RISING global oil prices are squeezing fuel distributors in Jamaica as local price adjustments lag international market increases, forcing companies such as Future Energy Source Company Limited (FESCO) to absorb tighter profit margins even as revenues continue to grow.

“The reality is fuel prices really need to go a little higher to match what is obtained internationally,” CEO Jeremy Barnes explained during a recent investor briefing. “What that has caused is a lot of downstream margin compression where the prices aren’t where they should be.”

The government has sought to cushion consumers from sharp increases in fuel prices by allowing for a more gradual adjustment process locally, but Barnes said that has placed pressure on fuel distributors whose costs are tied to international market prices.

“We do not believe at this time it’s going to impact our Q1 (first quarter) numbers being less year over year, but it’s putting a brace on our ability to grow,” he said.

Despite the strain caused by higher global fuel costs and slower local price adjustments, FESCO delivered what it described as its strongest financial performance to date. Net profit climbed 65 per cent year-over-year to $764.1 million. Operating profit rose 41 per cent to $900 million, while gross profit increased 29 per cent to $2.1 billion. Revenues grew 8.4 per cent to $32.6 billion. Fuel volumes grew 12 per cent year-over-year, while the company improved its operating expense ratio from 65.5 per cent to 57.4 per cent of gross profit. In practical terms, this means FESCO spent less to generate each dollar of gross profit than it did a year earlier, even as operating costs increased 25 per cent. The company expects the pressure currently affecting fuel margins across the industry to begin easing within the next two to four weeks as local fuel prices become more aligned with movements in the international market.

“We do hope and anticipate that in Q2 and Q3, the margins will get back to where they should be,” he said.

To help soften the impact of weaker fuel margins, FESCO has expanded beyond fuel distribution into fuel retail, LPG and other business segments where profit margins are stronger. The group’s diversification strategy now includes businesses such as Fesco, FesGas, YC Water, Futron 90+ and Futroil. While LPG currently accounts for a relatively small portion of the company’s revenues — less than $2 billion out of total revenues of $32.6 billion — management said the business remains strategically important because it generates stronger gross margins than transportation fuels. The company also intends to continue expanding its footprint through additional service stations and land acquisitions as part of its broader expansion plans.

“Our footprint at this point in time is not enough, and we will continue to grow our locations,” Barnes stated.

FESCO is also considering refinancing a $300-million bond due in March 2027 to preserve financial flexibility for future expansion. Management noted that the company could repay the debt using surplus profits if necessary, though refinancing would preserve additional cash for future investments and acquisitions. The board is also considering whether to pursue a rights issue — a process through which existing shareholders are offered additional shares to help the company raise capital. Barnes explained that FESCO previously avoided issuing shares when its stock traded around $3 or lower because management believed the market was undervaluing the company. Instead, the company opted to raise capital through debt financing at the time.

“We know the value of the company, and we know the earnings of the company and growth projection of the company a little bit better than the investing public,” he said. “So at that point in time we didn’t think it was prudent; we thought raising capital via debt would be the better route.”

However, Barnes noted that some projects are better suited for equity financing. As a result, the board is reconsidering whether to raise funds through additional shares. Those projects include the company’s ongoing station expansion programme, with three additional service stations due to open this calendar year. The company recently opened its Sheffield location in Westmoreland in May, while new stations in Runaway Bay and Cinnamon Hill in Montego Bay are scheduled to open in September and December, respectively. FESCO ended the last financial year with 23 service stations and expects to add another three by the end of 2026.

“We know there are some headwinds that are happening globally that we have to consider, but we do have a platform to achieve growth again this year,” Barnes shared.

FESCO’s stock traded at $3.63 as of May 20, 2026, up from $3.01 a year earlier, though still hovering near the price range management previously cited when explaining its reluctance to issue additional shares.

BARNES… we do not believe at this time it’s [margin compression] going to impact our Q1 (first-quarter) numbers being less year over year, but it’s putting a brace on our ability to grow.