US re-refiner and lube blender Safety-Kleen Sustainability Solutions (SKSS) saw profit fall in the final three months of the year as a seasonal slowdown in demand cut sales volumes.
High US base oils prices relative to other markets added to buyers’ preference to hold back and to cover requirements with existing stocks.
Costs rose because of weather-related disruptions in December that impacted production.
The dynamic showed signs of changing over the coming weeks amid a seasonal pick-up in demand.
The company built up base oils and lubricants inventories during the fourth quarter of last year in anticipation of firmer demand and margins during the first half of this year.
US refiner HF Sinclair also saw fourth-quarter profit fall from year-earlier levels amid a slowdown in demand and higher costs.
SKSS’ earnings before interest, taxes, depreciation and amortisation (EBITDA) came to $54.3mn in the three months to end-December, Clean Harbors said in an earnings statement.
SKSS is the re-refining and lube blending unit of Clean Harbors.
Profit fell by more than half from $103.16mn in the third quarter and by 12pc from $61.60mn during the same period a year earlier.
Profit fell even as sales rose in the fourth quarter from year-earlier levels. But the pace of the increase in sales was the slowest in seven quarters.
Slower demand and rising costs cut SKSS’ profit margin to 23.5pc in the fourth quarter.
The margin fell from more than 36pc in the second and third quarters of the year and from 29.2pc during the same period a year earlier.
A seasonal pick-up in base oils and lube demand in the coming months should get a further boost from the improved availability of lubricant additives.
Clean Harbors expected the pick-up in additives supply to enable the company to boost its own lubricant volumes this year.
“We also see numerous opportunities to enhance our profitability in this segment including raising production from 2022 levels, increasing sales of blended products and capitalising on growing interest in our sustainable products,” Clean Harbors Chief Executive Alan S. McKim said in a statement.
SKSS launched its ‘KLEEN+’ base oils brand in the middle of last year to take advantage of growing demand for sustainable products.
