Jun 27, 2022Liked by Carsten Mueller

Hello Carsten,

There is a YouTube video of Fuchs Petrolub employee making a presentation(https://bit.ly/3OziYKC). You may have watched it. At 9 minute mark you can see global lubricant demand in volume regressed from 2007~2016. And @ 9:52 the share of Asia Pacific increased from 45% to 53%, that probably means ASP went down. Also in that video he mentioned American consumer basically chose the cheapest lubricant as they see it practically as a commodity. Maybe in mission critical application end users will demand quality over price, however the industrial equipment and machinery segment is only 11%, so perhaps that doesn't move the needle.

Also the trends pointing to lubricant usage will continue to go down: 1. Efficiency improvement in fluid transmission design in machinery 2. Advancement in lubricant technology 3. Electrification of automobiles. You can also see it in BP Castrol KK’s (5015 JP) numbers. BP Castrol KK is a lubricant company in Japan, one can observe revenue and bottom line decline over the years.

From a moat point of view, big part of lubricant manufacturing process is mixing and blending, there is no secret sauce. The process is a mature one what's left is efficiency gain. I don’t see how Fuchs have advantage over major oil companies in that regard. Oil companies have other advantages such as sourcing, scales of economics, pricing power, sales channels, R&D budgets…etc. In other words being independent is probably a detriment instead of a merit.

Curious on what you think.


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Jun 28, 2022Liked by Carsten Mueller

Hi Carsten, very much enjoy your substack. Thank you.

Do you see catalysts that would bringt Fuchs Margins and Return on Capitals back to previous highs?

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