Fuchs Petrolub

Business is running like a well-oiled machine

Mannheim-based Fuchs Petrolub is the global market leader in lubricants and motor oils. Thanks to a strong research team, new products are constantly being developed and sold to industry. Almost 10% of all employees work in research and development. So you can be sure the company has prepared for the future.

The company was founded in 1931 by Rudolf Fuchs. He quickly recognized the growing automotive industry in Germany and supplied manufacturers with the lubricants and oils that led to better performance. In 1985, Rudolf's son Manfred Fuchs took the company public. Since then, shareholders have been able to profit from its success too. In 2004, Rudolf's grandson Stefan Fuchs took the helm. He paid down the company's debt and led Fuchs Petrolub to global market leadership.

Long-term investors in particular get their money's worth from the company's policy. The majority of voting rights is still held by the founding family. And when making company decisions, they aren't thinking about making a quick buck, but about providing for the generations to come.

The origins and business model of Fuchs Petrolub SE

Without lubricants, nothing would run. Car engines would quickly break down, trains couldn't run anymore, escalators would grind to a halt. In short: the entire industry would stall. But that's exactly why Fuchs Petrolub exists. The company now has almost 10,000 different products in practically every industry sector. The biggest customer sectors are trade and transport, closely followed by the automotive industry. Mechanical engineering, agriculture, energy producers and mining also provide steady revenue.

Around 80% of the product range is tailored specifically to customer requirements. These products mean less machine downtime and higher productivity in general. Accordingly, industry is grateful to Fuchs Petrolub. Customer loyalty is very high, which also makes higher profit margins achievable.

So you can say Fuchs Petrolub is a company with a wide moat. No other manufacturer is going to hold a candle to it anytime soon ...

What does the future hold for Fuchs Petrolub?

The outlook for the future doesn't look bad. Lubricants, oils and greases have to be bought even in weaker economic times. So revenue will keep developing positively and ensure a steadily rising share price. The stock last dipped a bit in 2008 during the financial crisis; since then it's been going uphill.

Of course, this is no forecast of a golden future, but the signs are good that revenue and profit can keep growing. Over the last 10 years, profit grew by almost 8 percent annually. That's nothing to sneeze at.

So what about the dividend?

A share of the profits has been paid out continuously for 24 years now. For more than 16 years, it has been raised regularly. So it will still take a little while until Fuchs Petrolub becomes a true Dividend Aristocrat. But I'm confident the dividend will continue to be paid and raised.

Conclusion

The savvy executives at Fuchs Petrolub have set the company up very broadly. Its products are needed in many industries, and the family-run company has also prepared for the future. If the stock ever dips, buying in would definitely pay off in the long run. Even without a correction, I would put Fuchs Petrolub in my portfolio.