Americas News
WFS Expects Stronger Pricing and Increased Volatility to Drive Performance
Independent marine fuels trader and reseller World Fuel Services (WFS) posted a loss-making third quarter and drop in bunker sales but in its earnings call, management remained upbeat on future prospects.
In the call company president and CEO Michael Kasbar said the lack of price movement had impacted on the marine fuels space.
"Low pricing and a lack of volatility has pushed the traditional reselling and underwriting model to supply and transportation," Kasbar said. This was most notable in Singapore "where the introduction of mass flow meters has accelerated this trend".
But the company had also seen an impact on the derivatives' side of things.
"One of the areas where we've been very weak recently is on the sale of derivative additions to our customer or the hedging side of our business or fixed price deals."
Given the spot nature of marine fuels, things could quickly turn positive, Kasbar said.
"If prices continue to move up, and move up rapidly, the opportunity for that type of business to come back picks up pretty significantly."
This would work well in marine fuels.
"In marine this quarter, we probably had our lowest result as far as I can remember in terms of delivering on that part of our business [however] as prices go up, we have an opportunity to see some large improvement in marine more quickly than we would necessarily see it in our other businesses just because of the spot nature of that business."
In addition, the executive said that marine could benefit from a "continued increase in prices from the derivative sales activity", according to Kasbar.
WFS's bunker activities produced a gross profit (of $30 million) in the quarter although this was 18% down over the same period last year.
"The gross profit decline was again principally driven by reduced volume in our resale business in Asia, as well as a further decline in profits from the sale of price risk management products globally," said CFO Irna Birns.
Birns continued: "We remain focused on driving further cost efficiencies in the marine business and identifying growth opportunities despite the challenging maritime markets environment."
