World Fuel Services Q1 Marine Profits Jump 68%, Warns of Tough Q2 Ahead

World Fuel Services. Image Credit: Ship & Bunker

World Fuel Services (WFS) [NYSE:INT] today reported its marine unit produced a standout performance for Q1 2020 despite a slight dip in bunker sales volume and the end of the period feeling the impact of COVID-19 restrictions.

Gross profit for the segment was $59.3 million, its highest level of marine quarterly gross profit in over five years and an increase of 68% year-over-year.

The firm attributed the growth primarily to heightened market volatility and higher bunker prices during much of the period as a result if IMO 2020.

Bunker sales volume for the three months ended March 31 was 4.9 million mt, down 300,000 (6%) on the 5.2 million mt sold in the period for 2019.

With oil and bunker prices having now cratered in addition to the COVID-19-related demand destruction, the firm warned that the road ahead will be difficult.

However, those difficulties would not include any fallout connected to the recent revelations about Hin Leong's financial woes in Singapore, with WFS' chairman and chief executive officer, Michael J. Kasbar, saying his company had "virtually no exposure" despite having done a lot of business with Hin Leong subsidiary Ocean Bunkering.

For its marine unit specifically, CFO Ira Birns said there would be a significant sequential decline in marine gross profit for Q2 2020, but the segment would be its least affected and results would be generally in line with its performance for Q2 2019.

Despite the market difficulties, margins would see some protection as a result of the increased risk.

"There are pluses and minuses all over the place. While lower price is obviously going to have some impact, and lower demand, that's going to be offset to some extent by some risk premiums. It's all about counter party risk within the supply chain," Kasbar said during today's earnings call.

"I think people are going to be pretty careful in terms of how they do business and who they do business with."

In terms of the overall company health, WFS stressed it is well prepared for the difficulties ahead, having ended the year with its highest level of liquidity in company history and at the close of the quarter on March 31 it had in excess of $1bn of available liquidity.

"We continue to carefully manage our cash flows to ensure our liquidity position remains as strong as possible throughout this complicated and unpredictable time period," Birns added as part of prepared comments during the firm's earnings call.

Overall, across its aviation, land, and marine segments the company reported a total gross profit for Q1 of $258.7 million, up 3% year-over-year.

"I'm optimistic about the world," Kasbar said in his closing remarks.

"We will get through this and there will be the other side."