Aegean Marine Petroleum Network's CEO Discusses Q2 2013 Results - Earnings Call Transcript

Aug.20.13 | About: Aegean Marine (ANW)

Aegean Marine Petroleum Network Inc. (NYSE:ANW)

Q2 2013 Results Earnings Call

August 20, 2013 8:30 AM ET

Executives

Nick Tavlarios - President and CEO

Peter Georgiopoulos - Chairman

Spyros Gianniotis - Chief Financial Officer

Analysts

Doug Mavrinac - Jefferies

William Horner - BB&T Capital Markets

Ben Nolan - Stifel

Chris Snyder - Sidoti & Company

Peter Mahon - Dougherty and Company

Operator

Please standby, we are about to begin. Good morning, everyone. Welcome to the Aegean Marine Petroleum Network Incorporated Second Quarter 2013 Conference Call and Presentation. I would like to advise everyone that there will be a slide presentation accompanying today’s conference call. That presentation can be obtained from website at www.ampni.com.

I also want to inform everyone that today’s conference will be recorded and is now web -- being webcast at the company’s website ampni.com. We will conduct a question-and-answer session after opening remarks. Instructions will follow at that time.

A replay of the conference will be accessible through the next two weeks by dialing 888-203-1112 for the U.S. callers and 719-457-0820 for those outside the U.S. To access the replay, please enter the pass code of 8677165.

And now at this time, I’d like to turn the conference over to the company. Please go ahead.

Nick Tavlarios

Thank you. And welcome to Aegean Marine Petroleum Network’s second quarter 2013 conference call. With me on the line today are Peter Georgiopoulos, Chairman of Aegean, as well as Spyros Gianniotis, Aegean CFO.

Before we begin our presentation, I would like to note that this conference call will contain forward-looking statements with the meaning of the Private Securities Litigation Reform Act of 1995.

Words such as expects, anticipates, intends, estimates, or similar expressions are intended to modify -- identify these forward-looking statements. These statements are based on Aegean Marine Petroleum Network, Inc.’s current plans and expectations, and involve risks and uncertainties that could cause future activities and results of operations to be materially different from those set forth in the forward-looking statements.

Important factors that could cause actual results to differ include our future operating or financial results, our ability to manage growth, adverse conditions in the marine field supply industries, and increased levels of competition. For further information, please refer to Aegean Marine Petroleum Network, Inc.’s report and filings with the Securities and Exchange Commission.

I’d like to begin with an overview of the second quarter, drivers of our operational and financial results and how recent and upcoming achievements underscore the progress we are making as we achieve our goals. I will then discuss our strong and consistent financial progress. Finally, I’ll provide some concluding thoughts on the macro environment, drivers for the remainder of 2013 and upcoming milestones.

During the second quarter, Aegean achieved its 10th consecutive quarter of profitability and accomplishment we have achieved 25 out of 26 quarters since we became a public company. We are excited about the opportunities in front of us and expect to build on positive momentum that our team has worked so hard to create.

Despite challenging market dynamics, we have continued to leverage our increased asset base and infrastructure to capture additional voyage and storage revenue opportunities, and drive operating income.

We achieved major milestones during the quarter, including the commencement of operations in Barcelona, expansion to Algeciras Bay and signing of a cooperation agreement with SK Lubricants, both of which I’ll discuss a bit later.

Turning to slide number four, during the second quarter our sales volumes were flat year-over-year at approximately 2.7 million metric tons. On a sequential basis, sales volumes increased by approximately 13.8% or 326,000 metric tons compared to the first quarter.

Sales volumes continued to be affected by the challenging macroeconomic and marine industry landscapes, as important to note that under normalized market condition volumes, it would have been significantly higher.

As things stands, our clients are facing challenges in their end markets, which in turn impacts our sales volume and tonnage pricing. Our team is focused on continue to achieve proper volume growth in the long-term, while managing and optimizing our strategy to capture all efficiencies possible.

As we navigate today’s market, we will continue to optimize Aegean size and make improvements where necessary. We have already seen the benefits resulted from our continued efforts to streamline our expense structure and leverage our model, which have driven growth on bottom line and we believe delivered value to our shareholders.

For the month of July, we generated sales volume of approximately 900,000 metric tons. Gross spreads in Q2 continue to reflect a highly competitive market. We continue to successfully execute our strategy to actively identify opportunities to increase efficiencies and drive profitability as capacity comes out of market and initiative that is delivering results.

During the second quarter, we capitalize on our significant built-in fleet capacity in order to take advantage of our unique economies of scale. Importantly, Q2 marked our fifth consecutive quarter of reducing operating expenses.

We are successfully leveraging our fixed cost to drive improvement on the bottom line, Aegean remains well-positioned to continue leveraging our scale and reducing our cost structure.

During the second quarter, gross profit decreased slightly by 1.8% sequentially. Net income for the second quarter was approximately $6.1 million on an adjusted basis, a slight decrease compared to the first quarter. EBITDA for the second quarter was $19.7 million or $20.2 million adjusted for the sale of non-core vessel.

We continue to drive our operating expense structure while strengthening our integrated marine fuel logistics chain through targeted expansion and the disposition of an older non-core vessel.

The sales of older non-core vessels allow us to overtime increase utilization of our remaining fleet and reduce maintenance CapEx. And importantly, rationalize our expenses by selling older non-core vessels will remain apart of our operating strategy for the foreseeable future.

These strategic actions directly impacted Aegean’s bottom line for the quarter and are expected to continue to enhance value for our shareholders. We have also taken other decisive actions to increase our earnings potential by diversifying our geographic presence and expanding our revenue base.

First, we expect to commence the commercial operational of our Fujairah storage facility in the first quarter of 2014.

Second, in April, we launched physical supply in our Barcelona facility a new and attractive market that provides Aegean with compelling growth opportunities. Prior to the launch of our Barcelona, this part was being served by only one player.

We believe our onshore capabilities, our service not previously offered in this region give Aegean strong competitive advantage. We are confident that our operation in Barcelona create substantial new volume and contribute to a larger profitable revenue base.

Third, in July, we announced our expansion to the Port of Algeciras Bay, one of Spain's largest ports and one of the busiest transit shipment and container ports in the world. Algeciras is a compelling opportunity for Aegean as we continue to expand to our presence in the Western Mediterranean. We are now making our first deliveries in this market.

Over the past several years, we have successfully execute our strategy opportunistically entering and exiting markets, strengthen our competitive positioning and this development is perfectly aligned with its operating loss. These new and attractive markets provide Aegean with compelling growth opportunities that allowing the company to leverage its built-in capacity and enhance utilization.

Turning to slide seven, we continue to expand lubricant volumes during the second quarter, which were up 37% to 10,900 metric ton sold as compared with 80,000 for the same period in 2012.

Although this is smaller lower volume business for Aegean, it continues to yield higher operating margin and is profitable revenue stream for the company. As we continue to successfully capture market share in lubricants, we are well positioned to achieve and execute goal of additional revenue diversification.

With that high level look at Q2, let me now provide you with more details about our financial results. As you may know, since market conditions fluctuate at ports around the world, we provide sequential comparisons in our discussion of quarterly financial results, comparing the results for the second quarter of 2013 to the first quarter of 2013.

On Slide eight, we present our volumes and gross spread. During the second quarter, the gross spread per metric ton of marine fuel decreased approximately 12% to $23.10 per metric ton compared to $26.20 in Q1 2013.

Slide nine illustrates a company-wide utilization for the quarter, which is measured as volumes delivered per vessel per day, excluding both scheduled and non-scheduled non-operating or off hire days. In Q2, utilization was 573 metric tons per day compared to 459.6 metric tons per vessel per day in the first quarter.

Utilization increased in the second quarter due to an overall reduction in our fleet size and the strategic decision to charter out excess tonnage on shore-term contracts. As a reminder, our utilization does not include Aegean North-West in Europe, which operates on a spot-based model focused on providing same day sales and delivery services.

During the second quarter 2013, we recorded a total of 155 non-bunkering days, which we defined as scheduled and unscheduled off-hire days for our bunkering fleet plus days associated with the strategic re-positioning of vessels. This number compares to 123 non-bunkering days in the prior quarter. For the current third quarter, we approximately -- we estimate approximately 160 scheduled non-bunkering days.

We generated voyage revenues of $5.1 million in the second quarter, which is in line with the previous quarter. Looking ahead, we expect voyage revenues to increase as we continue to leverage our built-in idle fleet capacity and charter out excess tonnage. We are well positioned to benefit from these short-term chartering opportunities and in fact, we recently renewed an annual transportation contract in Greece that will support the strategy.

Gross profit during the second quarter which is calculated as total revenue less cost of sales was $69.5 million. Since the fourth quarter of 2006, gross profit has increased at an annual rate of approximately 20%.

On Slide 10, we present our historical gross profit and EBITDA margin trends. Our EBITDA margin which is calculated as adjusted EBITDA divided by gross profit was 29.1% in Q2, which was slightly higher compared to our adjusted EBITDA margin in the previous quarter.

Turning to our working capital slide on Slide 11. During Q2, our days payable, days inventory and days receivable outstanding, all decreased slightly quarter over quarter. The net effect was a small overall decrease in our cash conversion cycle to 22.4 days from 22.5 days.

Moving to our balance sheet on slide 12, Aegean reported net cash used in operating activities of $66.4 million for the second quarter, due primarily to timing issues. Our free cash flow of the quarter reflects the variability in our business pertaining to recorded items.

At the end of Q2, we bought several cargoes on near-term credit, which was then sold in Q3. Although this was recorded in Q2, we’re already seeing the benefit of these items in our cash flow for third quarter. In addition, we use operating capital to continue funding the construction and pre-commission of our Port Fujairah facility. The capital commitments for the funding of this construction are winding down and we do not expect to see the impact in the future quarters.

Our strong balance sheet continues to be a key differentiator for our company. As of June 30, 2013, our cash position was $62.9 million and our working capital position totaled $36.1 million.

Importantly, regarding our global facility, we have attained subscriptions from 10 banks for a total of approximately $1 billion. The facility [will be used] [ph] for the financing of working capital needs in connection with the purchase, transportation, storage, and sale of fuel and gas oil. We are pleased that we have attained the subscriptions and believe that this demonstrates our lender’s confidence in our strategy and ability to deliver profitable results.

These facilities will support Aegean’s growth and expansion into the future. We expect to begin drawing down on the facilities in September. In addition, we've executed documentation for $73.5 million senior secured term loan to fund construction of our 465,000 cubic meter oil storage facility in Port Fujairah.

This new secured loan will fund the remaining construction costs with the balance being used to reduce short-term borrowings, enhancing our working capital position. We plan to begin drawing on this facility shortly.

With this commitment along with our global credit facility, we have significantly enhanced our financial flexibility. We appreciate the continued support from our lenders and their continued confidence in our ability to successfully execute our strategy.

Following the drawdown in utilization of these two facilities just discussed we expect to generate an additional $170 million in working capital. And our total amount of working capital is expected to exceed $200 million resulting in a current ratio of approximately 1.33 times. These facilities will further strengthen the company's balance sheet and provide the foundation to further expand our profitable operations.

In reviewing our balance sheet strength on Slide 12, it is important to note that while trade finance debt at the end of Q2 totaled $490 million due to the intensive working capital requirements inherent in the global marine fuel supply industry this debt figure has a rapid turnover of between 30 and 45 days.

The remaining debt in our book will be approximately $114.3 million which is secured by 36 young vessels or $3.2 million of debt per vessel. As a result, we end up with unencumbered debt free assets that include 23 owned bunkering vessels, three floating storage facilities and three existing onshore storage facilities.

As of June 30, 2013, our fixed-asset debt to adjusted EBITDA multiple was approximately 2.3 times. Our substantial financial liquidity, including approximately $900 million in working capital credit facilities or $1.2 billion including supplier credit provides Aegean with a distinct competitive advantage as we seek to further expand our global market share and strengthen our industry leadership for the benefit of the company and the shareholders.

As our progress indicates, we are controlling factors within our reach by executing on our strategy to strengthen our global brand, increasing earnings potential and successfully navigate the challenges of the macroeconomic environment. We have strategically expanded our global footprint to 21 markets, covering approximately 60 ports to increase our global market share, drive business revenues and streamline trade efficiencies.

As we mentioned last quarter, we are focused on expanding service centers in a cost-effective way around the world. The strategy has allowed us to generate sustained strong results and we are excited about our path forward and opportunities to build significant shareholder value.

Looking ahead, there are a number of key milestones on the horizon that will showcase our progress. Let me highlight a few. First, in addition to our this year’s facility, we continue to explore opportunities to open additional port in 2013 or early 2014.

Secondly, we expect to begin utilization of our new global -- $1 billion global credit facility further enhancing the company’s strong balance sheet and providing additional financial flexibility.

Third, with the upcoming completion of the Fujairah onshore storage terminal, we will commence the sales process to monetize our floating facility in this location. Our goal is to continue to utilize our onshore storage capacity significantly as we work toward further reducing our floating storage capacity worldwide.

The elimination of floating storage facilities has become a growing trend around the world. At Fujairah, we expect this policy to increase demand for onshore storage capacity and enhance the value of our new facility there.

We expect to complete the facility before the end of 2013, commence utilization in early 2014. We’re excited to capitalize on the emerging opportunities in the region. Finally, we will continue to examine opportunities to increase our efficiencies to additional sales of older vessels and other non-core assets.

Before we take your questions, I would like to walk you through trends that we know is to the first half of 2013 and we expect for the second half of the year. Market headwinds and competition persist in our industry. To combat them, we will continue to act on opportunities to smooth out volatility by expanding our distribution and further diversifying our geographic mix.

We anticipate headwinds in the macroeconomic environment to impact our volumes and spread over the next few quarters. This is nothing new for our company. We have been dealing with this environment for the last two years and have been successfully navigating these headwinds and driving solid performance and generating profitability.

As we strategically enter and exit markets to maintain our leading competitive positioning, remain focused on our operating philosophy and dedicating our resources to those revenue opportunities that will not drive just volume growth, but will increase profit volume growth for the long term.

As older tonnage continues to exit the market, the delivery of new build vessels slows and global demand improves, the supply and demand balance in the overall shipping sector will improve. In the meantime, Aegean’s focus on higher quality customers will serve us well as we gradually begin to see these clients start buying larger amounts of fuel.

In the midst of a challenging environment, we’ve reported 10 consecutive quarters of profitability. We will not stop there. We have a solid global foundation and our confident that Aegean will continue to achieve profitable growth as the market emerges from the current shipping cycle.

With that, I would like to open the floor for questions. Operator?

Question-and-Answer Session

Operator

(Operator Instructions) And first we will go to Doug Mavrinac with Jefferies.

Doug Mavrinac - Jefferies

Great. Thank you. Good morning, guys. I just had a few follow-up questions for you all this morning. First, looking at the quarter, sales volumes were very strong during the quarter. Nick as you mentioned OpEx had declined once again, the only real kind of negative you want to color there at least kind of negative surprise, was the gross spread coming in at little bit below $25.

My question is was there a specific circumstance or region that caused that overall spread to decline from 1Q. And then I guess as a follow-on to that, whatever the answer is, is that something that is manageable going forward from your perspective?

Nick Tavlarios

So, Doug, I mean if you look at our 2012 results, we had two quarter below $25 and two quarters above $25.

Doug Mavrinac - Jefferies

Right.

Nick Tavlarios

And we kind of push the year out averaging $25 and sort of the same things happened here, this year we had one quarter above and one below it. That’s kind of where we’ve seen the norm over time. Sure, I mean there is definitely some increased competition.

What goes on when we use that term is ship owners are out in the market buying smaller quantities and more frequently. So they are increasing the pressure on from a competitive standpoint in some of the markets. And yeah, we’ve seen the strength occur more so in Q2. It tends to correct itself and we do expect it to restore, yes.

Doug Mavrinac - Jefferies

So maybe if we just think about a $25 being the mean, 1Q is little bit above, 2Q is little bit below, but throughout the year $25 is probably the right number from your perspective?

Nick Tavlarios

Again, we don’t really get into guidance and such but…

Doug Mavrinac - Jefferies

Yeah.

Nick Tavlarios

…I’m just looking more historical performance.

Doug Mavrinac - Jefferies

Okay. Right.

Nick Tavlarios

And there are drivers that certainly suggest that is the case.

Doug Mavrinac - Jefferies

Got it. That’s perfect. Great. That’s very helpful. And then, second, Nick, you also mentioned how your quarterly OpEx continue to decline, I mean, I think, that’s five quarters in a row? My question is for that one similar to the first question, was there something specific during the quarter that enabled you to reduce it further or is this kind of part of the broader strategy that you guys have employed over the last year or so to bring OpEx down?

Nick Tavlarios

Yeah. It’s all about that strategy. I mean that program was specifically there to really put us in a much better position. Again, the company I think is in the better position this quarter, meaning Q2 results here than it was a quarter before, we reduced expenses when this market turns around, it creates that much more leverage in our business for greater profitability down the road.

Doug Mavrinac - Jefferies

Got you. And then just kind of little slight follow up to that. How much more can we go, I mean, or is it just a matter of, just dealing with the market that presents itself, because at some point, we -- I mean, your -- the scale of your business is getting very large and you guys are becoming very, very efficient. Does it reach a point where you can’t go any lower, or are you always looking for opportunities to continue to remain as efficient as possible?

Nick Tavlarios

Well, as I said in my remarks earlier, we’re definitely looking to offload one of our floating storage facilities when the Fujairah onshore storage facility comes online and we do have around one to two bunkering tankers perhaps over time…

Doug Mavrinac - Jefferies

Yeah.

Nick Tavlarios

…and again that would really create some significant savings for the company and obviously go right to the bottom line.

Having said that, we do have capacity within our current fleet to take on these additional ports that we’ve spoken about and as volumes ramp up there is again significant capacity there two to meet that demand.

Doug Mavrinac - Jefferies

Got you. Got you. And just a couple more for…

Peter Georgiopoulos

Doug, what Nick is saying there is that, our utilization can increase dramatically with the existing fleet that we have.

Doug Mavrinac - Jefferies

Got you. And which is all upside and all flows down to the bottom line automatically, Peter is that accurate?

Peter Georgiopoulos

Yeah. No. Virtually no incremental cost for that, I mean, after the cost of the fuel.

Doug Mavrinac - Jefferies

Right. Just turning on the switch and letting it flow through.

Peter Georgiopoulos

It’s like a pipeline, just push it through.

Doug Mavrinac - Jefferies

Yeah. Got you. Got you. And then, just final question before turning it over, Nick you mentioned sales volumes for July, just confirming, 900,000 tons that’s -- that was a number for July, so about a little bit better if not in line with Q2?

Nick Tavlarios

Yeah. It’s actually 902, I was conservative saying 900,000.

Doug Mavrinac - Jefferies

That’s excellent. Thank you for the time.

Nick Tavlarios

Thank you.

Operator

Okay. Thank you. Next we’ll go to Kevin Sterling with BB&T Capital Markets.

William Horner - BB&T Capital Markets

Hey, guys. It’s actually William Horner on for Kevin.

Nick Tavlarios

Good morning, William.

William Horner - BB&T Capital Markets

Nick, if you could help me out here, I know, you obviously ramped up your exposure in the Western Mediterranean, you’ve been in Gibraltar, now in Barcelona and Algeciras. What’s the competitive landscape looking like? You mentioned that there is only one other -- when you entered Barcelona, one other competitor there and are you seeing other players enter those markets and if so, are the players being rational?

Nick Tavlarios

Barcelona has us and another player as you pointed out. Algeciras has about four players, not an overly populated market per se. We are in Gibraltar. We have been there for a long, long time and there is four major players there and couple of the minor players.

So, the Western Med Basin, let’s call it, is a pretty substantial market and because it is such a strategic shipping area around the world. So, yeah, again, I find it’s rational. If it does get irrational at times and it had when people first entered Algeciras ahead of us, it tends to find its equilibrium and that’s what we see now.

William Horner - BB&T Capital Markets

Okay. That’s helpful. Thanks Nick. And with Fujairah, I know you are excited about the on-shore storage you got coming on in end of ’13 and ’14, and just out of curiosity, what’s the level of interest you are receiving from potential customers in terms of either targeted lease capacity or potential spot business? And just, how things are progressing there?

Nick Tavlarios

Yeah. We are actually beginning to approach the market right now to speak to long-term users along with ourselves. By the way, we will be one of the significant users in the storage facility. So there is that locked-in kind of capacity if you will, right on that plan. But it’s definitely there. There is particularly a demand for fuel oil in the area. So, we are excited about opportunities.

William Horner - BB&T Capital Markets

Okay. Thanks. And one quick housekeeping issue, I know you mentioned in the call, but can you go back over some of the timing issues you said you noted with your operating cash flow this quarter?

Nick Tavlarios

Sure. We purchased some cargoes in, without naming the markets, I can name them, but I’d rather, wouldn’t get into the details. But we purchased four cargoes right at the end of the quarter there on near-term credit requirements. So, they were paid for right at the end and it began getting sold in -- right at the start of Q3. So, that caused that use of cash per se. But, again, now if you look at the balance sheet right now that situation has reversed.

William Horner - BB&T Capital Markets

Okay. Okay. And one more Spyros if you are on, I know you had a slight tax benefit this quarter, just how should we think about from modeling purposes going forward?

Nick Tavlarios

Spyros may have been cutoff, so what I will do is I’ll -- he is going to be joining in a second. What I answer for you on that and one of our operating subsidiaries they had sale of an asset and that caused the, (inaudible) payment of taxes. So that is what that reflects.

William Horner - BB&T Capital Markets

Okay. I will follow up offline and thanks Nick.

Nick Tavlarios

No problem.

Operator

(Operator Instructions) Next we go to Ben Nolan with Stifel.

Ben Nolan - Stifel

Alright. Great. Good morning, guys. I just had a question about the credit facility and if Spyros is off, maybe Nick you can help me. It sounds like it is pretty close to being [SandField] delivered and you guys going to be able to draw on it. But it has kind of taken awhile? Could you maybe walk us through the timing of or when you expect to have it, absolutely completed and what has been the process here that’s sort of taken this much time?

Nick Tavlarios

Well, again, let, just going back to last quarter, I think in our prior quarter’s remarks, we said that we had completed our first stage of subscribers. We are at the $800 million level and we were had just launched a process to expand it to what we thought would be close to a $1 billion to additional subscribers and I think there were seven banks at a time.

We went to a broader rate banks, that level now is at 10 banks and the level again is around the $1 billion mark as we thought it would be. And we have terms are all been negotiated, everyone signed on and committed. Now we have circulated to all banks the final, I shouldn’t say final, but the document themselves for commentary. And when you are working with that many parties it takes some time.

The -- this process has started now well over a week ago. So we are well into the common stage. The whole multiple conference goal per week going though the comments with attorneys and such, and we are -- the expectation right now is that in September. I’d like to say early but, just giving myself a little bit room, but in September we will have this executed and this will be there….

Ben Nolan - Stifel

Okay.

Spyros Gianniotis

I got to hop in, I actually don’t think, I mean for a $1 billion credit line in this environment, I don’t think it’s taking a long time, I think it’s taken, I mean, which part has will be the process has gone?

Ben Nolan - Stifel

Okay. And then, could you maybe, you guys said what $375 million of liquidity or so at the end of the quarter, when it is finalized, what is that number -- what would that number move to, I mean, what’s the incremental level of capacity?

Nick Tavlarios

Well…

Spyros Gianniotis

Stop. Nick, can I answer?

Nick Tavlarios

Of course. Hello.

Spyros Gianniotis

Yes. And we, I mean, at the moment we had -- we have the Deutsche Bank facility. We had $950 million availability. So, now we will increase this liquidity, July available credits for trade finance to $1 billion, $100 million something in that area. So the availability will increase a little bit above $100 million.

Ben Nolan - Stifel

Okay. Okay. So closing in on, based on the end of 2Q you are closing in on about $0.5 billion of available liquidity for trade finance, that sort of thing, right, a little short of $0.5 billion, I guess. So that’s get, okay. That is helpful. And I think really every thing else is sort of been addressed. I think the key issues probably the gross margins and Nick you spoke to that and I guess, the takeaway is that we should sort of look for, you guys are targeting kind of a $25 per ton run rate. That is fair, right?

Nick Tavlarios

Well, again, we will work on what we can control. Again, everything suggested that that’s sustainable. We’ll keep working at it and we are not going to confirm your figure…

Ben Nolan - Stifel

Of course.

Nick Tavlarios

But we are again, we are doing. We have seen that in the past and again, the drivers are there for us to continue to strive for those figures.

Ben Nolan - Stifel

Right. Well, that’s great.

Peter Georgiopoulos

I -- sorry to interrupting. But as we have been saying for seven years, we can control our costs and we can control the volumes, the market is the market.

Ben Nolan - Stifel

Right.

Peter Georgiopoulos

I think we are doing a very good job obviously controlling our cost and pumping out our volumes and increasing those over time. And even given the difficult shipping market, I think, we’re doing a good job on capturing the best spread we can right now, but again some of that’s out of our control. That being said, we’re pleased where we’ve come out this quarter.

Ben Nolan - Stifel

And I think certainly from the cost perspective anytime you can consistently remove as much cost as you guys have out of your system, it’s pretty impressive. So certainly with respect to the things you gain control, I think, it’s well done.

Peter Georgiopoulos

Thank you.

Nick Tavlarios

Thank you.

Operator

Next, we’ll go to Chris Snyder with Sidoti & Company.

Chris Snyder - Sidoti & Company

I know you guys probably talked about gross spread, but I had kind of a follow-up question. So I mean obviously that came in low but I think it kind of over shadowed or otherwise pretty solid quarter in terms of the (inaudible) cost reduction. So was the gross spread -- was that just due to the allocation of sales among different markets or is that more -- or you guys kind of see a decline in across all markets compared to first quarter?

Peter Georgiopoulos

No. Well, it’s not across all markets. It’s been sort of a couple of markets that we had tough quarters and I think the lion share of the markets exceeded our expectations. Nick, would you state?

Nick Tavlarios

Yeah. Yeah, that’s correct. And it’s largely driven by competition in those markets. Look, we’re letting the gross spread over shadow something Peter pointed out here. We really believe that we executed very, very well here. The company is really in a great position here to really kind of pull itself coming out of this quarter.

Chris Snyder - Sidoti & Company

Yeah, I agree. And my next question is on, as Fujairah is completed, you guys, I don’t think have any capital expenditures plan for some of major -- which leads to probably some pretty significant cash flow. Have you guys decided about leaning ports, what you’re going to do with that?

Peter Georgiopoulos

Not yet. I mean the board has to discuss various options as you can imagine but it’s not something we feel comfortable talking about. But, we really do believe again Fujairah facility will be finished. There are no more ships to order. We still have plenty capacity and that’s right. So we think that the company is going to be building up substantial amounts of cash. And it’s been an ongoing discussion at the board level and we’ll continue to discuss it.

Chris Snyder - Sidoti & Company

Okay. And my last question is about Barcelona, can you kind of give us an update on how that market’s done? Was it operating at full capacity throughout this quarter or do you expect kind of more of a ramp-up as we head into third quarter?

Nick Tavlarios

I would say in Q2 we were probably -- at the end of Q2, we’re at about 80% capacity. We’ve not added throughout the whole quarter. We’re probably at 25% capacity nearly part of the quarter then I would say we’re at about 75% to 80% right there at the end. So, yeah, I would expect to be at full capacity going into this quarter.

Chris Snyder - Sidoti & Company

Okay. Thank you for taking my questions.

Peter Georgiopoulos

Thank you.

Nick Tavlarios

You’re welcome.

Operator

Okay. Next, we’ll go to Peter Mahon with Dougherty and Company.

Peter Mahon - Dougherty and Company

Yeah. Good morning guys. I just had a couple of follow-up questions. You mentioned that you renewed a transportation contract in Greece. Could you detail exactly how many vessels in that market will be impacted by this renewal and how that might impact the P&L? I believe that runs through the voyage revenue line but is that correct and what kind of revenue can you kind of expect from that contract and how might that impact that revenue line?

Nick Tavlarios

So the transportation contract in Greece is a contract that existed before that we just renewed. So that element doesn’t remain neutral, it’s two vessels. There is an additional transportation contract that we picked up at the end of the tail part of Q2 that goes into Q3 that will give us some additional revenue. Again, we’ll see what that number translates to. But it’s -- Spyros, do you want to offer any commentary on that?

Spyros Gianniotis

No. Like we said, I mean it goes at slightly better rate. So we will see somewhat impact on the bottom line.

Peter Mahon - Dougherty and Company

Okay. Perfect. And then could you talk about other revenue line, what is running through that that revenue line and why did we see a decline of about $1 million from Q1 to Q2 and that also impacted profitability of that revenue line. And so I was just wondering if you could detail what happened and what that might look like going forward?

Spyros Gianniotis

On this other revenue line, it’s -- we put their commissions, the margins and we have -- which other vessel and the vessel delays to unload the things like that. And we do have -- at this moment, I cannot recall what was the decrease and how can I present this to you. I’ll give that to -- hello.

Peter Mahon - Dougherty and Company

Yeah.

Nick Tavlarios

Yeah. Are you there?

Peter Mahon - Dougherty and Company

Yeah.

Nick Tavlarios

Go ahead. Also the storage revenue was -- that we had from Panama that’s no longer there. Again that will get replaced later when the Fujairah revenue comes on board.

Peter Mahon - Dougherty and Company

Okay. Got it. So that all kind of worked its way out of this…

Peter Georgiopoulos

The Panama revenue was the lion share of that.

Peter Mahon - Dougherty and Company

Okay. All right. Thanks a lot guys.

Operator

Okay. At this time, there are no questions. This concludes the Aegean Marine Petroleum Network Inc. conference call. Thank you and have a nice day.

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