Fri 20 Mar 2015 15:01

Aegean is 'done with capex', plans to shore up balance sheet and raise dividend


Bunker firm has no capex plans for the near future, and intends to use additional cash flow to fund working capital and increase the dividend.



Bunker firm Aegean Marine Petroleum Network Inc. has this week provided an insight into its strategy for 2015 and beyond during the company's quarterly earnings call on March 17.

Speaking during the call, E. Nikolas Tavlarios, president, explained that the company did not plan to sink a large amount of capital expenditure (capex) into future projects, and that any future expansion into new markets would be via "opportunistic expansions" similar to its recent acquisition of OW Bunker assets, which he said had been "aligned with our strategy to diversify our operations and expand our global footprint in a risk-averse manner".

Ben Nolan, director at brokerage and investment banking firm Stifel Nicolaus, asked Tavlarios: "Nick, sort of in your commentary there, you talked about looking to open new facilities. I guess - correct me if I am wrong, but my sense was that, it seemed like you guys are a little bit more - maybe the commentary was a little bit more focussed on growth opportunities than it has been in the past. First of all, is that correct, secondly, is that maybe a function of disruption of OW not being in the market, and that's sort of creating some disconnect and some opportunities to expand where maybe they didn't exist in the past?"

In reply to the question, Tavlarios said: "Look, it's a general matter. We analyze each and every location's performance on an ongoing basis, okay, and we also examine other markets that have an effect on us, to see if there are opportunities for us to do something better, more effective. And we have done this successfully and very methodically over the past, almost nine years now. We will continue to do that. We have certain things that we are looking at, at all times. I don't think if we could open a new location, we are going to go sit there and invest capex. No, this is going to be something greenfield that we do, much like when we bought on the new OW locations, right; we did not start putting invested capital in there. Those were done - again, we acquired those without having to put any capital to work or capex to work. We basically got them by signing contracts over. And I think if we were to do something new, it would be along that same line."

Peter Georgiopoulos, chairman, also added: "We are done with capex, and we don't see any capex in the near future."

Tavlarios later said that he expected earnings for 2015 to be higher than in 2014. Georgiopoulos explained that the reason for the income growth forecast was that the company expects to see more stable margins as it moves more towards blending in certain markets and "not just sort of buying retail, selling retail"; increased volumes from new markets (Los Angeles, U.S. Gulf, Germany and St. Petersburg); higher volumes in the U.S. East coast; revenue from the new storage facility in Fujairah; and a number of cost-cutting initiatives.

In terms of what the company plans to do with the expected additional cash flow, Georgiopoulos explained that the company intended to "just use it to shore up the balance sheet, to keep an amount of cash that we need to keep on the balance sheet to fund our working capital facilities. I think that's the first order of business with the free cash flow, its just keep an amount there that we need to satisfy our working capital facilities".

The Aegean chairman added: "After that, I mean look - I know it doesn't sound like a lot, we increased the dividend from a $0.01 to $0.02, but the 100 percent increase. So I think as we feel more comfortable that these initiatives are taking hold, that these new places that we have opened up are actually generating the kind of volumes we believe, that Fujairah is actually generating the kind of EBITDA we believe. Sure, then I believe that we will probably increase the dividend again at some point in the future."

On the issue of divestment, Georgiopoulos said: "We are just really looking at underperforming assets and saying, you know what, time to get rid of them."

When asked later if the company had any non-core assets that it was looking to sell in the short term, Georgiopoulos said: "There are a couple of older ships and a couple of other things, but nothing that we have announced yet and nothing that we are prepared to announce."


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