China Aviation Oil posts 32.8% jump in Q2 profit to US$23.6m

MAINBOARD-LISTED China Aviation Oil (CAO) on Thursday posted a 32.8 per cent rise in its second quarter net profit to US$23.6 million, on the back of higher trading gains, increased supply and trading volumes, as well as a jump in share of profits from associates and joint ventures.

Earnings per share for the quarter came in at 2.74 US cents, compared with 2.07 US cents in Q2 2015.

Revenue for the three months to end June climbed 19.8 per cent year on year to US$3,023.3 million, mainly due to the increase in trading volume of other oil products.

Cost of sales for the quarter rose 19.8 per cent to US$3,013.4 million.

Gross profit derived from jet fuel supply and trading and trading of other oil products was US$9.90 million in Q2 2016, an increase of 7.6 per cent from a year ago, largely due to the increase in jet fuel volume supplied to China and higher profits from trading and optimisation activities.

Share of profit of associates and joint venture jumped 43.5 per cent to US$19.4 million, on the back of higher contributions from Shanghai Pudong International Airport Aviation Fuel Supply Company Ltd (Pudong) and Oilhub Korea Yeosu Co Ltd (OKYC).

The share of profits from Pudong was US$17.5 million, up 38.1 per cent, mainly attributable to higher gross profit as a result of higher refuelling volume and higher profit margin due to the rebound in oil prices in Q2 2016 partially offset by higher operating expenses.

Share of profits from OKYC was US$1.1 million, compared with US$0.4 million in Q2 2015. This was largely attributable to higher revenue from its tank storage leasing activities.

For the first six months of the year, net profit jumped 48.6 per cent year on year to US$47.8 million, even as revenue slid 2.6 per cent to US$4,487.6 million. This, as cost of sales improved while other operating expenses as well as finance costs fell. The much higher share of profit from associates and joint venture also helped lift half-year earnings.

Notwithstanding global macroeconomic uncertainties, CAO said its total supply and trading volume for jet fuel and other oil products soared by 56 per cent to 13.6 million tonnes in the first half of 2016. This came on the back of an 11.8 per cent rise in jet fuel volumes and a 154.2 per cent increase in the volumes of other oil products, in line with the group's strategic drive to expand its earning base through diversification.

Meng Fanqiu, CEO of CAO, said: "CAO turned in a commendable half-year performance on the back of sterling contributions from our supply and trading operations and portfolio of strategic investments in oil-related assets through our associates and joint venture companies. This set of strong results is again testament to the compelling value proposition offered by CAO's diversified and international growth platform today."

In its outlook, the group said the second half could be more difficult for oil trading, as concerns about supply and economic demand and unsure economic outlook after Britain's exit from the European Union could, among other factors, cause more volatility in the oil market.

But CAO said it would continue to maintain its strategic drive along with the rapid growth in China's civil aviation industry, further expand its aviation marketing business outside of mainland China, diversify its trading business activities, and also expand its earnings base.