TETTEY ET AL.: PROFITABILITY OF GULF OF MEXICO SHRIMP VESSELS 



costs more than doubled over the period 1971-80, 

 from $74,889 to $161,965 (Table 2). The highest net 

 revenue before taxes recorded was $22,619 in 1978. 

 Losses were recorded in 1974, 1975, and 1980, and 

 this could be due to the effects of inflation and poor 

 harvest recorded in those years. 



Terminal value has a critical effect on profitabil- 

 ity. Decreased landings led to a substantial 

 economic loss of $20,758 in 1980 (Table 2), when 

 vessels were salvaged at 359£ of their original val- 

 ues. Increasing the terminal value to 100% of cost 

 resulted in a positive economic profit of $36,130, 

 the highest obtained (Table 2). It was further ob- 

 served that the net present value for the invest- 

 ment project increased by 72.5% when vessels 

 were salvaged at their original costs rather than 

 at the 35% level of their original values. 



Investment in Different Time Periods 



Tables 2 and 3 present the results of investing in 

 a shrimp vessel in 1971. Considerable investment 

 has been made in new shrimp vessels since 1977. 

 Table 4 shows the annual increase and cash flow 

 statements for purchasing the same steel vessel in 

 1977. Since the level of operations is held constant, 

 revenue and variable costs are the same; fixed 

 costs, however, changed dramatically. 



In 1971, the value of the 20.1-21.5 m steel vessel 

 was $129,767. In 1977, that same vessel cost 

 $222,084, a 71.1% increase in price. The loan pay- 

 ment in 1971 was a little over $ll,600/yr assuming 

 a 10 yr note, but increased to $24,074/yr. If the 

 vessel was purchased in 1971, profits were made in 

 1977 and 1978; for the vessel purchased in 1977, 

 losses were incurred over the entire investment 

 period. Losses were particularly substantial if the 



vessel was sold for salvage value at the end of 

 1980. 



The cash flow statement shows that cash avail- 

 able was very low for 1977-79. There was about 

 $35,000 difference in cash available in 1980, de- 

 pending on whether the vessel had been sold for 

 salvage value or for its original purchase price. For 

 the vessel purchased in 1971, the net cash increase 

 in 1977 was $9,643; and only $2,223 for the vessel 

 purchased in 1977. In 1979 under the 1971 

 scenario, cash available would have increased 

 $2,047; here it declined $6,252. Despite poor 

 economic conditions, NPV was positive for both 

 vessel sale prices, implying vessels would have had 

 a greater return on investment than bonds pur- 

 chased in 1977. 



Table 5 shows the results of purchasing a vessel 

 in 1979. The price of the vessel went up by about 

 26.8% since 1977, and substantial losses were in- 

 curred. The NPV is negative if the vessel is sold for 

 its salvage value and positive if it is sold for 100% 

 of its original purchase price. Short-term borrow- 

 ing occurred when the vessel was purchased in 

 1979. In fact, the vessel owner had to borrow more 

 than he was paying in principal on his original 

 purchase note. 



Economic Performance by Size and 

 Construction 



Figures 3 through 8 show variations in net rev- 

 enue for the various vessel types used in the analy- 

 sis. These variations follow a general pattern. For 

 vessels purchased in 1971, net revenue peaked in 

 1972 and 1978 and dropped to minimum levels in 

 1974 and 1980. A major reason for this trend is that 



TABLE 4. — Summarized annual income and cash flow state- 

 ments for steel vessels, 20.1-21.5 m long, operating out of Texas 

 ports, 1977 to 1980. 



1 Salvage value set at 35% of original cost. 

 2 Vessel sold for original purchase price, 



3 Vessel was purchased for $222,084; 75°o financed at 7 93% interest. 

 4 Economic profit is the net revenue adjusted for any changes in the value of 

 operating inventories and capital items. 



TABLE 5. — Summarized annual income and cash 

 flow statements for steel vessels, 20.1-21.5 m long, 

 operating out of Texas ports, 1979 to 1980. 



'Vessel sold for salvage value. 



2 Vessel sold for original purchase price. 



3 Vessel was purchased for $269.21 0; 75% financed at 1 2.25% 

 interest. 



"Economic profit is the net revenue adjusted for any changes in 

 the value of operating inventories and capital items. 



369 



