uploads///Operating expenses

Lower 1Q15 Vessel Operating Expense Boosts Navios Distributions


Jun. 17 2015, Updated 8:45 a.m. ET

Daily vessel operating expense

Daily vessel operating expense is an important metric to gauge the operational efficiency of marine shipping companies. It affects companies’ costs and earnings. When operating efficiency is high, companies will generally have higher margins and returns on investments, and vice versa.

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Lower vessel operating expense

Navios Maritime Partners L.P. (NMM) has a contract with the subsidiary of Navios Maritime Holdings (NM). In the contract, daily vessel operating expenses are fixed through December 31, 2015.

For the first quarter of 2015, NMM’s reported daily vessel operating expense was $5,107. This is quite low compared to 1Q15 expenses per day of $6,356 for DryShips Inc. (DRYS) and $6,073 for Diana Shipping (DSX). Safe Bulkers’ (SB) expenses are quite low at $4,872 per day for the same quarter. The above graph shows dry bulk shippers’ daily operating expenses for 1Q14 and 1Q15.

Lower expenses support distribution

It’s important to note that a company’s daily vessel operating expenses are subject to fleet age, operating efficiency, company structure, and fleet portfolio. NMM benefits from the economies of scale of the Navios group and has low fixed operations costs. All else equal, NMM’s lower daily vessel operating expenses suggest that a larger share of revenue will be distributed to investors and the general partner.

Investors looking to have a diversified exposure to shipping companies can use the Guggenheim Shipping ETF (SEA). NMM forms 2.7% of SEA’s net assets. The SPDR S&P 500 ETF Trust (SPY) provides exposure to the broader industry.


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