World Kinect Marine Profits Jumped to One-Year High in Q1 as Volumes Climbed

World Kinect saw a strong quarterly rise in marine margins in Q1. Image Credit: Ship & Bunker / Data Credit: World Kinect

Marine fuel profits at World Kinect -- the world's second-largest bunker supplier, previously known as World Fuel Services -- jumped to a one-year high in the first quarter as delivered volumes jumped.

The firm saw income from marine operations of $26.8 million in Q1, down by 13% from the abnormally high level seen a year earlier but up by 38.9% from the level seen in Q4, it said in a results statement on its website. The company is the world's second-largest seller of marine fuels after Bunker Holding.

Gross profit from the marine segment was $48.4 million in Q1, down from $52 million a year earlier and up from $44 million in Q4.

The firm sold 4.3 million mt of bunker fuel in Q1, up by 1.2% on the year and on the quarter.

That left a Q1 profit margin on its bunker sales of $6.19/mt, down from $7.20/mt a year earlier and up from $4.51/mt in Q4. 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 year-on-year decline in marine profits can be attributed to abnormally strong profits seen the previous year, CFO Ira Birns said in a call with analysts on Thursday.

The fall was "driven principally by the reduction in market volatility when compared to what we experienced through 2022 and into the first quarter of 2023," Birns said.

"Sequentially, however, gross profit was up 10%, demonstrating our team's continued focus on driving solid returns in the current interest rate environment.

"As we look to the second quarter, while we expect marine gross profit to decline sequentially, principally driven by seasonality, year-over-year comparisons start to normalise as market volatility tapered off by the second quarter of last year.

"We are expecting second quarter results for marine to be generally in line with the prior year based on what we've seen quarter-to-date."

Volumes can be expected to remain stable in the second quarter, while margins may fall slightly, Birns added.

"I think volumes will be generally consistent with Q1," he said.

"But we're starting to see a little bit of softening in margin.

"The team has done a great job in keeping margins well above historical norms. We still expect them to remain well above those norms in the second quarter.

"But from what we're seeing so far, in April, they're coming in a little lighter than they did in the first quarter."

'Little Bump' From Red Sea Diversions

The firm's marine division has seen only a modest impact from diversions away from the Red Sea and Suez Canal, and this effect is already becoming less pronounced, CEO Michael Kasbar said on the call.

"It's extraordinary, the resiliency of the marketplace, and certainly shipping understands how to respond to disruptions, so, that's settling out a bit," Kasbar said.

"While there was an impact to some extent, and certainly that had material impact and still does on the fortunes of dry cargo and container and tanker, the impact in terms of the market coming together and sort of solving for that has settled down.

"So, not an enormous impact -- we got a little bit of a bump there, but that is pretty much settling down now."