China Aviation Oil’s H1 profits soar 48.6% to about $64.56m

Thanks to higher trading volumes, raised JV contributions.

China Aviation Oil (CAO) saw an auspicious close to 1H16, as the jet fuel trader saw a 48.6% YoY spike in net profit to US$47.8m (roughly $64.56m).

According to a media release by CAO, the steep spike in earnings is thanks to higher trading and optimisation gains, raised supply and trading volumes, as well as increased contributions from its associated and joint venture companies.

RHB asserts in a report that CAO enjoyed steady growth in its jet fuel business, with jet fuel volume climbing 11% 6.7m tonnes in H1, aided by continuing growth in China and international aviation traffic. RHB also notes that though revenue dropped amid lower oil price, the fixed cost plus nature of profitability enabled CAO to nag higher margins.

On top of this, CAO’s key associate Shanghai Pudong International Airport Aviation Fuel Supply booked a 41% YoY surge in 1H16 contributions to US$29.6m. This was boosted by increased refuelling volumes and higher margins.

Further, Oilhub Korea’s contributions skyrocketed 275.8% to US$2.5m amid increased tank storage leasing activities, while China National Aviation Fuel Pipeline Transportation’s contributions soared 74.2% to US$1.8m on higher volumes.

Moreover, CAO saw volumes for the trading of other oil products surge 154% to 6.9m tonnes in H1. Earnings from this segment tend to be volatile and more risky compared to CAO’s jet fuel supply and trading businesses. RHB notes that CAO had reported losses in this segment over the last two years.