(EnergyAsia, May 30, Friday) — Singapore-listed marine fuels company Chemoil said its first quarter net profit fell by around 87% to US$2.32 million despite a strong surge in revenue and sales volume compared with the same period last year.
The company attributed the profit decline to a worldwide drop in marine fuel prices in January 2008 which hit physical inventories it held at the time.
Its sales volumes grew 36% to 4.87 million metric tons, while revenue surged by more than 133% from US$1.01 billion in the first quarter of 2007 to US$2.36 billion.
Rising volumes were driven by increased wholesale opportunities in Singapore and the Amsterdam-Rotterdam-Antwerp (ARA) region, combined with the successful development of new business operations in the Gulf of Mexico and Fujairah.
Chemoil’s chairman and CEO, Clyde Michael Bandy, said: “The first quarter 2008 was a challenging one and the oil markets were extremely volatile. There was an uncharacteristic January drop in marine fuel prices at all our ports which immediately squeezed our margins. Further, unit operating problems at refineries in California created a surplus of fuel oil within the regional market.
“These further depressed prices in the port of Los Angeles/Long Beach compared with the decline in prices at our other US ports. As the largest supplier of marine fuels in Los Angeles, these circumstances affected our short-term profitability considerably.”
Chemoil said it was also impacted by losses incurred from crude oil derivative hedges due to spiking crude prices and volatility inconsistent with price movements of fuel oil. Port congestion, mostly in various locations in the Americas, also increased demurrage expenses.
Mr Bandy said: “Against these factors, our European operations were able to capitalise on the greater delivery capability afforded by our investment in Burando Holdings BV and turned in a profitable quarter for the region. We also recorded a non-recurring income pertaining to insurance claims.
“In recent months, the behaviour of crude prices has had far reaching effects on all businesses within and beyond our industry. Chemoil is continually adapting our hedging strategy to align with the rapidly changing market behaviour. While most of our losses from crude oil derivatives came in February, we made a number of changes to our hedging strategy that produced favorable results in March.
“The trading environment is currently turbulent and we may see earnings volatility on a quarter-to-quarter basis but our fundamental business model is robust and will return long-term rewards. Investments in our asset base continue to improve cost structures and increase economies of scale while our global supply chain infrastructure provides unparalleled access to high volume locations. Our new ventures, such as the offshore bunkering in the Gulf of Mexico, are already positive indicators of this.
“We also continue to take the lead in the lucrative lower emission marine fuel supply market and drive best practice in this area. Together this fortifies our competitive position, which will create long-term future value for our shareholders.”
As a leading supplier of marine fuels, Chemoil has integrated operations in Los Angeles, New York, Houston, Singapore, Panama, UAE and the ARA region (Antwerp, Rotterdam and Amsterdam).
Established in 1981, Chemoil was listed on Singapore’s main exchange on December 14, 2006.