World Kinect - Q1 2023

Transcript

Operator (participant)

Ladies and gentlemen, thank you for standing by and welcome to the World Fuel Services first quarter 2023 earnings conference call. My name is Gigi, and I will be coordinating the call this evening. During the presentation, all participants will be in a listen-only mode. After the speaker's remarks, there will be a question-and-answer session. Instructions on how to ask a question will be given at the beginning of the Q&A session. As a reminder, this conference is being recorded. I would now like to turn the conference over to Mr. Glenn Klevitz, World Fuel's Vice President, Treasurer, and Investor Relations. Mr. Klevitz, you may begin your conference.

Glenn Klevitz (VP of Investor Relations and Treasurer)

Thank you, Gigi. Good evening, everyone, welcome to the World Fuel Services first quarter 2023 earnings conference call, which will be presented alongside our live slide presentation. Today's presentation is also available via webcast. To access this webcast or future webcasts, please visit the World Fuel Services Corporation website and click on the webcast icon. With us on the call today are Michael Kasbar, Chairman and Chief Executive Officer, and Ira Birns, Executive Vice President and Chief Financial Officer. By now, you should have all received a copy of our earnings release. If not, you can access the release on our website. Before we get started, I would like to review World Fuel's safe harbor statement.

Certain statements made today, including comments about World Fuel's expectations regarding future plans and performance, are forward-looking statements that are subject to a range of uncertainties and risks that could cause World Fuel's actual results to materially differ from the forward-looking information. A description of the risk factors that could cause results to materially differ from these projections can be found in World Fuel's most recent Form 10-K and other reports filed with the Securities and Exchange Commission. World Fuel assumes no obligation to revise or publicly release the results of any revisions to these forward-looking statements in light of new information or future events. This presentation also includes certain non-GAAP financial measures as defined in Regulation G. A reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures is included in World Fuel's press release and can be found on its website.

We'll begin with several minutes of prepared remarks, which will then be followed by a question-and-answer period. As with prior conference calls, we ask that members of the media and individual private investors on the line participate in listen-only mode. At this time, I would like to introduce our Chairman and Chief Executive Officer, Michael Kasbar.

Michael Kasbar (Chairman and CEO)

Thank you, Glenn. Good afternoon, everyone. We appreciate you joining us today. The first quarter of 2023 saw a continuation of the many trends that made last year a successful one for our business. Our aviation business benefited from increased international airline passenger demand as many parts of the world were still experiencing pandemic-related travel restrictions, which did not fully ease until the latter part of the year. Aviation has also benefited from the inventory risk mitigation efforts we implemented in response to the extreme price volatility experienced in 2022, which negatively impacted our aviation results through the first half of last year. We experienced continued growth of our diversified business in general aviation offerings, including products and services ancillary to our core fuel supply, such as trip support services and de-icing fluid, which also contributed meaningfully to the year-over-year increase in aviation profitability.

Many of the services and digital offerings we provide to these customers form integral parts of a broader aviation ecosystem that connects us intimately with our customer base. This connectivity has proven to be more resilient to short-term economic weakness than traditional fuel sales, which is why our investment in an expansion of these lines of business over the past several years has been a primary strategic focus. Looking forward, this is a key underpinning of our digital growth strategy. We believe that by expanding our portfolio of digital offerings across all of our businesses, we can not only engage more deeply with our customers, but also improve the ratability of our revenue sources and reduce the capital intensity of our offerings to deliver enhanced returns.

We are also focused on implementing advanced technologies to integrate our processes and make us easier to do business with, further enabling us to be the counterparty of choice in the markets we serve. On previous calls, I have emphasized our efforts over the last several years to sharpen our portfolio and maximize returns, which resulted in the reorganization of our marine business. These actions have positioned our business to be able to weather the inevitable cyclicality of the global shipping industry through a lower cost structure that enables us to generate respectable financial returns in down markets while preserving the ability to provide value in volatile and credit-constrained markets, especially when demand strengthens.

While the high fuel prices witnessed throughout much of 2022 began to ease in the first quarter of 2023, the marine business nevertheless benefited from the elevated interest rate environment and continued fuel price volatility, which together with our prudent allocation of working capital, enabled marine to again deliver outstanding financial performance during the quarter. Both our aviation and marine businesses have benefited from our ability to leverage our strength and stability as a preferred and reliable counterparty to support our customers' fuel and financing requirements amidst an increasingly constrained and costly credit environment and a continued period of heightened supply and logistical uncertainty. While our land fuels business was liquid land fuel business was impacted by extreme weather in North America, our gas, power, and sustainability businesses performed well.

Our liquid land and World Kinect sustainability businesses are following the common operating model we have in aviation and marine. We are now enhancing our products and services, realigning teams, hiring top talent where needed, and leveraging our digital capabilities to build out a similar solutions ecosystem. I continue to be optimistic about our liquid land, gas, power, and sustainability businesses becoming a larger and very complementary contributor to our overall business. In closing, while we continue to focus on driving growth and efficiencies in our conventional fuels business activities, which remain critical to our success for years to come, we recognize the evolving needs of our customers and the growing global demand for sustainable solutions. We therefore continue to focus on building our lower carbon fuel offerings, as well as a growing suite of other sustainability-related products and services.

We are continuing to build a business that not only thrives in the present, but also paves the way for an even brighter future. All of our successes to date are due to the collective efforts of every individual within our organization. These are the same individuals who will lead us to a greener tomorrow in more ways than one. Thank you for your continued support. I'll now turn the call over to Ira for a review of our financial results.

Ira Birns (EVP and CFO)

Thank you, Michael. Good evening, everyone. Before I walk through our first quarter results, please note that while there were no adjustments to GAAP results in this year's first quarter, that's correct, Ken, no adjustments. The comparative prior year numbers do exclude the impact of non-operational items, principally acquisition-related expenses and integration costs, all highlighted in our earnings release. To assist you in reconciling the results published in our earnings release, the breakdown of last year's non-operational items can be found on our website and on the last slide of today's webcast presentation. Let's continue with the financial highlights. Consolidated revenue for the first quarter was $12.5 billion. That's up 1% compared to the first quarter of last year. Consolidated volume for the first quarter was 4.5 billion gal in gallon equivalents, effectively flat with the prior year.

I'll talk a bit more about gallon equivalents shortly. Adjusted EBITDA for the first quarter was $87 million. That's an increase of $12 million or 16% compared to the first quarter of last year. Adjusted first-quarter net income and earnings per share were $23 million and $0.36 per share, respectively. That's a decline of $4 million or $0.06 per share compared to the first quarter of 2022. First quarter volume in our aviation segment was 1.8 billion gal. That's an increase of 7% compared to the first quarter of 2022. The volume increase in the first quarter was principally driven by a further year-over-year increase in commercial passenger activity.

Looking forward and considering the significantly higher interest rate environment, we are placing an even greater emphasis on generating commensurate returns, which may temper volume growth over the next few quarters. We remain confident in our opportunities to drive profitability in aviation over the balance of the year. Our land segment volume was 1.6 billion gal or gallon equivalents in the first quarter. That's a slight decline of 1% compared to the first quarter of last year. As a reminder, this gallon equivalent amount comprises liquid fuel activity as well as a growing contribution from natural gas and power volume, which represented approximately 1/3 of the aggregate land volume reported for the first quarter.

While volume in our North American liquid fuel business was negatively impacted by adverse weather during the quarter, including two record atmospheric rivers, which drenched parts of Flyers territory on the West Coast, we were pleased to see natural gas activity offset this decline, which benefited from increased demand and a growing customer base. Lastly, volume in our marine segment for the first quarter was 4.3 million metric tons. That's a 9% decrease year-over-year, driven principally by a softening container market. Consolidated gross profit for the first quarter was $263 million. That's an increase of $32 million or 14% year-over-year.

Our aviation segment contributed $101 million of gross profit in the first quarter, an increase of $36 million or 57% compared to last year's first quarter results, when, as you recall, we were negatively impacted by the backwardated jet fuel market that commenced in a significant way in the latter half of last year's first quarter. We also benefited from strong growth in our business and general aviation activities. As we look ahead to the second quarter, we anticipate a significant seasonal increase in aviation gross profit, with year-over-year results expected to be up even more significantly when compared to the backwardation-impacted second quarter of 2022. Our land segment delivered gross profit of $110 million in the first quarter. That's a decrease of $10 million or 8% year-over-year.

As already mentioned, extreme weather events during the first quarter resulted in both volume and gross profit declines in our core liquid fuel activities in North America. Reduced volatility and somewhat warmer weather also negatively impacted the year-over-year comparison of our U.K. Land results. Partially offsetting these declines were strong increases in profitability in our Kinect natural gas, power, and sustainability-related offerings. For the second quarter, we anticipate land gross profit to be flat sequentially, but down from the second quarter of 2022, when our U.K. operations continued to benefit from significant market volatility. The marine segment generated first quarter gross profit of $52 million. That's an 11% increase when compared to the first quarter of last year. While bunker fuel prices have declined, marine benefited from a significantly higher interest rate and credit-constrained credit environment in the first quarter.

As we look ahead to the second quarter, margins are expected to remain well ahead of historical averages. However, gross profit is expected to decline sequentially, driven principally by flattening prices and reduced market volatility. Consolidated operating expenses were $198 million in the first quarter, below the low end of the guidance provided on last quarter's call. Looking ahead to the second quarter, we expect operating expenses will be in the range of $204 million-$208 million. The anticipated sequential increase principally relates to increased variable compensation related to the expectation of a significantly higher consolidated result in the second quarter.

I already mentioned our first quarter adjusted EBITDA earlier, but our year-over-year adjusted trailing 12-month EBITDA was also up significantly, increasing 56% year-over-year to $392 million, our highest level of trailing 12-month EBITDA since the first quarter of 2020. This year-over-year increase is inclusive of the benefit of the Flyers acquisition completed to start the year in 2022. Interest expense in the first quarter was $34 million, in line with our guidance on last quarter's call, but up $20 million from last year's first quarter when interest rates were still materially lower. Fees associated with our receivable sales activity again comprised approximately 40% of our total interest costs in the first quarter.

We expect our consolidated interest expense for the second quarter to be flat to modestly down sequentially, and we remain focused on opportunities to reduce our current run rate of interest expense. Our adjusted effective tax rate for the first quarter was 16% compared to 20% for the first quarter and full year in 2022. As I mentioned on last quarter's call, we believe our 2023 full year tax rate will remain generally consistent with 2022. However, our quarterly rates may vary, as evidenced by the lower rate in this year's first quarter. During the first quarter, we generated positive operating cash flow of $143 million, driven by lower fuel prices and solid focus on and management of all components of working capital, including accounts receivable, inventory, and accounts payable.

While it will not be easy to repeat the strong result in the second quarter with average fuel prices already up 6%-7% from the first quarter, we remain focused on delivering solid cash flow for the full year, contributing to overall liquidity and returns. Our liquidity profile remains strong with significant availability under our revolving credit facility. This positions us well to pursue growth opportunities while maintaining very important financial flexibility. Despite it being a seasonally weak quarter for us in the first quarter, we delivered solid overall results. Aviation delivered very strong performance in what is traditionally the weakest quarter for air travel. While our land liquid fuels activity in North America was impacted by extreme weather, our natural gas and power businesses continued to perform well. Marine continued to outperform historical averages with very strong operating margins.

We are now entering our seasonally strongest second and third quarters and remain optimistic about our opportunities to deliver strong results for the full year. On the corporate development side of the house, we have expanded our team who are busy analyzing a growing pipeline of synergistic conventional fuel opportunities, as well as a growing number of opportunities to complement our existing suite of sustainability solutions in World Kinect. Our focus on operating margin improvement continues. I frequently remind our team how many gallons of fuel we need to sell to cover each and every expense we incur so that every member of our organization thinks critically about how each activity and cost contributes to our overall financial performance.

We are scrutinizing every aspect of our business to identify areas to eliminate waste and drive greater process efficiencies, we therefore remain confident in our ability to achieve or even surpass our longer-term articulated goals for operating margin improvement. Finally, we remain confident in our ability to continue to navigate challenges and capitalize on opportunities. Our strong balance sheet, combined with our continuing commitment to profitable growth, positions us well for continued success, we remain steadfast in our commitment to delivering value to our shareholders, customers, and employees. Thank you. I will now turn the call back over to our wonderful operator, Gigi, for the Q&A session.

Operator (participant)

Thank you. At this time, I would like to remind everyone if you would like to ask a question, please press star followed by one one on your telephone keypad. You will then hear an automated message advising your hand is raised. If your question has been answered and you would like to withdraw your registration, please press star one one again. If you are using a speakerphone, please lift your handset before entering your request. We will pause for just a moment to compile the Q&A roster. Our first question comes from the line of Ken Hoexter from Bank of America.

Ken Hoexter (Managing Director)

Hey, great. Good afternoon, Ira, Michael, Glenn. Just a couple from me, let's start on land. I guess, Ira, you talked about the harsh weather. Are you back up and running? Should we look at kind of the run rate there getting back to normal? Obviously, typically, middle of the year tends to be stronger some years, weaker in others, you know, with the U.K., I guess, balanced out now with your acquisition. Seems like the middle of the year should get stronger. Maybe just talk us through how you think about land going forward.

Ira Birns (EVP and CFO)

Well, it is, you know, with Flyers in the mix, you know, obviously the weather conditions have improved. You know, that happened, you know, during, I believe months of February and March.

In that business, we generally see seasonal strength as we get into the second and third quarter. We, you know, we think that'll generally be the case again. At the same time, the strongest periods for the U.K. business are the fourth quarter and the first quarter, we generally see a drop-off. Obviously, the heating oil business drops off dramatically in Q2. You have some pluses and minuses, but nothing extraordinary or, you know, or out of the ordinary in the second quarter, you know, compared to historical trends.

Ken Hoexter (Managing Director)

Okay. By the way, I just wanted to say, before I get started, congrats on so many things, Ira, but not just the fact that there's no adjustments, but now that Jets have gotten, Brett Favre version two of Aaron Rodgers. Should be a good year.

Ira Birns (EVP and CFO)

Thank you.

Ken Hoexter (Managing Director)

The interest expense, can you kind of dig into what you were talking about there? Obviously, if we just look at it on a straight up, you know, you've got a 17% rate just on your debt, but you're talking about You've got the accounts receivable thrown in there, but you were talking about maybe holding this despite debt coming down, that your interest expense should be flat. Maybe walk us through what's in the makeup there.

Ira Birns (EVP and CFO)

Well, remember, you know, over the first few months of the year, interest rates were still rising. That's hopefully stopped, except for maybe another 25 basis points next month. You know, that's where the flat comes from. We do not have a 17% rate on our debt. That's the reason that I've been sharing the percentage of the interest related to the receivable sales. Our average rate on debt is just under 7%, Glenn. You know, look, we're working. That number is still obviously a lot higher than where it was when interest rates were at historical lows.

As evidenced by this quarter, we're working really hard to drive, you know, cash flow, as best we can and bring down our trade cycle, which, you know, should help us reduce interest expense a bit going forward. It's a little easier if rates don't keep going up. You know, for the moment, our run rate is what our run rate is. We'll probably be a little bit lighter in Q2, and then hopefully come down a little bit more in the second half of the year, as I mentioned last quarter.

Ken Hoexter (Managing Director)

Okay. My last one, I'll turn it over to Ben, is just on your OpEx target, right? Your $204 million-$208 million in next quarter. Can you walk us through, is that now your kind of run rate if we're looking out from there? Is there, you know, obviously, if you're jumping up, is there something that's running it up? Maybe just talk to us about what's in it and how we should think about it going forward.

Ira Birns (EVP and CFO)

You know, it's a great question, Ken. Thanks. Look, there are certain elements of variability in our expenses on a quarterly basis that are tied to the level of profitability. One of those, you know, the example that I shared in my prepared remarks is variable compensation. That, you know, that's not, you know, spread like peanut butter over the course of the year. It's more directly correlated with the profit contribution by quarter. We generally will see a bump in expenses, assuming everything else was constant in Q2. That number will probably be a little bit higher in Q3, which is expected to be an even stronger quarter, and then should come down a bit in Q4.

Very consistent with the, you know, with the trend of our results on a quarterly basis, the way that you have them modeled out.

Ken Hoexter (Managing Director)

Perfect. Thank you so much. Have a great afternoon. Appreciate the time.

Ira Birns (EVP and CFO)

Thanks. Good, yes.

Operator (participant)

Thank you. One moment for our next question. Our next question comes from the line of Ben Nolan from Stifel.

Ben Nolan (Managing Director)

Thank you, Gigi. by the way, let me start off by just mentioning that I really, the tweaks that you guys did to the presentation and your remarks, I mean, are very, very helpful. Good job on that, and I appreciate it. My first question is related to conceptually, the margins, and you talked a little bit about this, Ira, about pushing for higher margins in the aviation business. It looks like that has been pretty well done or executed in the marine side, but maybe a little bit less so on the land and on the aviation side.

I'm just trying to understand if there's something structural because, you know, your cost of business has gone up with interest rates and, it would seem like you should be able to pass that through to your customers. Is there something that sort of, inhibits your ability to do that in a few of those categories?

Ira Birns (EVP and CFO)

Sure. You know, great and, you know, important question, so I'll try to, I'll try to be as clear as possible in my response. In, in, if you start with marine, of course, you know, we all know we had a phenomenal year next year, which was impacted by a couple things, honestly. One was, tremendous amount of volatility, you know, record prices, but also rising interest rates. We're able to address that head on and more immediately in marine because as we've said, you know, over and over again over the years, is marine is generally a spot business. When I am... Well, I'm not doing it personally, but when we're quoting, you know, a customer, we can react to market conditions. Every day, every hour of the day.

Of course, if interest rates are moving up, we could factor that into our thinking and our return, our hurdle rates, et cetera, on a very regular basis. In aviation, in a large part of aviation, commercial passenger, cargo, et cetera, most of that activity, very large percentage of that activity is under annual contract. A very large percentage of those annual contracts roll over on the first of July. Some of them in Europe are, you know, rolling over this quarter, but a very large percentage roll over in July. Over the course of July 1, 2022 to June 30th, 2023, the margin is what the margin is, right?

As those contracts come due in this higher interest rate environment, you know, being focused as we always are on returns, we're obviously hyper-focused on, you know, making sure that those returns don't deteriorate, and actually we can hopefully catch up a bit, as we're able to, you know, price the current interest rate into our return criteria and try to drive higher margins. One of the reasons I mentioned in my remarks that volume may be tempered a little bit where we can't do that. In some cases, we may, you know, forego some volume, you know, upon renewal. There's also, you know, the other lever is terms, right?

It may not always be achieved by getting a higher cent per gallon number in a customer engagement, that number could stay the same in some circumstances and we may have tighter terms and therefore have a positive contribution to the interest line. We can mix and match that way. It's all about, you know, increase, you know, acceptable level of returns in this interest rate environment. We've certainly raised the bar there as rates have gone up. Land is a bit more of a mixed bag. You know, land, you've got some spot business, where, you know, many parts of Flyers are spot.

We have seen our core margin per gallon in land, you know, 2022 was higher than 2021, and first quarter of 2023 was higher than 2022. We are in parts of that business able to achieve a higher margin. There's a part of that business which is the retail gas station distribution. Much of that is over contracts that span many, many years where we don't have the ability to go in and reprice on a regular basis. That's a business where the way that we achieve the return that we need in this higher environment has to be achieved by driving greater operating efficiencies, right? There are different levers for different parts of the business.

Overall, you know, I, you know, we've clearly gotten the offset in marine. We have a chance to get some higher margins in aviation the second half of the year. Obviously, you know, same goes for most of the land business except for that retail segment.

Ben Nolan (Managing Director)

Okay.

Ira Birns (EVP and CFO)

I hope that helps.

Ben Nolan (Managing Director)

It does. That's a good excellent explanation. I appreciate it. I had just a couple more. I wanted to circle back real quick on the tax side. What did you say was the annualized tax rate that you were expecting?

Ira Birns (EVP and CFO)

Same as last year. I think, you know, we're, we were lower this quarter. We'll probably be a little bit higher than the annual for the balance of the year, but it should annualize out to the same 20% or so, maybe 21, compared to last year where we were actually also at 20.

Ben Nolan (Managing Director)

Any sense as to how, you know, as you said, the first quarter was low. Any sense as with respect to the second quarter, if there's any nuance that would move it one direction or the other?

Ira Birns (EVP and CFO)

You know, if I had to guess, it'll be a little over 20. You know, it's more likely to be a little over 20 than under in the second quarter.

Ben Nolan (Managing Director)

Okay. As it relates to the aviation business, appreciating the whole pricing dynamic that you just talked about. I know typically the peak season for that is in the second and third quarter as you have a lot of vacation travel in Europe and that sort of thing. What's your sort of view or what are you hearing from your customers about what they're expecting for fuel demand aviation on the aviation side over the next two quarters or so?

Ira Birns (EVP and CFO)

Look, you know, I think in many markets, you know, we've seen, you know, pretty much the full recovery from pre-pandemic. Despite all, you know, maybe I'm providing a personal view here, you know, all the fears of recession and, you know, conversations around that, you know, I think a lot of people, including myself, are still, you know, getting on planes very regularly. I think the summer travel season in Europe, which was very strong last year, is expected to be strong this year. I think the volume story is still pretty good. The acceleration is not gonna be near what it was the last five or six quarters, you know, rebounding from the pandemic.

I think just kind of core, you know, macro volume opportunities, most particularly in North America and Europe, are still strong. We're seeing a little bit of softening on the business and general aviation side that had a big boost during the pandemic when those that could afford it, you know, preferred to travel private to avoid masking up, et cetera. Obviously that's waned and, you know, many of those types of customers have reverted back to commercial travel. On the commercial side, I think strong. On the business and general aviation side, you know, maybe a little bit weaker, but that's a lower volume number.

you know, I would say, you know, reasonably strong. Our results may be a bit different than that. Again, if certain business doesn't meet, you know, our return criteria, you know, we're, you know, we're willing to give up a little volume for the sake of, you know, driving, quote-unquote, profitable growth.

Ben Nolan (Managing Director)

Okay. Lastly for me, I appreciate you bearing with me here, I was curious on capital allocation. You have been reducing the leverage, you know, which makes sense in a higher interest rate environment. There hasn't been much in the way of buybacks lately. As you move forward to generating pretty good levels of free cash flow, just sort of what's the best home for that cash flow from here?

Ira Birns (EVP and CFO)

You know, always a tough question. You know, in this interest rate environment, you know, maybe I'm making a political statement, you know, buybacks aren't as accretive as they were when rates were zero. I think we generally prefer to allocate a, you know, a great percentage of our capital to driving our core business. I mentioned our corp dev team growing. We actually now have someone specifically focused on, you know, the sustainability related side of our business. There's a huge pipeline of inorganic opportunities. We wanna keep our powder dry for that. Then, of course, there's the dividend, right? You know, we always consider buybacks. We've been pretty consistent over the last few years.

That's not necessarily, a message about this year in terms of, you know, buying back enough shares to cover the dilutive impact of employee equity awards. We know we'll continue to consider that, but no, you know, no meaningful promises for what, you know, what we may throw into that bucket in 2023.

Ben Nolan (Managing Director)

Understood. Appreciate it. Again, I do like the tweaks that you guys have made. Very helpful.

Ira Birns (EVP and CFO)

Thanks, Ben. Appreciate the comments.

Operator (participant)

Thank you. One moment for our next question. Our next question comes from the line of Pavel Molchanov from Raymond James.

Pavel Molchanov (Equity Research Analyst)

Thanks for taking the question. Pleasure to be on your call for the first time. Can we get an update on World Kinect, please?

Michael Kasbar (Chairman and CEO)

World Kinect is, you know, a business. We started our journey a long time ago by investing in a business that had a sophistication in the natural gas business in the U.S. That was in 2012. We acquired a number of companies. You know, the most notable one was Bergen Energi in 2015, which handles a lot of power business and renewable energy certificates. GEOS is in the renewable energy solutions business and does a great job in Europe, and we're expanding that now in the U.S. with de novo operations in Asia and Latin America.

You know, we're using our global platform, you know, to continue to follow our land-based customers with any number of different services onsite solar, offsets, energy efficiency, carbon footprint reporting. It's continuing to grow. We've been adding a tremendous amount of talent to that part of the business. As Ira commented, we've got a pipeline of targets there. Presently we've been growing that organically. Also investing in future fuels, putting a little bit of money, but a reasonable amount of time, again, following our customers and looking to make sure that we're a fast follower on those emerging future fuels. Most notably focusing on onsite solar, renewable energy solutions.

Within those two sustainability businesses, we've developed their natural gas business in the U.S., and that's been growing materially, you know, in the last several years in our power business. I think it's probably a good opportunity to talk about what we're doing there. We're a physical power supplier in the Nordics and Netherlands, working in the B2B market. We sit between the grid and the consumers of electricity, and we're providing scheduling, balancing, forecasting services, and we handle some of their risk management. We're acting more and more as an offtaker for power producers, wind farms and others, where we're buying their daily production and selling it back to the grid. That's what we're doing most notably in Europe on power.

On the natural gas side, it's, you know, offering natural gas supply, dealing with the risk management in the B2B side. Again, scheduling, balancing, forecasting, ensuring logistics around the product, and then some financial optimization we'll do on our own account. That was the, you know, the commodity side of it. You know, we continue to, you know, develop that and sourcing demand in Asia, Latin America. You know, it's an important part of the business. It's growing at a pretty good clip. We'd like to continue to supersize that a bit more. That's, that's basically World Kinect on our sustainability. I probably forgot a couple of different things. Ira, anything you wanna add?

Ira Birns (EVP and CFO)

Just to try to frame that in numbers a little bit, Pavel. You know, as Mike said, it's been growing. In the first quarter, about 25% of Land's gross profit related to the nat gas and power activity and the sustainability and advisory services. That's grown. You know, it's still a relatively small number from a consolidated standpoint, but it's grown significantly from where it was just a short time ago. It's moving forward on a pretty steady clip and, you know, dropping more to the bottom line as well. You know, that's an area where we'll continue to invest.

Pavel Molchanov (Equity Research Analyst)

Appreciate all that detail. Let me zoom in on kind of an emerging market angle of your, I suppose, all three businesses, but perhaps most notably, in aviation. A lot of the EM currencies, I'm thinking Argentinian peso, Turkish lira are, you know, literally all-time lows against the dollar right now. To what extent is that hurting demand for imported fuel in those markets?

Michael Kasbar (Chairman and CEO)

Okay. I'm gonna fake an answer here. You know, listen, I, it's not something that I'm aware of as being a topic. Certainly not anything that's been brought up in, you know, any of our, you know, sort of meetings. Ira, do you have maybe you've got a little bit of color on that or?

Ira Birns (EVP and CFO)

I'd say I'm not sure exactly what the full angle there, Pavel, is. You know, most of our activity around the world on the fuel side, regardless of jurisdiction, and we're talking about a lot of jurisdictions, right? 'Cause we're selling fuel in, you know, over 200 countries and territories around the world, is U.S. dollar based. You know, the FX side of the equation may have some indirect impacts, but we're buying and selling in U.S. dollars, you know, almost everywhere. We do have some foreign currency denominated activity, but on the fuel side, it's mostly USD.

Michael Kasbar (Chairman and CEO)

I think, you know, as you're looking at, obviously, you know, Russia and what's going on in terms of, just, you know, different markets, I'm sure there's, you know, any number of activity there, but that's not, it's not something that we're zeroed in on or it's not anything that is mainstream for us that I know of.

Pavel Molchanov (Equity Research Analyst)

Okay. Clear enough. Thank you, guys.

Michael Kasbar (Chairman and CEO)

Thanks for dialing in, Pavel. Appreciate it.

Operator (participant)

Thank you. Mr. Kasbar, there are no further questions at this time. I will now turn the call back to you for closing remarks.

Michael Kasbar (Chairman and CEO)

Well, you know, this is not necessarily a closing remark. You know, in terms of our land business, you know, you asked the question earlier and, you know, it's off to, you know, a bit of a bit of a start with the weather. You know, it's a well-run business. The Flyers team is great addition. You know, we've brought on some additional talent, and I'm really just emphasizing, you know, the comments that I had in my prepared statements. Feel strongly about the fact that, you know, we're modeling those offers and the business and the processes against our well-run marine and aviation business.

While it's not an exact sort of overlay, there is a lot of commonality that we're going to leverage off of our, you know, marine and aviation organizational design. At the end of the day, we're moving molecules. You know, we're dealing with the logistics where the customer's coming to us in our cardlocks. We're going to the customer and wholesale business to their retail station. That business has taken a long time to be the, you know, fourth and fifth leg of the stool, but I'm optimistic that it will be. We'll be reporting back to you know, on a quarter-by-quarter basis. I just wanted to sort of emphasize that. Obviously, you know, we can't control the weather, but that business will start to produce. Any case, thanks very much.

Appreciate you spending the time with us, and look forward to talking with you next quarter. Thanks to the fantastic team that we have. It's a pleasure working with you every day. Thanks to our shareholders. Thanks very much. Take care.

Operator (participant)

Ladies and gentlemen, that does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your line.