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BUNKER INDEX :: Price Index, News and Directory Information for the Marine Fuel Industry
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Aegean expects to post first loss in three years

08 Nov 2017 05:43 GMT

Challenging environment has continued to put pressure on margins and gross profit, says firm.



Aegean Marine Petroleum Network Inc. has announced that it expects to report a net loss for the third quarter (Q3) of 2017 of between $3.4 million and $4.4 million, or a loss of $0.09 to $0.11 per share.

The expected loss would be the first in three years - since the third quarter of 2014, when the company posted a loss of $4.345 million.

Describing the current climate, Aegean said: "While the company continues to make significant progress on its cost savings initiatives, the challenging operating environment that dominated the first half of 2017 has continued to put pressure on sales margins, depressing the company's gross profit and inhibiting its ability to offset the cost of its operations."

In an analysis of Aegean's previous financial results, the data shows that the company's gross spread per tonne - the margin the company generates on sales of marine fuel - fell to $16.6 per tonne in the first half (H1) of 2017, whilst it was $19.2, $23.3 and $27.9 in H1 2016, H1 2015 and H1 2014 respectively. The figures are an indication of how sales margins have dropped over the last three years.

During the quarter when Aegean last posted a loss (Q3 2014), the gross spread per tonne was $24.7.

Jonathan McIlroy, Aegean's President, commented: "The third quarter of 2017 has seen a continuation of the challenging market trends that our company and our competitors have faced throughout this year. In addition, a combination of three hurricanes and one serious refinery fire compounded what was already a tough environment in the third quarter.

"Despite modest improvement in some segments of the shipping industry, the oil markets and the marine fuel sector remain under great pressure. We continue to see margin deterioration in many of our key markets resulting from lackluster demand and increased competition. This was a deciding factor in our recent decision to withdraw from the physical supply business in the Singapore market.

"We as a company are committed to offsetting market weakness by being proactive where we can. Through [cost-saving] initiatives and seeking growth opportunities in higher margin markets, these actions should improve the profitability of our business over time. Our recent changes in Singapore are illustrative of this commitment to our shareholders."

McIlroy added: "Despite our expected third quarter loss, we have taken cumulative measures through October 2017 that are aimed to yield more than $20 million in annualized cost savings. These measures include downsizing our U.S. West Coast storage footprint, our recently announced withdrawal as a physical supplier in Singapore as well as other fleet savings through the deactivation of unproductive tonnage.

In addition to the aforementioned cost savings, Aegean believes it will also be possible to further reduce expenses.

"We expect to discuss the market and these cost savings in more detail when we announce [the] full third-quarter results," McIlroy remarked.


Image: Aegean Marine Petroleum Network Inc storage tank facility. Image credit: Aegean Marine Petroleum




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