commitment, while remaining relevant and competitive to deliver sustainable value to all stakeholders.
