World Fuel Services Sees Q4 Bunker Income Quintuple as Volumes Slip
The Q4 result was weaker than Q3 and Q2, but still abnormally high in the company's recent history. Image Credit: Ship & Bunker / Data Credit: WFS
World Fuel Services saw its income from marine fuel operations more than quintuple on a yearly basis in the fourth quarter of 2022 despite a decline in sales volumes.
The firm reported income from marine operations of $31.5 million in Q4, up from $5.9 million a year earlier but down from $48.1 million in Q3, it said in a results statement late on Thursday.
Gross profit from the marine segment was $56 million in the last three months of 2022, up from $30.2 million a year earlier and down from $74.8 million in Q3.
The firm sold 4.7 million mt of bunker fuel in Q4, down from 4.9 million mt a year earlier and from 4.8 million mt in the third quarter.
That left a profit margin on its Q4 bunker sales of $6.73/mt, up from $1.21/mt a year earlier and down from $9.96/mt in Q3.
We were rewarded with generating exceptional returns and delivering the highest level of profitability in the history of our marine business.
Taking 2022 as a whole, marine operations income surged by 651.2% on the year to $155.5 million, marine gross profit jumped by 155.2% to $256 million, sales volumes gained 3.8% to 19.1 million mt and the bunker margin increased by 620.4% to $8.14/mt.
World Fuel saw significant growth from its bunker business last year as the war in Ukraine drove prices to record highs. The company saw its strongest margins in Q2, and while they have since declined from these record levels, the Q4 margin remained abnormally high compared with the rest of the company's history over the past decade.
CEO Michael Kasbar explained the company's strong marine performance in a call with analysts on Thursday.
"Due to the spot nature of our marine business, we have spent a considerable amount of time over the last decade reorganizing our business to drive internal efficiencies so that it can produce respectable returns in down markets and yet remain poised to provide value in volatile and credit constrained markets," he said on the call.
"The high fuel prices coupled with rising interest rates experienced through 2022 created an environment where we were able to leverage the scale of our business and the strength of our balance sheet to deliver for our customers and provide them with the product, services and credit they required when they needed it most.
"For this, we were rewarded with generating exceptional returns and delivering the highest level of profitability in the history of our marine business."
'Meaningfully Lower' Profits in 2023
CFO Ira Birns struck a more cautious note about expectations for 2023.
"While the market remains challenging, we expect marine first quarter gross profit to be up modestly year over year, driven in part by the continued higher interest rate and credit constrained macro environment," he said on the call.
"However, for the full year, we expect marine results to be meaningfully lower than the extraordinary results produced in 2022, considering the significant reduction in fuel prices and volatility from prior year highs."
Kasbar agreed that a repeat of 2022's performance was unlikely this year.
"We just had a phenomenal record year in marine last year, which is very difficult to replicate," he said.
"We expect that we'll still have a very good year this year.
"The team's doing a great job.
"We're also being mindful of risk and managing that element to the business as well as we typically do.
"But even saying that, marine will be down from the highs in 2023, unless something materially changes in the marketplace over the next 10 months."