The news: WD-40 said on its fiscal third-quarter earnings call that the cost of some specialty chemicals and base oils rose as much as 100% last quarter, driven by higher oil prices tied to the Iran war and disruption around the Strait of Hormuz.
WD-40 makes its lubricants through contract manufacturers and buys petroleum-based inputs. That means an oil- price shock flows almost directly into its cost of goods. Base oils are the refined petroleum that forms the bulk of a lubricant.
Where it hit:
Costs rose the most for third-party manufacturers making WD-40 products in Europe, India, the Middle East and Africa.
Asia-Pacific and Europe absorbed the price increases; the U.S. was shielded because WD-40 had already raised prices earlier in the fiscal year.
Shipping routes to India and the Middle East were disrupted during the conflict.
The lag: Input costs do not spike and recede evenly. CFO Sara Hyzer said elevated costs take 90 to 120 days to move through production and inventory. They also come down more slowly than they rise. “The costs go up pretty fast and then there’s a slower pace for it to step down,” she said.
The backdrop: Oil prices jumped during the conflict as tankers avoided Hormuz, then eased in late June as shipping resumed. The same disruption also pushed up ocean and air freight costs that WD-40's peers have flagged, making it one of the clearest examples of a shipping-lane shock landing directly on a manufacturer's bill of materials.
What's next: WD-40 said earlier price increases and cost-saving programs should help limit margin pressure as the higher costs move through inventory over the next quarter.
