Frontline (FRO) Q2 Profit Doubles

Frontline Profit More Than Doubles on Spinoffs, Sales
By Alaric Nightingale
Aug. 22 (Bloomberg)

Frontline Ltd., the world's biggest operator of supertankers, said second-quarter profit more than doubled as it increased charges for hiring out ships and spun off two companies.

Net income rose to $189 million, or $2.53 a share, from $68.6 million, or 92 cents a share, a year earlier, Hamilton, Bermuda-based Frontline said in a statement to the Oslo stock exchange today. Profit will be ``considerably weaker'' in the current quarter because of declining demand, it said.

``They are less optimistic about the future than they have been previously,'' said Anders Rosenlund, an Oslo-based analyst at ABG Sundal Collier ASA who recommends that investors sell the shares. Ship-hire rates were ``a bit better than people were expecting,'' he said.

Profit was boosted by $109.8 million from share and vessel sales. Frontline's biggest tankers earned 2.5 percent more in the quarter than a year earlier while income from smaller carriers rose by a quarter. Vessels leased out in the day-to- day, or spot, market may be operating at a loss as two production cuts by OPEC since November crimp cargo demand.

Frontline's shares climbed 7 kroner, or 2.8 percent, to 257.50 kroner as of 11:16 a.m. in Oslo, valuing the company at 19.3 billion kroner ($3.2 billion).

Frontline, led by Norwegian billionaire John Fredriksen, said it expects the Organization of Petroleum Exporting Countries to boost crude supply ``in the near future.''

The company needs $30,000 a day to break even on each of its very large crude carriers, or VLCCs, and $22,100 on its 1 million-barrel carriers, called suezmaxes. Currently, VLCCs are paying about $22,000 a day and suezmaxes $13,500, based on a formula by Oslo-based shipbrokers RS Platou A/S, benchmark ship- hire rates and marine-fuel prices compiled by Bloomberg.

$51,900 a Day

The company's VLCCs made $51,900 a day in the second quarter, compared with $50,600 a year earlier. Its Suezmax tankers made $38,600, compared with $30,600. Daily rental income from so-called oil-bulk-ore carriers, which are able to carry oil or commodities, earned $38,300, an increase of 27 percent.

The spinoff of Sea Production Ltd., a company that will operate storage and production vessels, boosted profit by $31.2 million, the company said. The merger of SeaLift Ltd., which was spun off in the first quarter, with Dockwise Transport NV contributed $43.7 million.