Q3 2019 Earnings Call
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[noise], ladies and gentlemen, thank you for standing by and welcome to the World Fuel services 2019 third quarter earnings Conference call. My name is Kevin I'll be coordinate all this evening.
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Now, let's turn the conference over to Mr., Glenn Klevitz World Fuel's, Vice President Treasurer, and Investor Relations Mr. Cabot's you may begin your conference.
Thank you Kevin Good evening, everyone and welcome to the World fuel services third quarter 2019 earnings conference call I'm, Glenn Klevitz and I'll be doing the introductions on this evenings call alongside our lives slide presentation.
This call is also available via webcast to access this webcast our future webcast. Please visit the world fuel Services Corporation website click on the webcast icon.
With us on the call today, our Michael Kasbar, Chairman and Chief Executive Officer, and IRA Birns Executive Vice President and Chief Financial Officer.
By now you should have all received a copy of our earnings release, if not you can access through at least on our website.
Before I get started I'd like to review World fuel Safe Harbor statement.
Certain statements made today, including comments about world Fuel's expectations regarding future plans and performance are forward looking statements that are subject to a range of uncertainties and risks that could cause world fuel's actual results to materially differ from the forward looking information.
A description of the risk factors that could cause results to materially differ from these projections can be found in world Fuel's. Most recent Form 10-K , and other reports filed with the Securities and Exchange Commission.
World fuel assumes no obligation to revise or publicly released the results of any revisions to these forward looking statements in light of new information or future events.
This presentation also includes certain non-GAAP financial measures as defined in regulation G. A reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures is included in World Fuel's press release and can be found on its website.
We will begin with several minutes of prepared remarks, which will then be followed by a question and answer area.
As with prior conference calls, we ask that members of the media an individual private investors on the line participate in listen only mode.
At this time I would like to introduce our chairman and Chief Executive Officer, Michael Kasbar.
Good evening, everyone actually for me, it's good morning.
I'm, calling in from Singapore.
Right, but generally the global maritime for annual summit.
This all that is a gathering of marine industry leaders, who has come together to discuss challenges facing the maritime industry.
And exploring how the industry can drive positive change for business in society.
This year summit is especially timely considering the significant changes on the horizon as marine markets prepare for ARYMO 2020, which is now only two months away as one was the sustainability goals being shot for 2030 and 2050.
Moving onto our third quarter results, our global team executed extremely well, which drove very strong operating results in the third quarter significantly ahead of our results through the third quarter of last year.
This is evidence that our hiking focused on driving organic growth while remaining focused on cost Sim returns is paying off.
[noise] origination segment again delivered strong results driven principally by growth and profitability from our government operations in Afghanistan.
Our core commercial business also delivered solid results in its seasonally strongest quarter Walmart business in nature activity also remained strong.
Business mission operations will be further bolstered by the addition of the recently announced easier acquisition.
Which we now expect to close in early 2020.
Getting back to Marine Marine segment generated its strongest results in nearly five years, driven by seasonality and it's hard to high sulfur fuel oil market in Singapore, which was generally the result of supply disruptions caused by the oil fuel, which acts in Saudi Arabia.
Well these conditions seem to be moderating the potential for market volatility and rising prices for low sulfur fuel oil, which will be drawn the principal fuel use by the shipping industry Trump January .
Could provide similar profitable opportunities.
As the IMO 2020 regulations go into effect.
I bring team has done a fantastic job managing returns in expenses relating to the healthiest contributions to our overall results in quite sometime.
[noise] or when business delivered double digit growth.
Gross profit in the third quarter, driven by strong government results continued improvement in commercial and industrial business and steady growth Locum service business activity.
We remain focused on driving further improvements in land profitability operating leverage and returns as we head into the new year, what remains fragmented market with significant organic and strategic growth opportunities ahead.
In closing, we're very pleased with our results this quarter across all regions and business segments, and we remain focused on driving growth both organically and through select strategic investments wants further enhancing returns across our global business.
I'm truly extremely proud of how well we are executing on our core strategies like do you think your entire world fuel team for their tireless efforts and continued focus on driving success contributing to significant growth and shareholder value. This year.
Thanks, very much to all of my team members Iris, let's let's take a look at the financial results and then will follow with the queuing. It thanks very much.
Thank you make good morning to you and good evening to everyone else on todays call or or webcast.
We delivered solid financial results in the third quarter as Mike said already mentioned.
Benefiting from our core strategies of organic growth continuous cost management and sharpening our portfolio to drive enhanced returns before I get into the details let me share some highlights with you.
Adjusted EBITDA for the third quarter was $118 million, that's an increase of $13 million or 13% compared to last year. We have now delivered year over year increases an adjusted EBITDA for 10 consecutive quarters and our trailing 12 month adjusted EBITDA has increased to a record $401 billion.
Adjusted earnings per share for the quarter was 77 cents, an increase of 22% compared to the third quarter of last year and lastly, our balance sheet remains strong aided by $33 million from operating cash flow during the quarter.
Consolidated revenue for the third quarter was $9.3 billion, that's down 11% compared to the third quarter 2018.
This year over year decrease in revenue was principally driven by the declining volumes at our marine segment as well as a 19% year over year decline in average fuel prices.
Our aviation segment volume was 2.2 billion gallons in the third quarter, an increase of 4% year over year and 1% sequentially.
Volume in our Marine segment for the third quarter was 5.5 million metric tons, which is down 400000.
Tons or 8% compared to the third quarter of last year, but up 400000 tons sequentially.
The sequential volume increase principally related to increased demand in Asia, driven by recent market volatility.
Our land segment volume was 1.35 billion gallons or gallon equivalents during the third quarter, that's effectively flat year over year, but up 2% sequentially.
Total consolidated volume for the third quarter was 5 billion gallons or gallon equivalents, that's flat year over year, but an increase of approximately 160 million gallons were 3% sequentially.
Please note that the following figures exclude the impact of pretax non operational items that third quarter as well as non operational items in periods previously reported as highlighted in our earnings release. These non operational items, principally represent restructuring and acquisition related costs.
To assist all of you in reconciling results published the earnings release the breakdown of these non operational items can be found on our website and on the last slide of today's webcast presentation.
Consolidated gross profit for the third quarter was $306 million, an increase of $38 million were 14% compared to the third quarter of 2018.
Our aviation segment contributed $157 million of gross profit in the third quarter, an increase of $16 million or 11% compared to the third quarter 2018.
Year over year the increase in aviation gross profit was principally the result of increased profitability from our government related operations in Afghanistan as well as continued strength in our core commercial and business aviation activities.
Looking ahead to the fourth quarter, we expect the traditional decline from a seasonally strong third quarter also we are diligently working towards closing the year acquisition, which we announced in August which is now expected to close in early 2020.
The Marine segment generated third quarter gross profit of $53 million, that's a 10 million dollar or 24% year over year increase representing the highest level of quarterly marine gross profit since the first quarter 2015.
The year over year increase was driven by continued strengthen our core resale business as well as additional activity in Asia, principally resulting from the drone strikes in Saudi Arabia, which created significant disruptions in exports of high sulfur fuel oil to Singapore. The latter part of the third quarter. This resulted in supply shortages.
Which drove increased volumes and profitability the Asia during the quarter.
It is possible that the timing of such disruption in advance of the upcoming IMO 2020, low sulfur regulations going into effect also contributed to the increase similar to prior years, bringing also benefited from seasonal activity during the third quarter.
As the impact of the recent supply disruption and the demand for high sulfur fuel oil declines leading into 2020, we believe the market conditions in Asia will normalize with prices of high sulfur fuel oil already down significantly from levels reached in September .
The fourth quarter also not see the benefit of the seasonal activity realized over the summer, resulting in an expected sequential decline in profitability in the fourth quarter.
However, at the upcoming IMO 2020 deadline leach the further market volatility as we approach and entered the new year. This could provide opportunities for additional marine profitability towards the end of the year and into 2020.
Our land segment delivered gross profit of $95 million in the third quarter, that's up $12 million or 15% year over year.
When compared to last year, the principal drivers of the 15% year over year.
Increase resulted from an increase in commercial and industrial and government related activity and further growth in our multi service business multi service business.
Speaking of multi service gross profit in multi service was $20 million in the third quarter. That's an increase of $2 million were 12% compared to the third quarter of last year, reflecting the continued strength of the growing multi service business model looking ahead to the fourth quarter, we expect sequential seasonal improvement in our UK.
And connect business activities.
Operating expenses in the third quarter, excluding bad debt expense in non operational items were $195 million, that's an increase of $15 million compared to the third quarter of last year.
Our expenses exceeded the range provide on last quarter's call principally relating to variable costs associated with improved performance during the quarter.
Nevertheless, we remain on track to meet our goal of a 250 basis point year over year improvement in our operating expense ratio for the full year 2018 Beatty excuse me.
In the fourth quarter, we expect operating expenses, excluding bad debt and any non operational items to decline sequentially to a range of $185 million to $189 million somewhat similar to the level of expenses incurred in the second quarter.
We did experience an elevated level of bad debt expense in the third quarter, driven principally by one well publicized airline bankruptcy in Europe during the quarter.
While we will occasionally be negatively impacted by an unforeseen customer default, we believe our overall receivables portfolio remains quite strong.
Adjusted EBITDA was $118 million that third quarter up $13 million were 13% from the third quarter of 2018 as I mentioned earlier again this represents a 10th consecutive quarter of year over year improvement in EBITDA.
Additionally, our trailing 12 month adjusted EBITDA was $401 million at the end of the third quarter. Another record result for us.
Adjusted income from operations for the third quarter was $96 million up $13 million were 15% year over year.
Third quarter interest expense was $21 million, an increase of $2 million compared to the third quarter 2018, I would assume interest expense will remain generally flat.
Fourth quarter.
Our adjusted effective tax rate in the third quarter was 30% that's down from 36% in the third quarter of last year and somewhat lower than the guidance provided last quarter due to certain discrete tax benefits recorded during the quarter.
We are beginning to make progress towards improving our effective tax rate and while we expect our tax rate to be in the range of 31% to 35% in the fourth quarter, we had increased confidence that we'd be able to reduce our effective tax rate to 30% or below in 2020.
Adjusted net income for the third quarter was $51 million, an increase of $8 million were 19% when compared to the third quarter of 2018.
Onto the balance sheet, our total accounts receivable balance was $2.7 billion. It at the ended the quarter, that's effectively flat sequentially and a decrease of $400 million when compared to the third quarter of 2018, which was principally related to the decline in fuel prices over that period.
Operating cash flow of $316 million generated over the last 12 months has helped to further improve our balance sheet by further reducing our net debt position. This has resulted in a reduction in our ratio of net debt to adjusted EBITDA. The 1.2 times down from 1.8 times in the third quarter of 2018.
The operating cash flow combined with increased profitability has also resulted in a significant increase in our return on invested capital.
In closing, reaching $400 million and trailing 12 month, EBITDA, which was barely $300 million at the end of 2017 has been a great accomplishment for us and we have delivered such results by significantly improving efficiencies in our business from cost improvements to improve capital utilization realized by exiting low return bill.
This activities.
This is also increased our trailing 12 month return on invested capital to 9%, representing our strongest performance since the fourth quarter of 2016.
Water our return on invested capital exceeded 11%, which represents our strongest quarterly return since 2014.
Great accomplishments, but we have more heavy lifting to do to take our business to the next level.
We remain focused on generating greater operating leverage in our business remains focused on sharpening our portfolio and with our strong liquidity position, we remain focused on driving growth organically and identifying strategic investment opportunities in our core business like the air transaction, we announced in August our entire team of professionals worldwide.
Our all committed to continuing to drive the business forward, making all of our contributions more fulfilling and rewarding and increasing value for our shareholders I will now I'd like to turning the call back over to our operator to initiate the Q and a session.
Thank you at this time I'd like to remind everyone. If you would like to ask the question. Please press the number one followed by the number four on your telephone keypad.
We'll hear three tone prompt to acknowledge your request. If your question has been answered and we'd like to withdraw your registration. Please press the number one followed by the number three.
You are using a speakerphone. Please if your handset before entering a request.
A reminder, we would appreciate it if the participants would limit themselves to two questions with one follow up and we'll pause for just one moment to compiled the culinary roster.
And our first question is from Kevin Sterling with Seaport Global Securities that lines open.
Thank you.
Good afternoon, our and Mike Good morning to you and maybe I guess good until you have alloway Mike.
Yeah, Thanks very much.
Okay Thats. Your since you are ahead of us in time, we let me know if the nationals when game seven.
[laughter].
That would be fun.
Good day.
But I am now moving on.
Obviously your marine business the shown quite the improvement this quarter can you tell as any of that IMO 2020 related I know you mentioned the drone strikes in the volatility that calls and obviously you guys do well in those cases, some volatility but is it any way to parse out like Hey, we did get some benefit benefit.
IMO 2020.
Well the comments.
That we shared we wanted to get that out there because I know that thats on everybody's mind.
You know to add a little bit of color, let me know calling from Singapore. So if there's any if theres any sort of funding delays sleeping so.
Any case sound okay.
Yes, yes, yes, you sound I can hear you tomorrow. Thank you.
All right no problem so.
You know, what's it was a combination of a number of different things.
Certainly.
As we said before disruptions don't disrupt like they used to because you've got an oversupplied market.
However.
And this scenario you had a confluence of issues that you know all occurred at about the same time refiners started to switch to producing low sulfur fuel.
They are getting prepared for 2020 as you can imagine owners and operators want to be buying high sulfur fuel.
For as long as possible in 19 before they switch over to the materially more expensive low sulfur fuel.
So.
The the drone strike limited a little bit of the more than a little bit of high sulfur heading to Singapore and.
Trade flows are a little bit different these days so all of that really occurred at the same time, creating steeply backwardated market.
And you had a number of different books scrambling for a few things that we have a little bit of our own physical supply and around back inventory.
Of course, our own risk management position, so all of those activities.
Created more more opportunity add value add for us, helping our clients outside product so.
What will happen on a go forward basis remains to be seen the price increasing is going to put pressure on credit lines, our balance sheet is working.
Looking very healthy and it's always been concern is that's the number one is balance sheet trumps almost everything that we do and.
The the credits I think is going to continue to be something that people are going to look to us for certainly the quality.
He is going to be an issue we've got a deep technical group that was really our point of differentiation years ago, where quality was the way that we were really differentiating ourselves from.
The rest of the marketplace we.
Added to our.
Nicole and quality team, we've built all sorts of different solutions.
There is going to be.
Logistics challenges, it's going to require more planting.
Kick in Italy for ships that don't have a regular schedule, you're not going to have the availability of all fuels in all different toward so there's going to be significant value add that we're going to bring to the market in terms of buyers and sellers, but we don't want to overdo it.
When we W. went down people got a little bit of irrational exuberance and predictive Zack.
It was going to be crazy multiple sort of effect than what happened. Shortly thereafter is the energy complex.
Imploded and.
A lot of the market change so the oil industry I wondered certainly from our land business, it's very impressive entity the organized oil industry.
Is pretty sophisticated this is not new news, there's been a lot of time to prepare there's a good amount of low sulfur around.
So.
We don't think thats going to be as periodic you're you're going to have assorting mechanism were good owners and operators and suppliers are going to do a good job you're going to have those folks that you didn't plan. So much and don't have as predictable schedule. So they they have a challenge certainly is going to be more beneficial for us because there's going to be.
More of the demand for the sophisticated services required in order to achieve that so we feel good about what the road ahead is.
In terms of the value we can bring to the market that will help our earnings, but we don't see it as something that's going to be around our way.
It's really not have oriented.
Logistics and recurring predictable revenue and big.
Important part of the value chain is really the mantra, it's really about reducing cost and using technology to grab them basically provide value internally and externally. So I'm not going to go on anymore I know you've got two more questions.
Yes, no. Thank you.
Very helpful.
Appreciate that.
If I could maybe they don't want to go but maybe I can ask.
Another question around IMO 2020, and it I get the idea of chaos and volatility supply shocks and.
There is.
You just don't have the fuel available how you guys have been a benefit from that but if I think back 10 years ago.
During the great recession, and there is oil price volatility if I recall no more more more your customers did hedging and that's a benefit for you guys too and so if we see price spikes is it the thought that.
You may see.
I see more hedging opportunities from your customers customers come to you look to do hedging am I thinking about that right just try to compare what may happen now versus when we saw significant price volatility.
Absolutely no you're right on the money, Kevin we've got a sophisticated derivatives practice, we've been delegates since 1988 that certainly.
Something that we use for our own risk management, because we're managing a material amount of inventory and don't expect it will position so.
There will definitely be.
Opportunities for folks you are going to see aberrations cemeteries in the marketplace in.
Many folks have done that already and we think that.
There will be a greater opportunity for us to provide risk management services for folks who want to have more predictable pricing. So 100%, we will be seeing that come back and we're happy because were.
Pretty good that and so we will be seeing that as a bigger part of the next without question.
Okay. Thank you for my last question, just kind of little housekeeping and our maybe this is for you you talked about your bad debt expense spiking.
Third quarter due to carrier bankruptcy.
Do you anticipate that level to come back down in Q4 or expected to be elevated in Q4, we may not see returned to more normalized levels in 2020.
Thanks, Good question, Kevin I would certainly hope and expect to that number would come back down to more normal levels in Q4, big chunk into Q3 piece related to one specific bankruptcy.
We're not planning on any additional bankruptcies in Q4, we view our.
Our best job to avoid those when they do happen, but once in awhile.
Big kind of come out of nowhere so.
But with respect to your question in Q4.
It is very likely that we would return to more normal levels just anything could happen.
Based on what we know today, we would expect to be.
Back to.
The two 3 million dollar level so to speak.
But you that used to seeing in the fab the pass on a quarterly basis.
Okay, great well, that's all I had I think free time I need to go Washington Nationals game seven at night. So thank you.
Hey, good low Astro.
Next question is from Ben Nolan with Stifel. Your line is open.
Yes. Thanks.
I can.
And form Kevin at the Astra is going to win Tonight hope it in spoil that for anybody but.
That is going to happen.
The.
Yes, I do have a couple of questions first is well good core congratulations.
On the aviation side.
The government government side of the business you called out is something that was especially good in the quarter.
Has there been any material change there how are you thinking and this is always one of those things that comes up seems like every year at least every.
So often that how it's hard to say whether that government business is going to be repeat or whatever but here. It is again being sort of a driver for the aviation business any extra color that you might have around sort of how you're thinking about that and what specifically was.
Benefited you in the quarter.
I'll start.
Ben and Mike May choose to chime in I mean nothing.
Nothing overly significant to report aside from the fact that that that business has has remained strong for US third quarter is generally are the strongest season of activity in the region in Afghanistan and in particular this year was no exception when you look at our year over year performance.
Part of the improvement or a big part of the improvement actually was driven by a supply chain improvements over the course of the year.
So we've been able to get better pricing, which has helped improve profitability. So we didn't see a significant change in volume year over year above, but we generated more profitability. So.
The color is the same over the long term this is a.
A contract that is.
It doesn't have any guaranteed minimum levels of activity at sea its demand base.
We should report that I think.
That's why we talked about this is a couple of years ago, when we renewed our contract.
And.
We mentioned that margins were lower than they had been in the previous contract we've since.
Claude some of that back with improved supply dynamics, but we've also just extended so the two years are up in December and we had if you remember we had three one year extensions to that contract and we we've now gotten the extension through the end of 2021 it at a minimum.
But as you put it then.
You just never know rights or are we have hundreds of people in Afghanistan doing a phenomenal job day in day out.
But we don't necessarily control the level of activity in any way so as you look towards.
Look towards 2020.
We hope another great year, but.
There are troop withdrawals or.
Any other type material changes that could that could impact that part of our business.
In blogger I'm, sorry, when I when I said the essentially at the end on a year ahead makes a day Adam year at we got the extension through the ended 2020 and other additional extension possibilities under the contract for 2021 in 2022 down the road.
Okay, that's helpful and I assume that similar logistics.
Benefit the you had been able to extract that there's no reason to believe that those should not be replicable going forward right.
That.
Supply chain benefit as sticky.
Pretty volatile environment.
There have been scenarios in the past of a border closings and things like that that that have caused us to bringing supply is less favorable terms that hasn't happened in quite a while but yes look thats always a risk we're not delivering fuel from Chicago animal right. The fuel has gone from Pakistan, Ghana status, so little bit.
Front, we were excellent than what we do.
Extremely complicated.
But again.
We don't control the overall volume of activity.
On a day to day basis, but no we.
The short run it's business as usual.
Of course due to the sensitive nature of the activity, we don't get a heads up.
If demand requirements are going to come down all the sudden.
But well, we'll all know at around the same time, when when and if that happens. So for now we continue focusing on servicing.
Net debt market very well, but also working really hard to grow the other parts of our business.
So that that this piece of business over time becomes a smaller part of our overall business.
Worldwide.
Right Okay.
And then.
Shifting.
Bill a killer.
You'll recall that Atlanta.
Yeah, Dan is I've said it before but.
First of all we're very proud of the gene.
It's just the created logistics.
It's it's very strategic and.
Within our.
Aviation logistics military.
Petroleum logistics.
Expertise has been instrumental in terms of expanding that to a number of different areas. So you'll see us with business continuity emergency services rapid response and any number of difference.
Capabilities and as I've said before its weekends and formula racing for passenger car companies. So.
It really is.
Beyond obviously the business activity itself.
It is.
It's very important strategic part of what we do to what we've done and what we've leveraged.
In the evolution from us being underwriting.
Reselling company to a sophisticated global logistics partner for airline shipping companies and.
Our ground fuel clients around the world. So just wanted to remind everybody and add that end what that gives to us.
Right.
Thanks, Jim important.
Switching gears, a little bit for me to the balance sheet.
Notice there was a little bit of an increase in inventories in a in a bigger increase in the other current assets line.
Yes, I was curious if you have you guys are doing anything strategically there in terms of I don't know weather related IMO 2020 in inventory building and Thats happening.
By a number of people but.
Or just more thematically carrying more inventory and how we should think about that maybe if you could give a little color on on the bump in the other current asset line as well.
Yes on the on the inventory side for starters that number will move around quarter over quarter.
And we have gotten a bit more physical and aviation in particular.
Post the Exxon acquisition.
But a lot of it to be honest is timing related nothing substantially has changed in.
In terms of our decisions on carrying or something we don't necessarily carry inventory strategically we can carry inventory to support the book of business that we need to support.
That.
That mix between back to back in inventory will shift a little bit from time to time, but nothing nothing really significant has changed.
In.
In the past couple of quarters from an inventory perspective.
The mix of business mix, and and and and pricing dynamics from from quarter to quarter.
Other current assets you honestly stumped me.
There's nothing significant that's in there I believe it's simply a timing issue, but I guess I could get back.
Okay.
Right.
All right, but that does remain.
I appreciate the time, good quarter, guys and enjoy Singapore.
Thanks, Ben let me start happening out here.
And are last question comes from Ken Hoexter with Merrill Lynch. Please go ahead.
Hey, Greg Good morning, Mike and after in Iran. Glenn.
Maybe lets hit the one part of the business you haven't had yet on land you had a big upturn in profits you gave great detail on the aviation and Marine and you noted Ireland was increased from commercial and industrial activity in multi service.
Is this also seasonal acquisition benefits is something clicking here, that's ramping up on our weather station deliveries or the UK acquisition, and maybe just delve into multi service a bit more.
Sure.
I'll start my could add some color in terms of the qualitative.
But.
Inland look we've got the two larger CDAI commercial and industrial acquisitions, we made three years ago are.
It is we got off to a slow start with one in particular, you know, it's starting to catch up and we we've seen that business continue to grow.
It's still smaller than we would like it to be and Thats, where some of these strategic opportunities may may come into play over the next several quarters, but we did see we did see some uptick there.
Yeah.
It's not Europe as you mentioned Europe remember that this summer is the weaker period for the European side of the land business. So there's no no significant movement there year over year, we we hope to see a nice uptick sequentially in the fourth quarter. If it's finally cold again in the UK in the winter.
The connect business, which includes.
Activity in both.
Principally in the in the US in Europe continued to perform pretty nicely in the third quarter. The Nat gas a piece of that business from Thats Nat gas and power had some.
Relatively impressive growth as they continue building out there.
The breadth of their their customer relationships. So yes, there were pieces that did pretty well in there. There were pieces that were relatively stable, we still need to achieve more operating leverage in land and we're only going to achieve that with a more organic and.
Growth combined with some strategic opportunities, we're very focused on capitalizing on multi service continues to do really well.
An impressive little business that continues to add.
Customers continues to drive efficiencies and its platform and has grown quite regularly now over the past over the past several years and that again they had another they had another good quarter.
They are converting on their pipeline of new opportunities.
And.
Our our belief is that we'll continue indefinitely, albeit a small piece of our overall business.
It is certainly one of our one of our growth drivers.
We're very proud of.
Okay.
Yes, Mike Guide.
Laguardia Gaunt, Ken I'll comment later get get your trust himself.
No. Okay, I thought our is going and it over to you but.
Hi, if I'll just jump in with a different one then on on ironic accounts receivable just back on the balance sheet.
Seems like you've had a couple of questions here, but you've made progress in different areas. It you know today, our is down just because of the the price of fuel is there anything to do in this environment just given the economic backdrop right. If things are we got some bad debt is that something you look to rein in at all on on a dollar basis or are you happy with levels, you're not just wondering.
And what your thoughts or I guess relative to the economy and what usually do with with your extension on day sales outstanding.
Yes.
Sales outstanding is not necessarily the issue that's been.
Very consistent we have brought that down a little bit.
But some of the things we talked about if you start with marine as an example.
Some of that low margin higher risk business, we've done a really good job in pulling that wasn't necessarily a massive.
Impact on.
Accounts receivable is probably $50 million to $100 million over the last year. So we've lived through the high times, a low ties in terms of the economic cycles and we've always played a relatively conservative.
And if you will in terms of managing the overall portfolio.
And some cases that means we've walked away from some margin opportunity because weve risk was too big.
We've ramped up.
Our credit insurance programs to mitigate against potential losses, but overall I would say our portfolio is very healthy probably healthier than it's been in a while that doesn't mean that that eliminates the risk of what happened to for example, with one particular customer in the third quarter. So.
Our team is doing a really nice job.
Where issues or flag, we're we're very quick to at a minimum ramp down the amount of credit we may provide someone whose credit conditions have have negatively.
I've been negatively impacted for whatever reason.
And.
So.
I don't think does any conscious effort to say, we want to take that $2.7 billion.
Down dramatically to move up and down as you noticed based on fuel prices Thats a given.
But we'll continue to monitor the portfolio day to day out and if there are more.
Opportunities too.
You know to exit low margin business specialty low margin business or low return business that has significant amounts of working capital invested receivables in particular, we're always going to do that.
I think we've gotten through a big chunk of that I would say so there's not a lot of that on the table today. So if fuel prices didn't move over the next six months I would expect our receivables balance would remain in a very tight ZIP code no around that $2.7 billion number.
That's really helpful.
And then last from me.
I doubt it there Michael or I guess, just your thoughts on the competitive market I mean in the past.
Mike You mentioned no w. earlier.
Maybe just give an update on on the state of your competitors thoughts on your your GP pricing in this rebound.
Maybe just run through each segment, what you what your thoughts on the competitive positioning.
Well.
We will make comments on some of the other stuff, but I'll answer the first.
Gives me.
You know its.
It's interesting.
We.
We made now we're living.
In highly fragmented markets.
And we created a certain amount of navigation.
There was good amount of volatility there is.
A lot tighter supply demand equation, you had a lot of location arbitrage that.
Certainly helped the derivatives part the things there's information arbitrage.
But things have changed dramatically when I look at world fuel today, and what it was 2030 years ago, what it was five years ago.
Continuing transformations quite extraordinary and when you look at the marketplace.
Really no different so yes, there's been a lot of consolidation on buyers and sellers that we.
Yes, it's sort of that as not necessarily beneficial, but we've also consolidated and weve ground and we've scaled it hasn't been always this move this road.
But I think that's some part of the story is.
The fact that there's not that many companies that can actually scale. So I think we've demonstrated.
Our ability to scale and certainly predicts the balance sheet.
And.
You are seeing some progression.
So.
Volume's up sequentially in land, it's up sequentially in marine.
And aviation continues to tick.
We continue to penetrate marketing gained market share grow.
Faster than GDP team. So I think those are all good indicators of the capability of the company.
And what's in the markets as competitive as it's ever been a credit card companies looking to get into healthcare in supply chain management. So.
There's a hell of a lot of convergence going on in the marketplace.
And there's a good amount a convergence going on with sand world fuel. So when you look at land Marine and aviation.
Moving targets and stationary targets at the ship, a playing a truck and airport a seaport truck rack in a molecule.
So and certainly with signed our 2020.
You are seeing a good amount of convergence there in terms of fuel.
In terms of distillate.
The regulation should have been 0.1% Dan.
Any case it is what it is so.
I think I think that we're feeling like we've got greater capability. If you look good story, we transformed from underwriting at a market maker to being a pretty sophisticated logistics company and now I'd say to the next.
Evolution is deeply getting into digitization, and crushing cost internally and reducing costs for our clients and creating convenience and being integrated with their operations and then using our global platforms. We were born global.
Marine and aviation, where global from day, one land is more of a local regional business, but you've got now a land business that is starting to reach its stride or you could see it coming through and it's been a tough road I mean, we clear that a lot of the portfolio, there's still more to do we brought.
On a lot of.
Capital back Mike progeny, the gene or legal team and financing and everybody is on technology is coming through it's been it's been it's been a journey that is for sure, but we can see it's coming through and.
We are in Singapore with this global Maritime form, it's essentially a world economic Forum for the Maritime industries, there's a tremendous amount of convergence we have our connect.
One of that Bill base too.
Started.
The journey with us with selling his company Jewelers us energy in 2012 and that would put seven other companies together to make connect energy group then.
That's been pretty timely.
So now were burgeoning.
Our liquid diesel business with our gas and power and sustainability business said brand to get World connect energy services. So it's a carbon garden offsetting its renewables bio gas wind and solar is growing in.
All of these clients.
With these commercial and industrial clients, they're all looking for the same site. So they all have sustainability goals and.
So all of it is kind of coming together and we feel pretty good about it. So any cash so just wanted to add a little bit of that tolerant multi service is doing well and it's definitely part of the Digitization journey.
So others, there's more and more.
Engagement.
You know Salesforce dot com in terms of just.
Getting standard tools and some of our native cloud applications that were right out of the box.
Is definitely.
An area that is.
Sort of bright we could see bright lights here, where we are going to start the leverage technology internally. So anyway long winded answer, but it's it's my once a quarter opportunity to sort of tell the story. So I think this story is important and then the visions important that we're executing on it in our our team is more engaged and I think more positives. So.
We're feeling good despite all the craziness in the World. We've got I think an excellent excellent business model and.
You know, it's working better than ever before.
Hey, Mike I read and Glenn it truly appreciate time and insights and and they shop. Thanks.
Thanks guessing.
And Mr. Kessler there are no further questions at this time I'll now turn the call that to you for closing remarks.
Well, thank you to all of our investors and analysts that have stayed with us and the importantly to all of the global World fuel team. As you guys are the best ladies and gentlemen, so thanks very much and look forward to talking to everybody next quarter Goodbye from Singapore.
Ladies.
This concludes your conference call for today, we thank you for your participation and ask that you. Please disconnect your line.