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World Fuel Services Corp (NYSE:INT)
Q3 2019 Earnings Call
Oct 30, 2019, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by and welcome to the World Fuel Services 2019 Third Quarter Earnings Conference Call. My name is Kevin and I'll be coordinating the call this evening. [Operator Instructions] After the speakers remarks, there will be question-and-answer session. [Operator Instructions]

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 -- Vice President, Treasurer and Investor Relations

Thank you, Kevin. Good evening, everyone, and welcome to the World Fuel Services Third Quarter 2019 Earnings Conference Call. I'm Glenn Klevitz and I'll be doing the introductions on this evening's call alongside our live slide presentation. This call 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 the copy of our earnings release. If not, you can access the release on our website.

Before I get started, I'd 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 will 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 J. Kasbar -- Chairman and Chief Executive Officer

Good evening, everyone. Actually, for me, it's good morning, as I am calling in from Singapore, where I'm attending the Global Maritime Forum Annual Summit. This summit is a gathering of marine industry leaders who have come together to discuss challenges facing the maritime industry, and exploring how the industry can drive positive change for business and society. This year summit is especially timely, considering the significant changes on the horizon as marine markets prepare for IMO 2020 which is now only two months away, as well as the sustainability goals being set for 2030 and 2050.

Moving on to our third quarter results, our global team executed extremely well, which drove very strong operating results in the third quarter, significantly ahead of our results in the third quarter of last year. This is evidence that our heightened focused on driving organic growth while remaining focused on cost and returns is paying-off. Our aviation segment again delivered strong results driven principally by growth in profitability from our government operations in Afghanistan.

Our core commercial business also delivered solid results in its seasonally strongest quarter, while our business aviation activity also remains strong. Our business aviation operations will be further bolstered by the addition of the recently announced UVair acquisition, which we now expect to close in early 2020.

Getting back to marine, our marine segment generated its strongest results in nearly five years, driven by seasonality and a tight high sulfur fuel oil market in Singapore, which was generally the result of supply disruptions caused by the oil field attacks in Saudi Arabia. While these conditions seem to be moderating, the potential for market volatility and rising prices for low-sulfur fuel oil, which will be principal fuel used by the shipping industry from January, could provide similar profit opportunities as the IMO 2020 regulations go into effect.

Our marine team has done a fantastic job managing returns and expenses, leading to the healthiest contributions to our overall results in quite some time. Our land business delivered double-digit growth in gross profit in the third quarter, driven by strong government results continued improvement in commercial and industrial business and steady growth in multi-service business activity. We remain focused on driving further improvements in land profitability, operating leverage and returns as we head into the New Year and what remains a fragmented market with significant organic and strategic growth opportunities ahead.

In closing, we are very pleased with our results this quarter across all regions and business segments and we remain focused on driving growth both organically and through select strategic investments, while further enhancing returns across our global business. I'm truly extremely proud of how well we are executing on our core strategies, I'd like to thank our entire World Fuel team for their tireless efforts and continued focus on driving success, contributing to its significant growth in shareholder value this year. Thanks very much to all of my team members.

Ira, let's take a look at the financial results and then will follow with the Q&A. Thanks very much.

Ira M. Birns -- Executive Vice President and Chief Financial Officer

Thank you, Mike. Good morning to you, and good evening to everyone else on today's call or webcast. We delivered solid financial results in the third quarter as Mike has already mentioned. Benefiting from our core strategies of organic growth, continuous cost management and sharpening our portfolio to drive enhanced returns.

Before I get into the details, let me share some highlights with you. Adjusted EBITDA for the third quarter was $118 million, that's an increase of $13 million or 13% compared to last year. We have now delivered year-over-year increases in adjusted EBITDA for 10 consecutive quarters and our trailing 12 month adjusted EBITDA has increased to a record $401 million. Adjusted earnings per share for the quarter was $0.77, an increase of 22% compared to the third quarter of last year. And lastly, our balance sheet remains strong, aided by $33 million of operating cash flow during the quarter.

Consolidated revenue for the third quarter was $9.3 billion, that's down 11% compared to the third quarter of 2018. This year-over-year decrease in revenue was principally driven by the decline in volumes in our marine segment, as well as the 19% year-over-year decline in average fuel prices.

Our aviation segment volume was 2.2 billion gallons in the third quarter, an increase of 4% year-over-year and 1% sequentially. Volume in our marine segment for the third quarter was 5.5 million metric tons, which was down 400,000 tons or 8% compared to the third quarter of last year, but up 400,000 tons sequentially. The sequential volume increased principally related, the increased demand in Asia driven by recent market volatility.

Our land segment volume was 1.35 billion gallons or gallon equivalents during the third quarter, that's effectively flat year-over-year, but up 2% sequentially. Total consolidated volume for the third quarter was 5 billion gallons or gallon equivalents that's flat year-over-year, but an increase of approximately 160 million gallons or 3% sequentially.

Please note that the following figures exclude the impact of pre-tax non-operational items in the third quarter as well as non-operational items in periods previously reported, as highlighted in our earnings release. These non-operational items, principally represent restructuring and acquisition related costs. To assist all of you in reconciling results published in our earnings release, the breakdown of these non-operational items can be found on our website and on the last slide of today's webcast presentation. Consolidated gross profit for the third quarter was $306 million, an increase of $38 million or 14% compared to the third quarter of 2018.

Our aviation segment contributed $157 million of gross profit in the third quarter, an increase of $16 million or 11% compared to the third quarter of 2018. Year-over-year, the increase in aviation gross profit was principally the result of increased profitability from our government-related operations in Afghanistan, as well as continued strength in our core commercial and business aviation activities.

Looking ahead to the fourth quarter, we expect the traditional decline from the seasonally strong third quarter. Also we are diligently working toward closing the UVair acquisition, which we announced in August, which is now expected to close in early 2020. The marine segment generated third quarter gross profit of $53 million, that's a $10 million or 24% year-over-year increase, representing the highest level of quarterly marine gross profit since the first quarter of 2015. The year-over-year increase was driven by continued strength in our core resale business as well as additional activity in Asia, principally resulting from the drone strikes in Saudi Arabia, which created significant disruptions in exports of high sulfur fuel oil to Singapore in the latter part of the third quarter. This resulted in supply shortages, which drove increased volumes and profitability in Asia during the quarter. It is possible that the timing of such disruption in advance of the upcoming IMO 2020 low-sulfur regulations going into effect, also contributed to the increase. Similar to prior years marine also benefited from seasonal activity during the third quarter.

As the impact of the recent supply disruption and demand for high sulfur fuel oil declines, leading into 2020, we believe the market conditions in Asia will normalize with prices of high sulfur fuel oil already down significantly from levels reached in September. The fourth quarter will also now see the benefit of the seasonal activity realized over the summer, resulting in an expected sequential decline in profitability in the fourth quarter. However, if the upcoming IMO 2020 deadline leads the further market volatility as we approach to enter the New Year, this could provide opportunities for additional marine profitability toward the end of the year and into 2020.

Our land segment delivered gross profit of $95 million in the third quarter, that's up $12 million or 15% year-over-year. When compared to last year, the principal drivers of the 15% year-over-year increase resulted from an increase in commercial and industrial and government-related activity and further growth in our multi-service business. Speaking of multi-service, gross profit in multi-service was $20 million in the third quarter. That's an increase of $2 million or 12% compared to the third quarter of last year, reflecting the continued strength of the growing multi-service business model.

Looking ahead to the fourth quarter we expect sequential seasonal improvement in our UK and Connect business activities. Operating expenses in the third quarter excluding bad debt expense, and non-operational items were $195 million, that's an increase of $15 million compared to the third quarter of last year. Our expenses exceeded the range provided on last quarter's call, principally relating to variable costs associated with improved performance during the quarter. Nevertheless, we remain on track to meet our goal of a 250 basis point year-over-year improvement in our operating expense ratio for the full year of '19. Excuse me.

In the fourth quarter, we expect operating expenses excluding bad debt and any non-operational items to decline sequentially, to a range of $185 million to $189 million, similar to a level of expenses incurred in the second quarter.

We did experience an elevated level of bad debt expense in the third quarter, driven principally by one well publicized airline bankruptcy in Europe during the quarter. While we will occasionally be negatively impacted by an unforeseen customer default, we believe our overall receivables portfolio remains quite strong. Adjusted EBITDA was $118 million in the third quarter, up $13 million or 13% from the third quarter of 2018, as I mentioned earlier. Again, this represents the 10th consecutive quarter of year-over-year improvement in EBITDA. Additionally, our trailing 12 month adjusted EBITDA was $401 million at the end of the third quarter, another record result for us.

Adjusted income from operations for the third quarter was $96 million, up $13 million or 15% year-over-year. Third quarter interest expense was $21 million, an increase of $2 million compared to the third quarter of 2018. I would assume interest expense will remain generally flat in the fourth quarter.

Our adjusted effective tax rate in the third quarter was 30% that's down from 36% in the third quarter of last year and somewhat lower than the guidance provided last quarter due to certain discrete tax benefits reported during the quarter. We are beginning to make progress toward improving our effective tax rate and while we expect our tax rate to be in the range of 31% to 35% in the fourth quarter, we have increased confidence that we'll be able to reduce our effective tax rate to 30% or below in 2020. Adjusted net income for the third quarter was $51 million, an increase of $8 million or 19% when compared to the third quarter of 2018.

On to the balance sheet, our total accounts receivable balance was $2.7 billion at the end of the quarter, that's effectively flat sequentially and a decrease of $400 million when compared to the third quarter of 2018, which was principally related to the decline in fuel prices over that period. Operating cash flow of $316 million generated over the last 12 months has helped to further improve our balance sheet by further reducing our net debt position. This has resulted in a reduction in our ratio of net debt to adjusted EBITDA to 1.2 times, down from 1.8 times in the third quarter of 2018.

The operating cash flow combined with increased profitability has also resulted in a significant increase in our return on invested capital. In closing, reaching $400 million in trailing 12 month EBITDA which was barely $300 million at the end of 2017 has been a great accomplishment for us and we have delivered such results by significantly improving efficiencies in our business, from cost improvement to improve capital utilization, realized by exiting low return business activities. This has also increased our trailing 12 month return on invested capital to 9% representing our strongest performance since the fourth quarter of 2016. For this quarter, our return on invested capital exceeded 11% which represents our strongest quarterly return since 2014. Great accomplishments but we have more heavy lifting to do, to take our business to the next level. We remain focused on generating greater operating leverage in our business. We remain focused on sharpening our portfolio and with our strong liquidity position we remain focused on driving growth organically and identifying strategic investment opportunities in our core business like the UVair transaction we announced in August.

Our entire team of professionals worldwide are all committed to continuing to drive the business forward making all of our contributions more fulfilling and rewarding and increasing value for our shareholders.

I will now like to turn the call back over to our operator to initiate the Q&A session.

Questions and Answers:

Operator

Thank you. [Operator Instructions] And our first question is from Kevin Sterling with Seaport Global Securities. Your line is open.

Kevin Sterling -- Seaport Global Securities LLC -- Analyst

Thank you. Good afternoon. Ira and Mike, good morning to you. And maybe I guess [Indecipherable], happy Halloween, Mike.

Michael J. Kasbar -- Chairman and Chief Executive Officer

Yeah. Thanks very much.

Kevin Sterling -- Seaport Global Securities LLC -- Analyst

Since you're ahead of us in time, we let me know if the Nationals win Game 7?

Michael J. Kasbar -- Chairman and Chief Executive Officer

That would be fun.

Kevin Sterling -- Seaport Global Securities LLC -- Analyst

That would be. So -- but now moving on, obviously your marine business has shown quite improvement this quarter. Can you tell us any of that IMO 2020 related? I know you mentioned the drone strikes and the volatility that calls and obviously you guys do well and there is chaos and volatility, but is there any way to parse out like, hey we did get some benefit from IMO 2020?

Michael J. Kasbar -- Chairman and Chief Executive Officer

Well, the comments that we shared, we want to get that out there, because I know that's on everybody's mind. To add a little bit of color, let me know, I'm calling from Singapore. So if there is any, if there is any sort of funny noise [Indecipherable] the phone any case. Does it sound, OK?

Ira M. Birns -- Executive Vice President and Chief Financial Officer

Yeah. You're good Mike. Yeah.

Kevin Sterling -- Seaport Global Securities LLC -- Analyst

You sound -- I can hear you. Thank you.

Michael J. Kasbar -- Chairman and Chief Executive Officer

All right. No problem. So, a combination of a number of different things, certainly, as we said before disruptions don't disrupt like they used to, because you've got an oversupplied market. However, in this scenario, you had a confluence of issues that all occurred at about the same time. Refiners started to switch to producing low-sulfur fuel. They are getting prepared for 2020. As you can imagine, owners and operators want to be buying high sulfur fuel. For as long as possible in '19, before they switch over to the materially more expensive low-sulfur fuel.

So, the drone strike limited a little bit of the -- more than a little bit of high sulfur heading to Singapore and trade flows are a little bit different these days. So all of that really occurred at the same time, creating a steeply backward dated [Phonetic] market. And you had a number of different folks scrambling for a few things. And we have a little bit of our own physical supply and our own inventory and of course our own risk management position. So all of those activities created more opportunity and value add for us, helping our clients find product. So what will happen on a go-forward basis, remains to be seen.

The price increasing is going to put pressure on credit lines or balance sheet is looking very healthy, and it's always been conservative. That's the number one, is balance sheet, trumps almost everything that we do. And the credits, I think is going to continue to be something that people are going to look to us for certainly the quality is going to be an issue. We've got a deep technical group, that was really our point of differentiation years ago where quality was the way that we were really differentiating ourselves from the rest of the marketplace. We've added to our technical and quality team. We've built all sorts of different solutions. There is going to be logistics challenges, it's going to require more planning, particularly for ships that don't have a regular schedule. You're not going to have the availability of all fuels at all different port. So there is going to be significant value-add that we're going to bring to the market in terms of buyers and sellers. But we don't want to overdo it. When OW went down, people got a little bit of rational exuberance and predicted that. It was going to be a crazy multiple sort of effect. Then what happen shortly thereafter is the energy complex imploded and a lot of the market change. So the oil industry, I have learned and certainly from our land business, is very impressive. I mean the organized oil industry is pretty sophisticated. This is not new news, there has been a lot of time to put there. There is a good amount of low-sulfur around. So we don't think it's going to be as chaotic, you're going to have a sorting mechanism where good owners and operators and suppliers are going to do a good job. You're going to have those folks that you didn't plan so much and don't have as predictable schedule. So they had a challenge, certainly is going to be more beneficial for us because there is going to be more of a demand for this sophisticated services required in order to achieve that.

So we feel good about what the road ahead is, in terms of the value we can bring to the market, that will help our earnings, but we don't see it as something that's going to be a runaway. And it's really not how we're oriented -- what logistics and recurring predictable revenue and being an important part of the value chain is really the mantra, it's really about reducing cost and using technology to basically provide value internally and externally. So I'm not going to go on anymore, I know you've got some more questions.

Kevin Sterling -- Seaport Global Securities LLC -- Analyst

Yeah. No. Thank you. That was very helpful. Appreciate that. If I could maybe -- I know you don't want to on. But maybe I can ask another question around IMO 2020, and I get the idea of chaos and volatilities supply shocks. And if there is, if you just don't have the feel available, how you guys will benefit from that? But if I think back 10 years ago during the great recession and there is oil price volatility. If I recall, more and more your customers did hedging and that's a benefit for you guys too. And so if we see price spikes, is it the thought that you may see more hedging opportunities from your customers. Customers come to you, look to do hedging. Am I thinking about that, right? Just trying to compare what may happen now versus when we saw significant price volatility?

Michael J. Kasbar -- Chairman and Chief Executive Officer

Absolutely. You're right on the money, Kevin. We've got a sophisticated derivative practice, we have been doing it since 1988, that certainly, it's something that we use for our own risk management, because we're managing material amount of inventory and we don't expect it was decisions. So, but there will definitely be -- I think opportunities for folks, you are going to see aberration in symmetries in the marketplace, and many folks have done that already. And we think that there will be a greater opportunity for us to provide risk management services for folks who want to have more predictable pricing. So 100% we will be seeing that come back and we're happy because we're pretty good at that. And so we will be seeing that as a bigger part of the next [Phonetic], without question.

Kevin Sterling -- Seaport Global Securities LLC -- Analyst

Okay, thank you. And for my last question, just kind of little bit of housekeeping. And Ira maybe this is for you. You talked about your bad debt expense spiking in the third quarter, due to a carrier bankruptcy. Do you anticipate that level to come back down in Q4 or do you expect it to be elevated in Q4? Or we may not see a return to more normalized levels in 2020?

Ira M. Birns -- Executive Vice President and Chief Financial Officer

Thanks for the question, Kevin. I would certainly hope and expect that number would come back down to more normal levels in Q4, a big chunk of the Q3 piece related to one specific bankruptcy. We are not planning on any additional bankruptcies in Q4. We do our best job to avoid those when they do happen, but once in a while they kind of come out of nowhere. So, but with respect to your question in Q4, it is very likely that we would return to more normal levels. Yes, anything could happen. But based on what we know today, we would expect to be back to the $2 million, $3 million level, so to speak. That you've been used to seeing in the past on a quarterly basis.

Kevin Sterling -- Seaport Global Securities LLC -- Analyst

Okay, great. Well, that's all I had. Thanks you for your time. I need to go watch the Nationals Game 7 tonight. So, thank you.

Michael J. Kasbar -- Chairman and Chief Executive Officer

Okay. Go Astros.

Operator

The next question is from Ben Nolan with Stifel. And your line is open.

Benjamin Nolan -- Stifel Nicolaus -- Analyst

Yeah, thanks. I can inform Kevin that the Astros are going to win tonight, and I hope I didn't spoil that for anybody, but that's going to happen. The -- I do have a couple of questions. The first is, well, good quarter congratulations. On the aviation side, the government side of the business, you called out as something that was especially good in the quarter. Has there been any material change there? How are you thinking? And this is always one of those things that comes up, it seems like every year at least every -- so often that it's hard to say whether that government business going to be repeated or whatever but here it is again being sort of a driver for the aviation business. Any extra color that you might have around, sort of how you're thinking about that? And what specifically was -- you have benefited during the quarter?

Ira M. Birns -- Executive Vice President and Chief Financial Officer

Yeah, I'll start Ben and Mike may choose to chime-in. I mean, there is nothing -- nothing overly significant to report aside from the fact is that, that business has remain strong for us. Third quarter is generally the strongest season of activity in the region Afghanistan in particular, this year was no exception.

When you look at our year-over-year performance, a part of the improvement or a big part of the improvement actually was driven by a supply chain improvements over the course of the year. So we've been able to get better pricing, which has helped improve profitability. So we didn't see a significant change in volume year-over-year, but we generated more profitability. So the color is the same over the long-term. This is a contract that is, that doesn't have any guaranteed minimum levels of activity, it's demand base. We should report that, I think, last time we talked about this is a couple of years ago when we renewed our contract and we mentioned that margins were lower than they had been in the previous contract. We've since -- some of that back with improved supply dynamics. But we've also just extended, the two years were up in December.

And we had, if you remember, we had three one-year extensions to that contract and we have now gotten the extension through the end of 2021 at a minimum. But as you put it Ben, you just never know, right? We have hundreds of people in Afghanistan, doing a phenomenal job, day-in and day-out, but we don't necessarily control the level of activity in any ways as you look toward -- looks toward 2020. We hope another great year, but if there are troop withdrawals or any other type of material changes that could impact that part of our business in -- I'm sorry, when I said the extension is at the end, I mean year ahead, Mike, they had them year ahead. We got the extension through the end of 2020 and then there are additional extension possibilities under the contract for 2021 and 2022 down the road.

Benjamin Nolan -- Stifel Nicolaus -- Analyst

Okay, that's helpful. And I assume that some of the logistics benefit that you've been able to extract out. There is no reasonably that those should not be replicable going forward, right? That supply chain benefit is sticky.

Ira M. Birns -- Executive Vice President and Chief Financial Officer

It's a pretty volatile environment. There have been scenarios in the past of border closings and things like that, that have caused us to bring in supply at less favorable terms, that hasn't happened in quite a while. But look that's always a risk. We're not delivering fuel from Chicago, right the fuel is going from Pakistan to Afghanistan. It's a little bit different, we were excellent in what we do. Extremely complicated -- but again we don't control the overall volume of activity on a day-to-day basis. But no, in the short-run, it's business as usual. Of course, due to the sensitive nature of the activity, we don't get our heads up, if demand requirements are going to come down all of the sudden. But we'll all know it around the same time when and if that happens. So for now, we continue focusing on servicing that market very well, but also working really hard to grow the other parts of our business. So that, this piece of the business over time becomes a smaller part of our overall business worldwide.

Benjamin Nolan -- Stifel Nicolaus -- Analyst

Right. Okay and then...

Michael J. Kasbar -- Chairman and Chief Executive Officer

The other color that will add, Ben is, I've said it before, but first of all, very proud of the team. It's sophisticated logistics, it's very strategic and within our aviation logistics, in our military petroleum logistics expertise has been instrumental in terms of expanding that to a number of different areas. So you'll see us with business continuity, emergency services, rapid response -- number of different capabilities.

And as I've said before, as [Indecipherable] Formula racing for passenger car company. So it really is beyond, obviously the business activity itself. It is a very important strategic part of what we do to or what we've done and what we've leveraged. And the evolution from us being an underwriting and reselling company to a sophisticated global logistics partner for airlines, shipping companies and our ground fuel clients around the world. So I just want to remind everybody and add that end what that gives to us.

Benjamin Nolan -- Stifel Nicolaus -- Analyst

Right. Switching gears a little bit for me to the balance sheet. Noticed there was a little bit of an increase in inventories and a bigger increase in the other current assets line. I was curious if you guys are doing anything strategically there in terms of, I don't know whether it's related to IMO 2020 and inventory building. I know that's happening by a number of people, but -- or just more thematically carrying more inventory and how we should think about that? Maybe if you could give a little color on the bump in the other current assets line as well?

Ira M. Birns -- Executive Vice President and Chief Financial Officer

Yeah, on the inventory side, for starters, that number will move around quarter-over-quarter and we have gotten a bit more physical in aviation in particular, post the Exxon acquisition. But a lot of it to be honest is timing related, nothing substantially has changed in terms of our decisions on carrying or it's something we don't necessarily carry inventory. On strategically we carry inventory to support the book of business that we need to support. That mix between back-to-back in inventory will shift a little bit from time to time. But nothing, nothing really significant has changed in the past couple of quarters from an inventory perspective, to mix of business mix and pricing dynamics from quarter to quarter.

Other current assets, you've honestly stump me, there is nothing significant that's in there. I believe it's simply a timing issue, but I can get back to you on that one.

Benjamin Nolan -- Stifel Nicolaus -- Analyst

Okay. That's fine. All right. Well, that does it for me. I appreciate the time. Good quarter guys and enjoy Singapore.

Michael J. Kasbar -- Chairman and Chief Executive Officer

Thanks, Ben.

Ira M. Birns -- Executive Vice President and Chief Financial Officer

Thanks, Ben.

Michael J. Kasbar -- Chairman and Chief Executive Officer

Lot of good -- happening out here.

Operator

And our last question comes from Ken Hoexter with Merrill Lynch. Please go ahead.

Ken Hoexter -- Bank of America Merrill Lynch -- Analyst

Hey, Greg. Good morning, Mike and afternoon Ira and Glenn. Maybe let's hit the one part of the business, you haven't hit yet on land. You had a big upturn in profits, you gave great detail on the aviation and marine. And you noted -- land was increased from commercial and industrial activity in multi-service. Is this also seasonal acquisition benefits is something clicking here that's ramping up? I don't know whether it's station deliveries or the UK acquisition, and maybe just delve into multi-service a bit more?

Ira M. Birns -- Executive Vice President and Chief Financial Officer

Sure I'll start, Mike could add some color in terms of the qualitative. But in land, look, we've got the two larger C&I commercial and industrial acquisitions we made three years ago. We got off with slow start with [Indecipherable] in particular, it's starting to catch up and we've seen that business continue to grow. It's still smaller than we would like it to be and that's where some of the strategic opportunities may come into play over the next several quarters. But we did see some uptick there in -- it's not Europe, as you mentioned Europe, remember that this summer is the weaker period for the European side of the land business. So there is no significant movement there year-over-year. We hope to see a nice uptick sequentially in the fourth quarter, and it's finally cold again, in the UK in the winter. The Connect business which includes activity in both principally in the U.S. and in Europe, its continue to perform pretty nicely in the third quarter of the nat gas. Piece of that business grew that's nat gas and power, had some relatively impressive growth as they continue building out there, the breadth of their customer relationships. So there were pieces that did pretty well and there were pieces that were relatively stable. We still need to achieve more operating leverage in land and we're only going to achieve that with more organic and growth combined with some strategic opportunities. We're very focused on capitalizing on.

Multi-service continues to do really well, it's an impressive little business that continues to add customers, continues to drive efficiencies in its platform and has grown quite regularly now over the past -- over the past several years. And then again, they had another, they had another good quarter. They are converting on their pipeline of new opportunities and our belief is that, we'll continue indefinitely, albeit a small piece of our overall business, it is certainly one of our growth drivers that we're very proud of.

Ken Hoexter -- Bank of America Merrill Lynch -- Analyst

Okay. And that you might had -- yeah, Mike [Speech Overlap]

Michael J. Kasbar -- Chairman and Chief Executive Officer

Go on, Ken, I'll comment later. Get your questions out.

Ken Hoexter -- Bank of America Merrill Lynch -- Analyst

No. Okay. I thought I was going to hand it over to you, but if I'll just jump in with a different one on accounts receivable, just back on the balance sheet. It seems like you've had a couple of questions here, but you've made progress in different areas, you know [Indecipherable] is down just because of the price of fuel. Is there anything to do in this environment, just given the economic backdrop, right? If things are weak you had some bad debt. Is that something you look to rein in at all, on a dollar basis or are you happy with levels you're at? Just wondering what your thoughts are, I guess relative to the economy? And what you usually do with your extension on day sales outstanding?

Ira M. Birns -- Executive Vice President and Chief Financial Officer

Yeah. Days sales outstanding is not necessarily the issue that has been very consistent. We have brought that down a little bit, but some of the things we've talked about, if you start with marine as an example, some of that low-margin higher-risk business we've done a really good job in pulling that. It wasn't necessarily a massive impact on accounts receivable, it's probably $50 million to $100 million over the last year. So we lived through the high times and low times in terms of the economic cycles. And we've always played a relatively conservative hand, if you will, in terms of managing the overall portfolio. And some cases, that means, we walked away from some margin opportunity, because the risk was too big. We've ramped up our credit insurance programs to mitigate against potential losses. But overall I would say, our portfolio is very healthy, probably healthier than it's been in a while. That doesn't mean that eliminates the risk of what happened, for example, with one particular customer in the third quarter. So, our team is doing a really nice job where issues are flagged, we're very quick to -- at a minimum ramp down the amount of credit we may provide for someone who's credit conditions have negatively -- have been negatively impacted for whatever reason. And so I don't think there is any conscious effort to say we wanted to take that $2.7 billion down dramatically to move up and down as you notice based on our fuel prices. That's a given. But we'll continue to monitor the portfolio day-in and day-out, and if there are more opportunities to exit low margin business, especially in the low-margin business or low return business, it has significant amounts of working capital invested -- receivables in particular, we're always going to do that.

And I think we've gotten through a big chunk of that, I would say. So there is not a lot of that on the table today. So if fuel prices didn't move over the next six months, I would expect our receivables balance would remain in a very tight zip code around that $2.7 billion number.

Ken Hoexter -- Bank of America Merrill Lynch -- Analyst

That's really helpful. And then last for me, it's either Michael or Ira, I guess just your thoughts on the competitive market, I mean in the past, Mike, you mentioned OW earlier. Maybe just give an update on, on the state of your competitors, thoughts on your GP pricing in this rebound. Maybe just run through each segment, what your thoughts are on the competitive positioning?

Michael J. Kasbar -- Chairman and Chief Executive Officer

Well, I will make comments on some of the other stuff. But I'll answer this first. Excuse me, it's sort of interesting, we made our living in highly fragmented markets. And we created a certain amount of navigation. There was good amount of volatility, there is lot tighter supply demand equation. You've had a lot of location arbitrage, that certainly help the derivative part of things, information arbitrage, but things have changed dramatically. When I look at World Fuel today and what it was 20, 30 years ago -- what it was five years ago, their continuing transformation is quite extraordinary. And when you look at the marketplace it's really no different. So there is been a lot of consolidation on buyers and sellers. And we -- I have thought of that as not necessarily beneficial, but we've also consolidated and we've grown, and we've scaled. It hasn't been always smoothest road. But I think that's some part of the story, is the fact that there is not that many companies that can actually scale. So I think we've demonstrated our ability to scale and certainly predict the balance sheet. And you're seeing some progression. So volumes up sequentially in land, it's up sequentially in marine and aviation continues to tick -- continue to penetrate marketing gain -- market share, grow faster than GDP.

So I think those are all good indicators of the capability of the Company. And what in the markets as competitive as it's ever been. As credit card companies looking to get into healthcare and supply chain management. So there is a hell of a lot of convergence going on in the marketplace. And there is a good amount of convergence going on within World Fuel's. So when you look at land, marine and aviation, you have got moving targets and stationary targets of the ship or plane or truck and airport or seaport and truck [Indecipherable] a molecule.

So and certainly with IMO 2020 you're seeing a good amount of convergence there in terms of fuel. In terms of distillate, the regulation should have been 0.1%. And any case it is what it is. So I think that we're feeling like we've got greater capability. If you look at the story, we transformed from underwriting and a market maker to being a pretty sophisticated logistics company. And now I think the next evolution is deeply get again to digitization and crushing cost internally and reducing costs for our clients and creating convenience and being integrated with their operations and then using our global platforms.

We were born global, our marine and aviation were global from day one. Land is more of a local, regional business, but you've got now a land business that is starting to reach its stride or you could see it coming through, and it's been a tough road, I mean we clear out a lot of the portfolio. There is still more to do, we brought a lot of capital back, Mike Crosby and the team, our legal team and finance team and everybody is on technology, is coming through. It's been a journey that is for sure, but we can see it coming through. And I'm here in Singapore with this global maritime forum, it's essentially World Economic Forum for the maritime industry. There is a tremendous amount of convergence. We have our Connect -- one of [Indecipherable] sort of started the journey with us, with selling his company to U.S. Energy in 2012, and then we put seven other companies together to make Connect energy group then -- that's been pretty timely.

So, and now we're burgeoning [Phonetic] our liquid diesel business with our gas and power and sustainability business brand to get world Connect energy services. So it's a carbon offsetting, its renewables bio gas, wind and solar is growing. And all of these clients -- these commercial and industrial clients, they're all looking for the same thing. So they all had sustainability goals. And so all of this is kind of coming together and we feel pretty good about it. So any case, I just want to add a little bit of that color and multi-service is doing well, and it's definitely a part of the digitization journey. So there is more and more engagement in salesforce.com, in terms of just getting standard tools and some of our native cloud applications that work right out of the box, is definitely an area that is sort of bright -- we could see bright lights here, where we are going to start to leverage technology internally.

So anyway long-winded answer but it's my once a quarter opportunity to sort of tell the story. So I think the story is important and the vision is important and we're executing on it, and our team is more engaged, and I think more positive. So, we're feeling good despite all the craziness in the world. We've got I think an excellent, excellent business model and it's working better than ever before.

Ken Hoexter -- Bank of America Merrill Lynch -- Analyst

Hey Mike, Ira and Glenn, I truly appreciate the time and insights and nice job. Thanks.

Michael J. Kasbar -- Chairman and Chief Executive Officer

Thanks Ken.

Glenn Klevitz -- Vice President, Treasurer and Investor Relations

Thanks Ken.

Operator

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

Michael J. Kasbar -- Chairman and Chief Executive Officer

Well, thank you to all of our investors and analysts that have stayed with us and importantly to all of the global World Fuel team, you guys are the best. And ladies and gentlemen, so thanks very much and look forward to talking to everybody next quarter. Good bye from Singapore.

Duration: 49 minutes

Call participants:

Glenn Klevitz -- Vice President, Treasurer and Investor Relations

Michael J. Kasbar -- Chairman and Chief Executive Officer

Ira M. Birns -- Executive Vice President and Chief Financial Officer

Kevin Sterling -- Seaport Global Securities LLC -- Analyst

Benjamin Nolan -- Stifel Nicolaus -- Analyst

Ken Hoexter -- Bank of America Merrill Lynch -- Analyst

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