CBL International Limited Q4 FY2024 earnings call

• Company Overview: CBL International is a marine fuel logistics provider with an asset-light model, operating in over 60 ports globally. Key competitive advantages include a global ports network, strong supplier and customer relationships, and a growth strategy focused on expanding services and sustainable fuels.
• Market Trends: Seaborne trade and container volume showed steady growth, but geopolitical issues like the Red Sea crisis and Ukraine conflict disrupted trade routes. CBL responded by adjusting its service network, implementing strategic pricing, and adapting to evolving shipping patterns.
• Financial Highlights: Total sales volume grew by 38.1%, revenue by 35.9% to USD 592.5 million, cash balance rose by 8.3% to USD 8 million, operational cash flow surged by 80.6%, and current ratio was 1.47.
• Operational Review: Service network expanded to over 60 ports, sales volume increased by 38.1%, biofuel initiatives included B24 launch, ISCC certifications, and 600% growth in biofuel sales. ESG initiatives focused on environmental, social, and governance aspects with structured phases for implementation.

CBL International Limited's total revenue in fiscal year 2024 rose by 35.9% to USD 592.5 million, up from USD 436 million in 2023. Gross profit declined by 25.5% from USD 7.21 million to USD 5.37 million. Operating expenses increased significantly by 56.8% from USD 5.55 million to USD 8.7 million. Net income fell from USD 1.13 million in 2023 to a loss of USD 3.87 million in 2024. Revenue distribution by geography: China accounted for 56.3% of total revenue, followed by Hong Kong at 30.3% and Malaysia at 9.8%, with smaller contributions from other regions.

• Fiscal Year 2025 Initiatives: Expand service network, strengthen presence in Asian and European markets, enter emerging markets, maximize sales volume, and focus on biofuels and other sustainable fuels. The global green marine fuel market is expected to grow at a CAGR of 50.4%.
• Strategy to Improve Performance: Increase sales volume for gross profit, manage cash flow and working capital, and enhance efficiency via automation and IT systems to reduce unit costs and improve margins.

• Geopolitical Disruptions: Red Sea crisis, Ukraine conflict, and Middle East tensions disrupted trade routes, increased operational costs, and caused fuel price volatility.
• Market Volatility: Fluctuating bunker fuel prices and demand patterns impacted profitability.
• Regulatory Changes: Stricter ESG and maritime emissions regulations increased compliance costs.

Q: Despite impressive revenue growth in 2024, the company transitioned to a loss. What drives this shift? And what factors caused the cost of revenue to increase more than revenue in 2024? And how will you address this going forward?

A: Nicholas Fung explained that the shift to loss was due to reduced gross margin, higher operating costs, ESG-related expenses, increase in interest expenses, and investment in biofuel operations. To address, focus on increasing sales volume, developing biofuels, and implementing automation to streamline operations.

Q: Can you please discuss your service network expansion, customer mix and future potential?

A: Teck Lim Chia stated that service network expanded from 36 ports to over 60 ports, covering 4 continents. Customer mix diversified with non-container liners contributing 45% of revenue in 2024. Future potential involves balancing new port openings with economic scale on existing network.

Q: Biofuel adoption trends, the introduction of B24 biofuel has been a strategic focus with operations in Hong Kong, China and Malaysia. How do you expect biofuels to develop in 2025?

A: Teck Lim Chia mentioned biofuel sales surged over 600% in 2024, and with tightening regulations, the global green fuel market is projected to grow at a CAGR of 50.4%, making biofuels a key focus.

Q: The bunkering industry is highly competitive. How does CBL's marketing emphasize its unique value proposition, for example, one-stop solution supplier network to retain existing customers and win the market share from rivals in 2025?

A: Teck Lim Chia noted CBL's unique value proposition includes an extensive global supply network, one-stop refueling solutions, quality services, comparative pricing, and compliance with environmental standards, supported by 9 out of 12 world top container liners.

Q: Environmental regulations are driving demand for green fuels, but also increasing compliant costs. How do you view the ESG market development?

A: Teck Lim Chia viewed rising demand for green fuels and stricter regulations as opportunities. CBL aligns with regulations by expanding biofuel supply and exploring other sustainable fuels like methanol and LNG, as part of ESG initiatives.

Q: The United States plans to impose port docking fees on ships related to China, but recently under consideration delayed implementation and new fee structures designed to reduce the overall cost to visiting Chinese vessels. How does the company assess the impact of this on its business?

A: Teck Lim Chia stated CBL has no operations in US ports, so the new fees have no impact on current business.

Q: Given the 2024 loss, what are your sales volume and gross profit margin targets for 2025? And how will the focus on biofuels and economies of scale contribute to reversing the profitability decline?

A: Teck Lim Chia said 2025 targets include increasing sales volume and recovering gross profit margins through network strengthening, new customers, and biofuel adoptions. Economies of scale from expanded operations will reduce unit costs, supporting profitability.

Q: CBL filed a private placement, shelf registration statement, and ATM offering. What are the use of proceeds of this capital market transactions?

A: Nicholas Fung said proceeds will be used for general corporate purposes including network expansion, biofuel business development, acquisition, and repayment of indebtedness, to support growth and operational efficiency.

Q: With cash increasing modestly to USD 8.02 million by year-end 2024, how do you plan to allocate funds or seek additional financing to sustain growth momentum?

A: Nicholas Fung stated funds will be allocated to network expansion, biofuel business development, and operational automation, with continued exploration of capital markets for strategic growth.