World Fuel Services: Marine Segment Hits Highest Level of Profitability in Nearly 3 Years

World Fuel Services sold 6 million mt of bunkers in Q3. Image Credit: Ship & Bunker

The ongoing refocusing of World Fuel Services Corporation's (WFS) [NYSE:INT] marine business has helped it put in a "better than expected performance" for 3Q 2018, with the segment achieving its highest level of profitability in nearly three years.

"Our marine segment generated gross profit of $43.0 million, an increase of 41% year-over-year, primarily due to improved economics in our core operations as well as seasonal activities," the company wrote in its latest earnings report.

With the supplier having said for some time it was looking to reduce its "low margin, low return" activity, particularly in Asia, it was no surprise that Q3 volumes were down 13% year-on-year to 6.0 million metic tonnes.

This was "principally due to discontinuing certain low margin activities during 2018," CFO Ira Birns confirmed, but noted that "sequentially, margin segment volume increased approximately 100,000 metric tonnes representing a sequential volume increase for the second straight quarter."

Looking ahead, Chairman and CEO Michael J. Kasbar was optimistic on the future for his company's marine segment, with the company also starting to enjoy tailwinds from rising oil and bunker prices.

"I think the message on marine it's not a big volume story," he said.

"The guys have done a great job moving away from some business that probably didn't make a whole lot of sense for us in the first place businesses that require a lot of working capital and generate a very low returns. So we've done a nice job and the core business has recently benefited from the sharply rising price environment.

"I would say we've more optimism in marine today than we did six months ago. The team did a great job in right sizing the cost structure and now we're taking advantage of more opportunities in the marketplace with a much lower capital investments or return on capital in that business has improve substantially year-over-year."