March 18, 2008 / 11:55 AM / 12 years ago

UPDATE 2-Tsakos Energy Q4 profit falls, hurt by weak US dollar

(Recasts, adds analyst comments, updates share price movement)

By Hezron Selvi

BANGALORE, March 18 (Reuters) - Greece’s Tsakos Energy Navigation Ltd (TNP.N) posted a lower fourth-quarter profit as a weaker U.S. dollar against the Euro pushed up its expenses, overshadowing an increase in revenue from higher charter rates and an expanded fleet.

The company, which transports oil and gas, reported net income of $52.2 million, or $1.36 a share, including a gain of $30.8 million from the sale of a vessel. It earned $77.1 million, or $2.02 a share, a year earlier, with capital gains of $50 million.

Voyage revenue rose 17 percent to $130.9 million.

Analysts on average expected earnings of 56 cents a share, on revenue of $125.4 million, according to Reuters Estimates.

For the quarter, operating expenses per vessel per day rose 9 percent to $8,542, due to higher crew wages on a decline of the U.S. dollar against the Euro, and increased repair costs during dry-docking of vessels.

“I think the falling dollar did have an impact on (operating expenses), but I think the major increases in operating expense was more a result of higher lubricant costs which is a function of oil prices and primarily higher crude costs,” shipping analyst Gregory Lewis of Credit Suisse said by phone from New York.

CREW CONCERNS

“I think we’ll continue to see pressure on crewing costs. I think crewing costs are going up regardless of where currency goes,” Lewis said.

He noted that roughly about 50 percent of a shipping company’s daily operating expenses are crew related, and another 10 to 20 percent related to lubricant costs, depending on the age of the vessel.

He believes that there would be a 5 to 10 percent year-over-year increase in crew costs over the next 12 months.

“Given the strong global fleet growth in all shipping spaces whether it be tankers, dry bulk, and container ships — the question of crewing has been a concern for sometime,” he noted.

However, a lot of the shipping companies have been addressing the shortage of skilled labor by setting up their own training schools, Lewis added.

LOOKING TO WEATHER STORM

The falling dollar, increases in personnel expenses, insurance premiums, higher bunker and lubricant prices, rises in risk premiums, and the international credit market tightening could create strong headwinds, the company said in a statement.

Credit Suisse’s Lewis believes that other companies in the sector will be also affected by these factors.

“I think it ends up affecting all of them. I don’t think anyone is really exclusive,” he said.

Tsakos’ peers include Frontline Ltd (FRO.N) and Teekay Corp (TK.N).

Asked if Tsakos will be hit by a possible recession in the U.S. or a slow down in oil demand, Lewis said: “Tsakos is in a better postion to weather that storm than most other companies, simply because when you look at 2008 and 2009, they do have a vast majority of their vessels on fixed rate contracts.”

Shares of the company, which has 43 vessels, were trading up 1 percent at $30.75 in afternoon trade on the New York Stock Exchange. (Reporting in Bangalore; Editing by Amitha Rajan and Bernard Orr)

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