CBL International Ltd Q2 FY2024 Earnings Call

Good morning, ladies and gentlemen. I'm Venus Zhao, Investor Relations and Public Relations Director of CBL International Limited. Thank you for joining the 2024 Interim Results webcast of CBL International Limited. Before we begin, I'd like to remind you that today's presentation will include forward-looking statements made pursuant to the Safe Harbor Provision of the Private Securities Litigation Reform Act of 1995. These statements are subject to the risks and uncertainties that may cause actual results to differ materially from our expectations. Today's meeting will be conducted in English with simultaneous translation into Mandarin. We'll begin with the presentation, followed by the Q&A session. You can find the presentation deck on the webcast page and in the Investor Relations section of our company website. We're excited to introduce the key members of our leadership team who are driving our vision forward. Let me introduce our speakers for today's session. We have Mr. Teck Lim Chia, the Group Chairman and CEO, Mr. Raymond Chiu, our Chief Financial Officer, and myself, Ms. Venus Zhao, Director of Investor Relations and Public Relations. Please allow me to give a presentation of our interim results. We'll divide it into five chapters: Company Introduction, Investment Highlights, Financial Review, Operational Review, Strategic Initiatives, and Market Outlook. The first chapter is the Company Introduction. Who we are. CBL International Limited, NASDAQ ticker, BANL, is the listing vehicle of Banle Group, a reputable marine fuel logistics company based in the Asia-Pacific region that was established in 2015. We are committed to providing customers with a one-stop solution for vessel refueling, which is referred to as a bunkering facilitator in the bunkering industry. Our clients are international container liners, bulk carriers, and tankers. We facilitate vessel refueling mainly through local physical suppliers in over 60 ports worldwide in Asia-Pacific, Europe, and Africa. We are among the top two players in both the Hong Kong and China bunker facilitating markets in 2023. We are committed to sustainable fuel solutions. This short corporate video will give you a comprehensive overview of our company's operation. I hope this video provides valuable insights into who we are and the exciting opportunities that lie ahead. Please enjoy. Let's continue. According to UNCTAD, total seaborne trade and containerized trade are forecast to grow 2.1% to 2.2% and 2.9% to 3.2% per annum from 2024 to 2028, respectively. According to BIMCO, container volume for all trade is forecasted to grow 5% and 6% respectively in 2024 and 2025. According to Frost & Sullivan, Asia and Oceania accounted for 70% of global container port throughput in 2023. CBL's bunkering operation network presence has covered 9 out of the top 10 global container ports in 2023. The ongoing Red Sea crisis, which began in October 2023, has significantly impacted maritime routes due to geopolitical tensions and conflicts in the region. The reduction in traffic through critical conduits such as the Suez Canal and Bab el-Mandeb Strait has forced ship owners and charters to reroute vessels, leading to increased transit times and operational costs. The voyage from Rotterdam to Shanghai increased from 25.5 days to 34 days. Free rates on affected routes have surged due to these disruptions, as shipping companies face longer voyages and higher insurance premiums. This disruption has also had a significant impact on the bunkering industry. The demand for bunker fuel in Asia-Pacific and Western Europe has risen sharply due to the rerouting of vessels around the Cape of Good Hope and other longer routes. Ports in regions such as China, Singapore, Mauritius, and Cape Town have experienced a surge in bunkering volumes, driven by the need for vessels to refuel more frequently along these extended routes. This increased demand has led to greater price volatility, with the price of low-sulfur bunker fuel on these routes rising immediately after the crisis began, and beginning to stabilize and decline somewhat. Even though they remain higher than pre-crisis levels, the decrease is attributed to the market adjusting to the new demand patterns and reopening of certain supply chains. Moving on to what makes CBL stand out. Bunkering is a critical process in maritime logistics, and we excel at it. Our primary role is to bridge the gap between ship operators, oil traders, and physical distributors. We handle all the logistics required to refuel vessels, including obtaining and comparing quotations, negotiating prices, arranging physical delivery, and managing any occurrences that arise. The value we provide to our clients is significant. By acting as a single point of contact, we reduce the administrative burden and time cost for ship operators, offer favorable pricing through demand aggregation, and provide flexibility to manage unexpected events. We are not just delivering fuel; we are delivering a comprehensive, reliable service that ensures our customers' vessels stay on schedule and operational. Our balanced business model is built around efficiency and scalability. We operate on a cost-plus pricing mechanism, ensuring a positive gross profit on every transaction. This model not only secures our profitability but also allows us to offer a premium service to our clients. Our extensive service network, now spanning over 60 ports, is key to capturing additional business opportunities. This network provides our customers with the flexibility they need to refuel at convenient locations across the globe. Achieving economies of scale allows us to lower our unit operating costs. Banle is also an asset-light company. We practice just-in-time inventory management, which minimizes our fixed asset investment and reduces financial risk. Our deep relationships with suppliers and our possession of all necessary licenses further enhance our operational capabilities. Lastly, our operational efficiency is evident in our rapid cash flow and the fact that we maintain no long-term debt on our balance sheet. We minimized interest expenses from accounts receivable factories. These factors contribute to our ability to remain agile and responsive to market needs, ensuring that we can continue to grow sustainably. Let's move on to our investment highlights. Now we summarize the key investment highlights of Banle International. These highlights are the pillars of our growth strategy and our value proposition to investors. First, our growth track record speaks for itself. We've achieved a revenue CAGR of 23% from fiscal year 2020 to fiscal year 2023, demonstrating our ability to expand and capture market share even in challenging environments. Second, our financial health is strong. We are in a position with access to bank facilities and positive free cash flow. This financial health not only supports our ongoing operations, but also enables us to seize new opportunities as they arise. Third, we pride ourselves on our operational efficiency with high liquidity. Fourth, we hold a leading market position in key markets, particularly in Hong Kong and China. Our strong relationships with top-tier clients and our expansive service network give us a competitive edge. Finally, our growth potential is significant. We are not just expanding our network; we are also innovating in areas like sustainable fuels, which positions us for longer-term success in an evolving industry. Let's move on to the next part, the financial review. Let's take a closer look at our financial performance for the first half of 2024. Our revenue grew by an impressive 44.4% year-on-year, reaching $277.2 million. This growth was largely driven by a 39.4% increase in sales volume as we expanded our global supply network and tapped into rising demand from both existing and new customers. Our current ratio stands at 1.51, reflecting our strong liquidity position. Additionally, our cash balance increased by 30.9% to $9.7 million, further strengthening our financial stability. Our capital days is minus 3.6 days, and free cash flow has increased by 131.8% to $2.3 million. The reduction in capital days indicates that we are managing our accounts payables and accounts receivables more effectively, leading to faster turnover and enhanced operational efficiency. The significant increase in free cash flow reflects our improved cash flow management, providing us with greater financial flexibility for investment and growth opportunities. Driving deeper into our financial results, our revenue of $277 million represents a significant increase of 44.4% compared to the first half of 2023. This growth was driven by a 39.4% year-on-year increase in sales volume, attributed to the expansion of our global supply network and higher marine fuel demand due to geopolitical factors. However, our gross profit declined by 32.2% to $2.71 million, primarily driven by the reduction in premium sold to customers and leading to lower gross profit per ton, which was partially offset by an increase in volume sold. Our operating expenses rose by 64% to $4.12 million, driven by higher selling and distribution expenses related to our sales growth, strategic investment expansion into our supply network to new geographic areas, and development of our biofuel operations. These expenses are necessary for our long-term growth and are expected to yield positive returns in the coming years. Our net loss of $1.62 million was driven by lower gross profit margin and higher operating costs. Despite these challenges, we are confident in our ability to navigate the current market environment and return to a path of improved profitability as we continue to scale and optimize our operations. Let's now examine our revenue breakdown by geographic location. China and Hong Kong remain our largest markets, contributing 51.3% and 34.8% of our revenue in the first half of 2024, respectively. Malaysia and Singapore also play important roles in our regional portfolio, accounting for 10.9% and 2.3% of our revenue. We have seen strong revenue growth across all these regions, with Singapore, Hong Kong, Malaysia, China, and South Korea experiencing a year-on-year growth of 150%, 52%, 41%, 38%, and 25%, respectively. This geographic diversity not only strengthens our market presence but also helps mitigate risks by spreading our revenue sources across multiple key markets. Our continued focus on expanding our network and customer base in these regions is expected to drive future growth and solidify our leadership position. Finally, let's review the key highlights of our balance sheet as of June 30, 2024. We maintain a highly liquid capital structure, with cash accounting for 41% of our net assets. This solid cash reserve not only provides us with financial stability but also enables us to seize opportunities as they arise. We operate on a debt-free basis with zero long-term borrowings. Instead, we leverage available non-recourse factoring facilities, which allows us to maintain liquidity without incurring debts. This approach minimizes financial risks and positions us favorably in the market. Our commitment to just-in-time inventory management further enhances our cash flow and avoids storage risks. This strategy not only improves our operational efficiency but also aligns with our goal of maximizing profitability. We also maintain a lean asset base with minimum fixed assets. This strategy allows us to remain agile and responsive to market changes, reducing overhead costs and enhancing our overall efficiency. Finally, our rapid cash conversion cycle is a testament to our efficient operations. We engage mostly in short-term activities with efficient operations. In summary, our balance sheet reflects a company that is not only financially stable but also strategically positioned for sustainable growth in the years ahead. Now, let's review the company's operational performance. Let's talk about one of the key drivers of our recent success, our service network expansion. Since our IPO in March 2023, we have significantly expanded our global service network from 36 ports to over 60 ports across Asia, Europe, and Africa. This expansion has been instrumental in enabling us to serve a broader customer base and meet the growing demand for our services. One of the notable milestones in this expansion is the opening of our new office in Ireland in late 2023. This strategic move has bolstered our market coverage in Europe and enhanced our local sourcing capabilities, positioning us to better serve our customers in this region. Additionally, we successfully launched bunkering services through local physical suppliers in new locations, including our inaugural services in Mauritius, Africa in May 2024. This further extends our reach and demonstrates our commitment to growing our footprint in key markets around the world. Now, let's dive into our sales volumes and oil prices per metric ton for our business. In the first half of 2024, our sales volume surged by 39.4% compared to the same period in 2023. This growth was driven by the expansion of our service network and the rising demand from both existing and new customers. In the first six months of 2024, the average bunker prices per metric ton increased by 3.6% compared to the same period last year. Our ability to serve eight of the world's top 12 container shipping lines, which together account for 87.1% of global container fleet capacity, has been a major factor in this volume increase. Our increased market presence in key regions like China, Hong Kong, Malaysia, and Singapore, along with our new market coverage in Africa and India, has contributed significantly to our strong sales performance. We implemented strategies to expand the service network beyond our traditional geographic areas in Asia-Pacific and Europe to Africa and broadened our offerings from container liners to include bulk and tanker businesses. As the global shipping industry moves towards decarbonization, Banle is at the forefront of promoting sustainable fuels. In the first half of 2024, Banle's biofuel volumes and revenue increased by 84.6% and 95.8%, respectively, compared to the same period of 2023. We've made significant strides in this area, having obtained ISCC-EU and ISCC-Plus certifications in early 2023. These certificates underscore our commitment to providing compliant and sustainable fuel options that meet the evolving needs of our customers and the industry. In July 2023, we commenced our B24 biofuel operations in Hong Kong, followed by successful bunkering in Yantian, Shekou, and Nansha in China, as well as Port Klang in Malaysia. The B24 biofuel blend offers a 20% reduction in greenhouse gas emissions compared to conventional marine fuels, making it an attractive option for ship operators looking to reduce their carbon footprint. Looking ahead, we plan to further expand our biofuel supply capabilities and explore other sustainable fuel options. Our work in biofuel is expected to facilitate the transition from fossil fuels to sustainable fuels, creating a second growth curve for Banle and positioning ourselves as a leader in the sustainable fuel market. Finally, let's take a closer look at our global service network and the extensive reach we have achieved. We are in the top two market share positions in both Hong Kong and China. As of the first half of 2024, Banle is providing vessel refueling services in over 60 ports worldwide. This map illustrates our network, which spans key locations across Asia, Europe, Africa, and beyond. Our presence in these strategic ports ensures that we can provide timely and reliable refueling services to our customers. We are recognized by our business counterparts as a professional and trustworthy partner, known for delivering flexible and integrated vessel refueling services. As we continue to expand and strengthen our network, we remain committed to delivering high-quality services that meet the needs of our customers and drive our growth. Looking ahead, Banle is focused on helping ship operators navigate the energy transition and comply with increasingly stringent emission regulations. The IMO's EEXI, Energy Efficiency Existing Ship Index and CII Carbon Intensity Indicator regulations, along with the FuelEU Maritime Initiative, are driving the industry towards greener pathways. These regulations require significant reduction in greenhouse gas emissions with targets of 2% by 2025, 6% by 2030, and up to 80% by 2035. Ship operators that fail to comply with these regulations will face significant financial penalties. However, there is a growing demand from corporations to reduce their scope-free emissions, those generated by their supply chain and logistics operations. Banle is well-positioned to help these companies achieve their sustainability goals by providing biofuels and other sustainable fuel options. Our B24 biofuel, for example, is a transitional product that allows ship operators to reduce their carbon footprint without making substantial investments in alternative fuel fleets. This flexibility is crucial, as many operators are hesitant to invest in new technologies due to the uncertainty of the market and existing depreciation timelines of their current assets. We are pioneers in promoting sustainable fuels in the Asia-Pacific region by leading the change in biofuel adoption and other sustainable practices. Banle is not only contributing to the decarbonization of the shipping industry but also positioning itself for long-term success in a rapidly evolving market. We are not just focused on growth. We play an important role in the value chain in the bunkering market. We have prominent local partners as our suppliers. Since the launching of our B24 biofuel operations in July 2023, we have successfully delivered these sustainable operations in Hong Kong, Shekou, Yantian, Nansha, and Port Klang. We strongly believe that biofuel is the inevitable trend during the energy transition from fossil fuels to sustainable fuels such as LNG, methanol, ammonia, or hydrogen. Owing to biofuel's compatibility with traditional fuel oil engines without requiring additional hardware investment and sacrificing efficiency. In the future, we are also exploring other sustainable fuels such as LNG, methanol, and ammonia, etc., to provide our customers, depending on market demand. Now, let's move on to the strategic initiatives and market outlook. As we look ahead, let me outline Banle's strategic initiatives as well as our market outlook. First, expanding the service network. Our recent actions include strengthening the Asia-Pacific market. Banle has prioritized bolstering its presence in the Asia-Pacific region where economic resilience is driving increased demand for shipping and bunkering services. Expanding into Europe and other regions, Banle is actively expanding into Europe and other regions, capitalizing on the robust demand for sustainable fuels driven by stringent environmental regulations and decarbonization targets. Second, maximize sales volume impact. Diversifying offerings and enhancing market position. Banle's efforts to diversify its fuel offerings, including biofuels and sustainable fuels, have enhanced its market position. Increasing market share. Banle's strategy is focused on increasing its market share by expanding into high-growth regions. Leveraging economies of scale. Banle's expansion allows the company to benefit from economies of scale. Third, explore sustainable fuels, future plans, compliance with IMO and EU regulations. Banle is committed to aligning with the latest environmental regulations set by the International Maritime Organization (IMO) and the European Union. Biofuel adoption. Banle is investing heavily in the adoption and expansion of biofuels. Exploring other sustainable fuel options. In addition to biofuels, Banle is exploring alternative sustainable fuels such as LNG, methanol, and hydrogen. As we execute these strategies, we will also continue to monitor and manage risk effectively, ensuring that we remain agile and responsive to market dynamics. Let's take a closer look at the market outlook and how it aligns with our strategic initiatives. The global green marine fuel market is expected to grow to $201.35 billion by 2030, with a staggering CAGR of 50.4% from 2023 to 2030. This growth is driven by increasing regulatory pressures and a global shift towards decarbonization. Banle is well positioned to capitalize on this trend. Our expanding service network, commitment to operational efficiency, and focus on sustainable fuel solutions put us at the forefront of this market transformation. We are also well prepared to navigate the challenges associated with oil price fluctuations and geopolitical conflicts. Our cost-plus pricing mechanism ensures that our profitability is not directly impacted by oil price volatility, while our proactive risk management framework allows us to adapt to changing market conditions. We will continue to enhance operational efficiency and cost control. In terms of strategic acquisitions and partnerships, we are exploring opportunities that enhance our operational capabilities and further strengthen our market position. By investing in technology and innovation, particularly in sustainable fuels, we are positioning Banle to lead the industry into a more sustainable future. With that, we conclude our presentation today. We've covered Banle's strategic initiatives, our strong financial and operational foundation, and the exciting growth opportunities ahead, particularly in the rapidly expanding sustainable fuel market. I'd like to open the floor to any questions you may have, whether it's about our recent performance, our future plans, or the broader market environment. Please feel free to ask your questions, and we will do our best to address them. Please type your questions in the Q&A box, and we will read them aloud for management to address. Okay, I've seen some questions online. The question one is from Shenzhen Cross-Field Asset Management, Wu Fenlan. The question is, what is Banle's macroeconomic outlook for the remainder of 2024? This question I would like to ask Mr. William.

Thank you, Venus. Thank you very much for the questions. Well, we do see that the global economy has shown signs of moderate growth in the first half of 2024, which we believe is driven primarily by the resilient activities in the emerging market, particularly in Asia. With the IMF and other institutions projecting moderate growth for the same year, the trend in the first half of this year shall extend into the second half. We believe that this is supported by the continued recovery efforts from various governments around the world, despite the geopolitical challenges as well as inflationary pressures. We strongly believe that the emerging markets will continue to play a critical role for the rest of the year. Talking about something closer to us, the international seaborne trade shows moderate growth in the first half of this year as well. The outlook for the second half of the year remains positive, with demand for shipping services in regions such as Asia-Pacific and Europe expected to continue to drive our business. The United Nations Conference on Trade and Development projects that international seaborne trade will continue to grow steadily in the next three to four years. Despite the ongoing geopolitical tensions in the Red Sea region, we see that there are many reroutings of vessels around the Cape of Good Hope, which has sharply increased bunker demand for the Asia-Pacific and Western European markets. With our well-established network, we can meet the increasing demands from our existing as well as new customers. We expect that the Red Sea disruptions will continue for the rest of 2024, and thus we expect bunker demand to remain high from the marine logistic operators. For the second half of this year, we anticipate further exacerbations in the demand for biofuels, as well as other decarbonization efforts driven by various regulatory bodies such as the IMO and the European Union. With the tightened rules such as FuelEU Maritime becoming effective next year, we believe biofuel demand will grow steadily. In summary, we maintain a cautiously optimistic outlook on the global economic landscape. Our strategy will continue to focus on growth, efficiency, and stability, enabling us to navigate challenges anticipated for the remainder of the year and positioning our company for continued long-term success. Thank you.

Thank you, William. Please submit your questions through the Q&A box, and we will read them aloud for management to address. The second question online is from J.H. Debrie. The question is, what is your view on the sustainable fuel market? Will sustainable fuel be the winner in the long run? I would like to address this to William.

Thank you very much for the questions. We see that the transition from fossil fuels to sustainable alternatives in the maritime industries is actually accelerating. This is driven by both market forces and regulatory pressures, which I refer to as the pull and push factors. On one hand, shippers and end customers are increasing their focus on ESG principles. The demand to further reduce their Scope 3 emissions places more significant pressure on logistics providers and container liners to adopt more sustainable marine fuels. At the same time, we see that international regulatory bodies like the IMO and the EU are enforcing stricter regulations and imposing penalties to curb carbon emissions from marine logistics companies. These pull and push factors are fostering a rapid energy transition, compelling logistics companies to adapt to their customer demands and meet regulatory compliance to maintain their competitive edge. We believe the sustainable fuel market is positioned for rapid growth in the coming years. From a public study, we see that the green marine fuel market is expected to grow from $11.5 billion last year to about $200 billion by 2030. We believe this is a very promising market. As of today, we still do not see any clear direction regarding who will be the winner in the sustainable marine fuel market. Many ship operators are experimenting with different alternatives, as many of the new ships being constructed are built with dual-fuel systems. This means that they can run on LNG combined with fossil fuels or methanol with traditional fuels, for example. This system offers flexibility and helps ease transitions to future sustainable options. As no player in the market is confident enough to rely solely on one single energy source, everyone wishes to retain the ability to power their new ships with traditional fuels while having options for new sustainable fuels. From this perspective, we can see that biofuel will become a crucial transitional option over the next decade. It can be used in existing traditional fuel engines, meaning that there will be no need to change the hardware of the vessels to adapt to biofuels. While using biofuels, it has a significant reduction in carbon dioxide, which will help operators comply with the upcoming regulatory requirements from various regulations. In the near future, we may have LNG dual-engine vessels, which may not have suitable LNG fuel available in certain parts of the world that they are calling. Then owners may opt to use fuel oil or biofuels if they prefer a lower-emission option. This will help operators increase their flexibility. The marine fuel market is growing at an annual rate of about 10% to 12%, driven by regulatory incentives and the push for renewable energy. By 2030, we expect biofuels to account for about 10% to 15% of the marine fuel market, especially if supply chain and cost challenges can be addressed. We believe there is still a long way to go for sustainable marine fuels, such as methanol, LNG, ammonia, or hydrogen, to establish themselves as a dominant market force. This is because it requires substantial investment, time, and expertise to achieve scalable production and supply worldwide. In terms of the potential winner in the long run, we personally believe that methanol may stand out as a more favorable option. According to the Classification Society, the order book for methanol-powered vessels has sharply increased compared to other sustainable fuels. Methanol is also projected to grow at an annual rate of 20% to 25% through 2030, driven by increased regulatory pressures to reduce emissions and the relative ease of converting existing vessels to use methanol. Thank you.

Thank you, William. Please submit your questions through the Q&A box, and we will read them aloud for management to address. Okay, the next question is from PineBridge, Chen Yi. The question is, how is Banle optimizing its supply chain to manage the increased demand for biofuels? I'd like to direct this question to William.

Thank you for the questions. As Banle, we are proactively establishing our comparative edge in biofuel supply to align with international environmental regulations, which include the IMO's greenhouse gas reduction strategies and the EU's FuelEU Maritime initiatives. These regulations will drive future biofuel demand, and we are well positioned to meet this demand. We have aligned our supply chain with industry standards. We obtained the ISCC-EU and ISCC-Plus certifications as early as early 2023, and we are committed to sustainability and compliance with international environmental standards. This ensures that our biofuel operations can meet the highest sustainability criteria. We launched our B24 biofuel operations in Hong Kong in mid-2023 and expanded our bunkering services to locations such as Yantian, Shekou, Nansha in China, as well as Port Klang in Malaysia. This operational expansion has strengthened our presence in regions with growing biofuel demand. In the first half of 2024, we achieved an 84.6% increase in our biofuel volume, along with a 95.8% increase in revenue compared to last year. This reflects the growing demand for biofuels in the market and our ability to cope with evolving needs from customers. We have proactively established strategic partnerships with our local suppliers in regions where biofuel markets are more developed. Through these partnerships, we can offer a comprehensive one-stop solution for biofuel bunkering, ensuring a consistent and reliable supply to our end customers. Thank you.

Thank you, William. The next question comes from Jeff Kone from the Wall Street Resource. This question is, what drives Banle's revenue growth in the first half of 2024, and will it continue? This question I would like to ask Raymond.

Our revenue went up by about 44.4% to about $277 million in the first half of 2024. This growth was mainly driven by a close to 40% increase in our sales volume and partly because of the 3.5% increase in the average bunkering price compared to the same period in 2023. While the fluctuation of the bunkering price is something out of our control, the significant growth of our sales volume was primarily driven by the expansion of our supply network, increasing from a coverage of 36 ports when we were listed in March 2023 to now more than 60 ports across Asia, Europe, and Africa. During this period, we have expanded from our customer base beyond container liners to bulk carriers and tankers. Opening our new office in Ireland also allowed us to capture new customers from Europe, who would have bunkering needs in the Asia-Pacific region as well. Regarding the rising environmental concerns globally, we have always taken a proactive approach to the development of sustainable fuels to address these issues. Our biofuel business, as mentioned by our CEO, achieved a close to 85% increase in sales volume and a nearly 96% growth in sales revenue in the first half of 2024. We strongly believe that our market share expansion strategy will enable us to optimize our supply chain, leverage economies of scale, and reduce unit costs in the long run. Revenue growth is expected to continue. Thank you.

Thank you, Raymond. Please submit your questions through the Q&A box, and we will address your questions. The next question we see comes from Mingyi. The question is, why did the gross profit margin decline despite revenue growth? And how is Banle addressing this? I would like to ask Raymond for this question.

Thank you. Our gross profit declined by about 32.2%. During this period, we faced tough market conditions and stiff competition. While we had to, though reluctantly, lower the premium we offered to our customers to capture more business and strive for rapid market share expansion. We have mitigated the GP reductions by significantly increasing our sales volume, but still, the decline was substantial. This margin squeeze is the price we have to bear in the current unstable market situation. The disruption of key shipping routes, particularly through the Suez Canal due to the Red Sea crisis, has intensified competition in the bunkering industry. Marine logistics companies facing higher operational costs have become very price-sensitive towards the bunkering price, pushing us to offer more competitive pricing, which has squeezed our gross profit margin. Regardless, we shall continue to focus on increasing our market share, enabling us to leverage economies of scale, and optimize our unit costs through higher order volumes and enhanced procurement power to reduce operational costs and improve profitability. As market conditions stabilize, we believe our operations will support higher gross profit margins in the future. The expansion of our supply network will capture new customers and continuously increase our sales volume, thereby mitigating the negative impact of the margin squeeze. Thank you.

Thank you. Please submit your questions through the Q&A box. The next question comes from Go Investing. Can you please provide insights into Banle's future expansion plans and how they align with the company's long-term growth strategy? I would like to direct this question to William.

Thank you very much for the questions. Let's start with expanding our service network. We have prioritized strengthening our presence in the Asia-Pacific region, where we see high growth potential with economic resilience driving demand for shipping, leading to greater demand for bunkering services. By expanding in this region, we can capitalize on new opportunities and leverage our existing supply network to attract more clients. On the other hand, we are also moving into other regions, especially in the European market. There is strong demand for sustainable fuels in Europe, driven by stricter environmental regulations and the decarbonization goals set by various authorities. Expanding into this part of the world is part of our strategy to diversify our geographical footprint and solidify our positions in the global market. Next, we'll talk about maximizing sales volume. We have been working hard to diversify our fuel offerings, focusing not only on traditional fossil fuels but also on biofuels while looking into future sustainable options. This has boosted our market position. Expanding these services will allow us to meet the growing global demand for both conventional and sustainable fuels. Our strategy focuses on increasing market shares, especially in high-growth regions. By capturing new business opportunities in these areas, we are setting ourselves up for sustained growth. Through our expansion, we benefit from economies of scale, increasing our volume and improving our procurement power by aggregating demand, thus optimizing costs and enhancing operational efficiency. We believe this is key to maintaining our profitability as we continue to grow our customer base. Moving forward, we will look into future sustainable fuels. We are fully committed to meeting the latest environmental regulations from various regulatory bodies, which focus on reducing carbon emissions, offering a great opportunity for us to be leaders in supplying sustainable fuels in the future. At the same time, we are investing in biofuels, partnering with local suppliers, and setting up operations in key markets. All these efforts position us to meet the growing demand for sustainable fuels, supporting global initiatives to reduce carbon emissions. Additionally, we are exploring other sustainable fuels like LNG, methanol, ammonia, and hydrogen to align with our strategies for cleaner energy resources in the maritime industry. Besides organic growth strategies, we are also considering strategic acquisitions and partnerships if opportunities arise. We will look for collaboration with key players across the supply chain, both upstream and downstream. This will strengthen our market presence, diversify our revenue streams, and enhance our ability to meet global demand for both conventional and sustainable fuels. In short, our future expansion plans closely align with our long-term growth strategy, focusing on geographical diversification, increasing market share, and driving sustainability initiatives. We are confident that Banle is well positioned for success in a dynamic global market. Thank you.

Thank you. Due to time constraints, we now take the last two questions. Please submit your questions through the Q&A box, and we will read them aloud. The next question we see is, what led to the shift from net income in 2023 to a net loss in the first half of 2024? What steps are being taken to return to profitability? I would like to ask this question to William.

Thank you very much. For the first six months ending June 30, 2024, we have navigated a shift in net profit, moving from a gain of approximately $1.15 million last year to a loss of about $1.62 million this year. This transition reflects the dynamic and competitive nature of our industry. The reasons are primarily due to lower gross margins influenced by challenging market conditions and intensified industry competition. As we expand our market share, we naturally face more competition. Higher operating costs arise from our investments in building our client base to increase sales and better position ourselves as the bunker market returns to a more normal state. However, despite these headwinds, we remain committed to strategic resilience and long-term growth. We are focusing on expanding our revenue streams through market segment, geographical regions, and customer base. Additionally, we are shifting towards biofuel and sustainable fuels while leveraging technology to control risks. Strategic partnerships and long-term planning are key to achieving sustainable profitability moving forward. Thank you.

Thank you, William. Due to time constraints, this concludes our Investor Presentation for today. Thank you for your participation and support for CBL. If you would like to have further discussions with our management, please contact our IR team. Once again, thank you for your time today. You may now disconnect. Thank you.

Thank you.