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WFS Q2 profit increases by 29%, ‘extremely well prepared’ for IMO 2020

26 Jul 2019

New York-listed oil and bunker trading firm World Fuel Services (WFS) on Friday (26 July) posted a 29% on year increase in net profit for the three months ended June 30 (Q2) 2019.

The company recorded $37 million of net profit during Q2 2019, higher when compared to net profit of $28.7 million seen in Q2 2018.

Total revenue from its aviation, land and marine segments in Q2 2019 was $9.46 billion, 6.8% lower than revenue of $10.15 billion during Q2 2018.

Specifically, its marine segment posted revenue of $2.01 billion in Q2 2019, lower than revenue of $2.29 billion in Q2 2018.

Gross profit from the marine segment in Q2 2019 was $36.4 million, higher than gross profit of $30.2 million in Q1 2018.

“Our marine segment continues to deliver strong earnings comparisons, consistent with the trend established in the first quarter of 2018,” said Michael Kasbar, Chairman and CEO of WFS, in a recent earnings call.

“The earnings growth has primarily resulted from a heightened focused on segmenting and satisfying demand that represents greater value to the customer, concentrating on enhancing fuel supply capabilities in specific geographies where customers are experiencing supply challenges.

“Following strong performance in Q1, core resale margins remain solid in Q2. We remain committed to deploying capital prudently, while remaining focused on financial returns, counterparty risk exposure and cost management.”

Volume in the marine segment for the second quarter was 5.1 million metric tonnes (mt), down 775,000 mt compared to the second quarter of last year.

“The volume reduction year-over-year principally related to the exit of certain low margin business activities in Asia, which we had mentioned for the past several quarters,” added Kasbar.

“Looking ahead to the third quarter, we expect a sequential increase in marine gross profit, principally due to seasonal activity, which we have now experienced for the past few summers.”

Moving forward, Kasbar noted WFS to be in an “extremely well prepared and well positioned” to handle the marine fuel needs of its clients heading into IMO 2020.

“Well, there's going to be more planning and logistics and quality control. Not every fuel is going to be available at every location, and you're going to see some amount of experimentation, perhaps on both buyers and sellers. So, I think one of the things we’re expecting is that there is going to be more interaction, there may be more frequent fueling, there's certainly going to be the market wanting to leverage external expertise, we certainly have a lot of it,” he states.

“One of our calling cards way back when from the 80s and we still have it, it was the way that we differentiated us. And I’d like to say that, we were a leader in the industry in terms of technical capabilities. So, there's certainly going to be that. There will be different sourcing and logistics and a lot of advisory. So, that will give an opportunity for additional value add. So, I think that it is generally a positive because there's going to be a greater demand for our services. All remains to be seen, it's not like it's a surprise, and it happened overnight.

“This thing was years with advance notice. So, we feel like we're extremely well prepared and well positioned, and certainly by virtue of our land business, and sourcing distillate and then with our Kinect business, in terms of, LNG, we've got a tremendous amount of internal capability. So, I'm not sure what else I could say in terms of giving color. It all remains to be seen in terms of how it's going to shake out, but we feel prepared and it should generally be positive for us.”

Related: WFS expands unsecured credit facility to $1.8 billion ahead of IMO 2020
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RelatedWFS returns to profit for 2018 in ‘year of continuing transformation’
RelatedWFS records ‘better than expected performance’ in marine segment
RelatedWFS Q2 bunker sales volume 13% down on year
RelatedWFS posts Q1 net profit on increase in oil prices, offset by lower volume
RelatedWFS posts net loss of $142.0 million in 2017

Photo credit: World Fuel Services
Published: 26 July, 2019

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