Miami-headquartered
World Fuel Services Corporation (WFS) reports that seasonal sales in the 'Sunshine State' helped improve profitability for its marine business during the first quarter (Q1) of 2018.
Speaking during an analysis of the company's results on Thursday, chief financial officer
Ira Birns explained that "one of the things that contributed to more profitability in the first quarter was some seasonal business right here in this neck of the woods, here in
Florida".
"You could imagine what industry that might support," he added, referring, it would seem, to the cruise sector.
Florida is home to the world's three biggest cruise ports - Miami, Port Canaveral and Port Everglades - and the peak season runs between December and April, with the hurricane season starting from around June and ending in November.
As well as its traditional trading business in the region, WFS recently launched a
new physical marine fuel supply location in Tampa, Florida. The NYSE-listed firm is able to supply fuel oil and marine diesel from
Port Manatee to vessels in Tampa Bay.
QoQ: Marine profit jumped $108.9m with virtually unchanged revenue
In an analysis of Q1 results, the marine division posted a gross profit of
$31.2 million, which was a hefty
$108.9m improvement on the $77.7m loss recorded in Q4 2017, and, significantly, was achieved with
very similar revenue generated over both periods ($2,025.3m in Q4 and $2,027.7m in Q1 2018) and despite
selling 300,000 tonnes less fuel than the previous quarter. However, it should also be noted, when comparing both periods, that WFS recorded a
non-cash impairment charge of $91.9 million in Q4, which was said to be primarily related to the firm's marine segment.
According to Birns and chief executive officer
Michael Kasbar, the company's strategy to reduce marine costs -
targeting a 3-4 percent decrease in 2018 - had been a key positive during the first three months.
"Our cost reduction initiatives... positively contributed to the marine segment profitability in the first quarter," Birns explained.
"Our marine business is doing an excellent job of managing costs and repositioning the business within the supply chain," Kasbar added.
YoY: Marine profit fell 7 percent with lowest quarterly sales volume in years
As
previously reported, Q1 marine gross profit of $31.2m was down 7 percent compared to a year ago, whilst revenue was 3 percent lower.
Additionally, the 5.8m tonnes sold between January and March is the lowest quarterly figure since WFS began reporting its sales volume in 2014. A summary of Q1 sales (in tonnes) since 2015 has been provided below.
Q1 2018 - 5.8m
Q1 2017 - 6.8m
Q1 2016 - 7.7m
Q1 2015 - 7.7m
Margins, niche markets, LNG and Q2 2018
On the issue of margins, Birns explained that the company was being structured in a way that would enable it to capitalize on opportunities to "make a significant amount of profit in high-margin areas".
Kasbar also noted that the marine segment had "started to penetrate the chain in niche markets", which had "worked out pretty well for us, developing some capability there".
As a marine, aviation and land fuel specialist, Birns was also positive about the 'good synergy' between WFS's land, marine and natural gas businesses for the supply of LNG to shipping clients.
Discussing Q2 performance, meanwhile, Birns remarked: "Looking ahead to the second quarter, we are cautiously optimistic about delivering another good quarter in marine. However, quarter-to-date, we are running at the same pace as we were in the first quarter at the same time during the quarter."
