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Norwegian shipping company Odfjell has posted a US$52 million drop in profits for the first six months of 2008 compared to the same period last year, due to soaring bunker prices, an increase in expenses and a weaker dollar.

Earnings before interest, taxes, depreciation and amortisation (EBITDA) in the first half of 2008 were US$149 million compared to US$175 million in the same period last year. Operating profit (EBIT) for the first six months of 2008 was US$82 million compared to US$135 million in the first half of 2007.

Earnings per share amounted to US$0.49, down from US$1.21 in the first six months last year.

Revenues amounted to US$724 million, up by US$119 million from US$605 milion in the first half of 2007. However, this increase was offset by a rise in operating, voyage and time-charter expenses. General and administrative expenses also rose during the same period.

Operating expenses as well as general and administrative expenses were higher in 2008 than in 2007, partly because of general price increases and a weaker US dollar.

The company said increased freight rates offset by record high bunker prices caused time-charter results per day to decrease by 5 percent compared to first quarter 2008.

The average cost of bunker fuel during the second quarter of 2008 was US$486 per ton (including compensation related to bunker escalation clauses and hedging), compared to USD 417 in the first quarter.

Odfjell said that it had taken steps in the second quarter to minimize its overall fuel consumption by reducing the service speed for a large number of vessels. Operating expenses on a comparable fleet basis were 5 percent higher first half 2008 than the full year 2007 figure. This was due to general price increases and a weaker US dollar.

The Bergen-based firm said the outlook for world economic growth was "fragile". In a statement, Odfjell said "With inflation on the rise, Central Banks will likely avoid lowering interest rates to stimulate economic growth, in a bid to buy time for inflation to level off. For the U.S., the consumer’s ability to restore economic growth is undermined by fewer jobs, decreasing property values, tighter credit and record high energy prices. Asian economic output is held back by the weaker overseas demand. "

Speaking about the effect of high bunker prices on the company's financial performance, Odfjell said "High bunker prices and high ship operating expenses, the latter partly explained by the weak USD, will continue to weigh upon the parcel tanker industry, unless and until compensated for by higher freight rates. We do expect tank terminal results to remain stable, and see no major changes to the operating results within our shipping business for the rest of the year, unless there should be a significant move in bunker prices."