WFS Expects 'Moderate' Growth in Marine Volumes and Profits in 2022

The firm saw a small improvement in its margins at the same time as growing volumes at the end of last year. Image Credit: Ship & Bunker / Data Credit: WFS

Global fuel supplier World Fuel Services is expecting moderate growth in both sales volumes and profits from its bunkering segment this year.

The firm saw about 4.86 million mt of bunker sales in the fourth quarter of 2021, up by 1.9% from the previous three months and by 15.2% from the same period a year earlier. The company also noted an improvement in its marine profit margins, rising to $1.21/mt in the fourth quarter from $0.76/mt in the third quarter and from $0.74/mt in the fourth quarter of 2020.

The company now expects an improving outlook for its marine business this year, its managers said in a call with analysts on Thursday. A transcript of the call can be read on the Seeking Alpha site.

"[In the marine business] we experienced increases in our core resale activity and physical operations during the fourth quarter, and expect volume to continue to grow moderately over the course of 2022," Ira Birns, chief financial officer of WFS, said on the call.

"As you look ahead to the first quarter for marine, we expect gross profit to increase sequentially and year-over-year driven by renewed signs of improving market conditions in our core resale and physical operations with a strong opportunity for further improvement as we navigate through 2022."

But margins are likely to be slow to improve, Birns said.

"On a historical basis ... there's been a much tighter correlation between price and margin in marine than our other businesses because it's principally a spot business and arguably more of a bulk business selling for dollars per unit instead of pennies per unit," he said.

"So the issue is it doesn't happen overnight. There's historically been a bit of a lag.

"We were starting to see that at the tail end of the quarter, which is why we outperformed our expectation in Q4 to be honest.

"That's still in thus far to the first quarter not meaningfully, but margins are certainly consistent with or maybe slightly higher than where we were in December. So that will play out over time."

Birns also said the company had only limited exposure to Russia as the Ukraine crisis develops, with revenues of about "a few million dollars on the marine side, spread amongst a pretty small number of customers in total."

"Obviously we're monitoring this situation, just as you are, considering the escalation overnight, and we're being very careful about managing any additional credit from today going forward."