Tanker firm founders on expansion doubts

What's down Gulf Navigation. Profits sprung a leak last year, but investors appeared more concerned that the tanker company's expansion efforts are foundering.

Profits for Gulf Navigation sprung a leak last year, but investors appeared more concerned that the tanker company's expansion efforts are foundering. Gulf Navigation, a UAE oil and chemicals tanker company, disclosed an 82 per cent drop in profits yesterday. The sharp fall - largely the result of a decrease in global shipping rates - was accurately forecast by analysts and appeared to already have been priced into the stock because it jumped 7.1 per cent to Dh0.60 yesterday.

The larger question is when will Gulf Navigation start adding new vessels to its fleet of 15 tankers, either through acquisition or commissioning construction at the shipyard. The company is sitting on a pile of cash and has repeatedly discussed ambitious plans to spend it. In December 2008, the company's chairman Abdullah al Shuraim said he was plotting a number of expansions in the coming year, and last November the chief executive Per Wistof announced the firm was in talks with an unnamed company to buy four petrochemical carriers.

The firm said yesterday it was now looking to 2010 "as a year of expansion". But investors are not so sure, said Kareem Murad, the vice president of logistics and transport at Shuaa Capital. "The problem with Gulf Navigation is that they are still in the growth stage," he said. "For the time being their carriers are not yet in, which poses a lot of pressure on them." Gulf Navigation, which moves crude oil and chemicals to markets across the world, reported net income last year was Dh26.6 million, down from Dh148m in 2008.

Shipping firms across the world last year fell victim to lower rates and an oversupply of vessels. Gulf Navigation's stock has absorbed its share of these market woes: it has decreased steadily since October 12, when a major client cancelled a chartering contract. @Email:[e-mail]