World Kinect Q2 Marine Profits Drop to Lowest Since 2021 on Reduced Volatility

Q2 marine income from operations was down by 47.5% on the year, by 61.2% from Q1 and the least since the fourth quarter of 2021. Image Credit: Ship & Bunker / Data Credit: WFS

Marine fuel profits at World Kinect -- the world's second-largest bunker supplier, also known as World Fuel Services -- slipped to the lowest level since late 2021 in the second quarter on reduced volatility in the market.

The firm saw income from marine operations of $10.4 million in Q2, it said in an earnings release on Thursday. The figure was down by 47.5% on the year, by 61.2% from Q1 and the least since the fourth quarter of 2021.

The company is the world's second-largest seller of marine fuels after Bunker Holding.

Gross profit from the marine segment was $36.7 million in Q2, down from $42 million a year earlier and up from $48.4 million in Q1.

The firm sold 4.2 million mt of bunker fuel in Q2, down by 1.2% on the year and by 3.9% on the quarter.

That left a Q2 profit margin on its bunker sales of $2.50/mt, down from $4.70/mt a year earlier and from $6.19/mt in Q1. Since the start of 2015 the company's average marine profit margin has been $2.64/mt.

World Kinect is the new name for the firm's overall holding company, but it still remains known as World Fuel Services in its market operations.

Analyst Call

The firm remains satisfied with the performance of the marine side of its business, CEO Michael Kasbar said in a call with analysts on Thursday.

"While results were down year-over-year, our marine platform remains highly efficient and working-capital-light," Kasbar said.

"Because marine is more of a spot business, it can deliver outsized results when market conditions are favorable, but creates value even in less beneficial environments.

"It is a consistent cash generator with minimal capital requirements and significant potential upside.

"We continue to appreciate the diversification and return profile of this business."

CFO Ira Birns attributed the lower marine profits to a more stable bunker market compared to the period of turmoil seen over the past few years.

"While volumes were essentially flat year-over-year, gross profit decreased about 13% driven principally by lower market volatility than experienced in the prior year period," Birns said on the call.

"While we anticipated a sequential margin decline heading into the second quarter, the actual decline was a bit more than it had been anticipated.

"While marine profitability is down from the highs of 2022, it remains an extremely efficient capital model and allows for strong returns and contributions to cash flow each quarter.

"As we look to the third quarter, we expect marine gross profit to be effectively flat when compared to the third quarter of 2023 as year-over-year volatility comparisons finally seem to be normalising."