China Aviation Oil Q1 profits up 13.88% to US$26.91m

The earnings of its associate company SPIA jumped 46% to US$18.9m.

China Aviation Oil's (CAO) profits in the first quarter of 2018 shot up by 13.88% from US$23.63m last year to US$26.91m. Revenue also grew 23.9% from US$3.31b to US$4.1b.

UOB Kay Hian analyst Edison Chen noted that gross profit, however, dropped mainly due to lower profits from trading and optimisation activities, whilst the 40.7% increase in associate contributions more than made up for it.

RHB Research analyst Shekhar Jaiswal agreed and said Shanghai Pudong International Airport Aviation Fuel Supply Company (SPIA) continues to shine as the crown jewel for the company. The 33%-owned associate of CAO that offers aircraft refuelling services at Shanghai Airport witnessed a 46% growth in earnings to US$18.9m.

"With upcoming capacity expansion at the Shanghai airport, we maintain that SPIA could continue to register strong growth over next few years," Jaiswal said.

Chen noted that the share of results for other associates also improved except for China National Aviation Fuel TSN-PEK Pipeline Transportation Corporation (TSN-PEKCL).

Meanwhile, CGS-CIMB analyst Cezzanne See noted that middle distillates volumes shrank 6.4% YoY to 4.3 million metric tonnes on lower trading and optimisation activities. "Other oil product volumes, however, continued to grow, 22.4% YoY in 1Q18, mainly due to the uplift in crude and fuel oil trading volumes," she said.

See emphasized that the company is seeking synergistic M&A opportunities as it intends to expand its global jet supply and trading network, complemented with trading in other products. "We were heartened to hear this as it could enhance CAO’s market presence given it is largely known as a China-centric company," she commented.