Aegean Warns Tough Market Conditions Set to Continue as Shares Slump 38%

E. Nikolas Tavlarios, President, Aegean Marine Petroleum Network - Image Credit: Aegean

Shares in Aegean Marine Petroleum Network Inc. [NYSE: ANW] (Aegean) Wednesday fell 38 percent to $6.50 following a 1Q 2017 result that President E. Nikolas Tavlarios said was "below our expectations," and warned that tough market conditions were set to continue.

Despite a respectable 5.6 percent increase in bunker sales volume, along with a doubling of revenue that beat analyst expectation by some 30 percent , first quarter net income for the world's largest independent physical supplier fell 88.1 percent to $1.4 million, or $0.03 per share.

"The results missed the consensus estimate by a country mile given that analysts expected the company to earn $0.36 per share," said Matthew DiLallo writing for investor website The Motley Fool.

Tavlarios explained the results were impacted by higher operating costs and expenses, and that the ongoing poor conditions in both shipping and oil trading had either failed to improve, or in the case of some segments, worsened.

"Container trade continues to experience overcapacity and consolidation which drives an elevated credit risk profile. During the quarter tanker rates were lower versus the prior year and dry bulk continues to slump and trade below the cash breakeven point," Tavlarios said during Wednesday's earnings call.

"As we have said in the last few quarters the global bunkering industry faces significant competition in a market saturated with back to back trading entities. These challenges were more prevalent during the last quarter and it appears that these conditions will continue. In addition to pressure from back to back competition physical supplier competition has reached very high levels in the Asian and Middle East markets."

Despite this, Tavlarios remained positive on the future and said the company would reduce annual operating expenses by $20 million by June 1, 2018,  the majority of which would be achieved in the second half of 2017.

"Our plan is focused on marketing several vessels for sale and/or charter, reducing other operating expenses and evaluating our portfolio and reducing exposure to underperforming markets as appropriate," he explained, adding that there would be a shift in strategy to a more asset light model.

"With the support of our dedicated employees we are focused on executing on our long term growth strategy maintaining our financial strength and continuing to drive shareholder value. We are optimistic heading into the second half of 2017 as significant opportunities ahead."

Quotes from Aegean's earnings transcribed by Seeking Alpha - click here for the full earnings call transcript