INT -- World Fuel Services

[lincolnc]

Has anyone come across this name?  Thoughts on the management team?

 

Interesting article from Fortune that caught my eye.

http://fortune.com/2013/05/20/the-only-fortune-500-company-thats-grown-faster-than-apple/

 

Basically a serial acquirer in the fuel distribution space: Bunker, jet fuel, diesel/gasoline.

 

 

[karthikpm]

It is a decent sized holding for Seqouia and Fidelity ( their value funds).  Don't know anything more than the article mentions - Good article. 

[peter1234]

It’s also not a high-margin business. World Fuel made just $189 million in profit in 2012, or just 0.5% of its almost $39 billion in revenues. But Kasbar is proud of his company’s “very solid and liquid balance sheet” and likes the way his business is set up. “It’s an asset-light business model,” he says. “Our net working capital is about $1 billion, but we only have about $100 million of fixed assets.”

 

Don't know World Fuel.

 

These commodity type distribution businesses usually carry huge inventories and have super slim profit margins.

 

If/when they get exposed to commodity price fluctuations by either speculating or not properly hedging commodity price risk, they can lose a lot.

 

Just something to watch out for.

 

;)

[portfolio14]

 

http://www.sequoiafund.com/Reports/Transcript14.htm

 

[lincolnc]

Thanks guys.  Very helpful!

[moody202]

I know nothing about the financials of this company. However, as I live in the area, I get some insight into their work environment. Most of the people working there are not happy. there is no long term commitment or loyalty from employees. The workload is fierce and employees are regularly looking for better opportunities. The general leadership seems scattered and very political. On the IT side also leadership does not seem great. Not a great work culture.

[fisch777]

Interesting business...if I recall correctly, they benefit from volatility of jet/bunker/diesel fuel markets as many of their customers use INT as hedging service.  This is somewhat similar to the 3rd party logistics guys who also benefit in periods of market disruption.  There is some tail risk inherent in the business - see oil train explosion in Canada and Afghan fuel trucks from a few years ago. Management is very seasoned, but I got the impression that senior management was perhaps less engaged after listening to a few calls...also selling a lot of stock from what I remember.

[lincolnc]

Thanks guys!

Fisch--I learned that they are also litigating with an airline client over bad fuel.  They may also have some environmental tail risk wrt to storage facilities

Moody--Senior management seems to keep a very low profile. Very little available on them on the web. Thanks for the local knowledge!

[peter1234]

It’s also not a high-margin business. World Fuel made just $189 million in profit in 2012, or just 0.5% of its almost $39 billion in revenues. But Kasbar is proud of his company’s “very solid and liquid balance sheet” and likes the way his business is set up. “It’s an asset-light business model,” he says. “Our net working capital is about $1 billion, but we only have about $100 million of fixed assets.”

 

Don't know World Fuel.

 

These commodity type distribution businesses usually carry huge inventories and have super slim profit margins.

 

If/when they get exposed to commodity price fluctuations by either speculating or not properly hedging commodity price risk, they can lose a lot.

 

Just something to watch out for.

 

;)

 

How a 1b IPO blew up within 8 months:

 

http://www.bloomberg.com/news/2014-11-06/ipo-that-raised-1-billion-implodes-in-denmark-after-8-months.htm

[handycap5]

gross profit per a measure of volume (i.e. cents per gallon) went up significantly during the 2000s, like 3x. i am not sure whether this was due to the volatility in the price of the fuel, the increasing price of fuel, or the consolidation in the market, as the IOCs exited the business. i spoke to an analyst who owned a lot of the stock, and he didn't know the answer either. my guess is that it was all of the above, and 2 of the 3 could reverse.

 

if anyone has a view, it would be appreciated...

[rogermunibond]

Sequoia had a little color on INT in the 2013 investor day.

 

Question:

My question is about World Fuel Services.

Could we get some color on that?

 

Rory Priday:

World Fuel Services is a fuel intermediary. A

number of the major oil companies like Exxon,

Shell, and BP had marketing departments for their

fuel operations. They needed to find buyers for their

production. They also needed to figure out what

credit standards they wanted to establish for

customers, and they had to do this across all markets

including aviation, land, and marine. Over the last

twenty years, they have lost interest in staying in that

downstream business. We have seen them selling off

gas stations. The folks that buy fuel from the refinery

and sell to the gas station are called jobbers or

wholesalers. You have seen the oil companies get out

of that business. So World Fuel has stepped in and

become the intermediary. In most cases, it is buying

the fuel and reselling it, but it also functions as a

credit agency, assessing the credit of its customers.

In some cases, companies like to use World Fuel

Services for hedging operations. You cannot go to

Exxon or BP to do that.

Our investment thesis when we first bought it

was that World Fuel would grow because it could

take market share. We expected at the time that the

markets would grow. But most of those markets are

pretty growth-challenged, especially the marine

market. The company does most of its land business

in the US, where demand for gasoline and diesel fuel

is not increasing. So the company is trying to grow

in the face of declining markets — by growing

organically or by buying other companies. World

Fuel has bought companies in the past and we think

that it is earning between 10% and15% returns after

tax on those acquisitions. As long as it can do that

and as long as the markets that it is in do not decline

too much, then in theory the compound of the

earnings should be good enough to make it a

satisfactory investment. But we will see. The end

markets are not as strong and the market share that

World Fuel is taking is not as significant as we

hoped for over the two or three years since we

bought the stock.

[dolce far niente]

The second biggest player after Woeld Fuel just files insolvency.

Capturing market share thesis may play out.

 

OW Bunker has filed for in-court restructuring for major parts of its business and the subsidiaries involved face insolvency following the uncovering a $125m fraud in Singapore and a $150m risk management loss.

 

The Danish bunkering group said it had not been able to find a solution with its syndicate banks following the events announced late Wednesday. When it revealed the fraud and risk management loss on Wednesday OW Bunker said these events had affected its operations and credit facilities.

 

“It has been decided to file for commencement of in-court restructuring procedure in the subsidiaries OW Bunker & Trading A/S and OW Supply & Trading A/S at the probate court in Aalborg. The main operational activities of the group are located in these companies, which are expected to be insolvent,” the company said in statement.

 

It said the purpose of the in-court restructuring was designed to see whether there was a basis for continued operations of the companies, including injecting further capital.

 

However, OW Bunker warned: “For the time being, the financial impact cannot be assessed, however, it must be assumed that the group's equity is lost.

 

“In court restructuring procedure is aimed at debtors who are insolvent but where there is a chance that all or part of the debtor's business may be able to continue operations after the completion of a restructuring,” it added.

 

The news will send shockwaves around the global bunkering market of which OW Bunker claims 7% share on its website.

 

OW Bunker chairman Niels Henrik Jensen told Reuters that it had received support from Danske Bank and Nordea, but not from 11 international banks. "The company is at risk of going bankrupt. We have decided to file for the commencement of a court restructuring process," he was quoted as saying.

 

On Wednesday OW Bunker revealed it had uncovered a $125m fraud in its Singapore subsidiary Dynamic Oil Trading allegedly carried out by senior members of staff.

 

It also announced that a review of OW Bunker’s risk management exposure had found significant losses in addition to the $24.5m loss announced on 23 October with the mark to market loss standing at $150m. The company immediately fired head of risk management and evp Jane Dahl Christensen.