:A tool for calculating long-line profitability
Contents
1. A tool for calculating long line profitability T he Secretariat of the Pacific Community wishes to thank the United N ations D evelopment Programme UN D P for its financial support which made the development of this computer program possible T he software was developed by Brian Egerton and D avid Peacock of Ivanhoe Associates with advice from Alastair Robertson and staff of the Fisheries Training Section of the SPC The user manual was written by Alastair Robertson T he Secretariat of the Pacific Community authorises the reproduction of this material whole or in part in any form provided appropriate acknowledgement is given Copyright Secretariat of the Pacific Community 1999 Original text English Secretariat of Pacific Community C ataloguing in publication data Robertson A Egerton B and Peacock D Vessel economics a tool for calculating longline profitability 1 Longlining Fisheries 2 Fisheries Economics aspects 3 Ships Accounting 1 Title 11 Secretariat of the Pacific Community 338 3727 AACR2 ISBN 982 203 705 8 Secretariat of the Pacific Community BPD5 98848 N oumea C edex New Caledonia Tel 687 26 20 00 Fax 687 26 38 18 E mail soc spc org nc http www spc org nc Prepared for publication by K aren Jones Archetype C reative Services Ltd N elson Printed by Printhouse Nelson Ltd NZ 1999 SPC FISHERIES ECONOMICS SOFTWARE This is a comprehensive program developed as a tool to u2. Fuel calculation Fue consumption will vary considerably from vessel to vessel depending on a large variety of factors Some of these are the size of the engine exceeding the designed steaming revs the match of propeller to vessel and engine the amount of fouling on the hull the state of the engine itself injectors compression and the condition of the propeller no bends or distortion The fuel calculation is based on averages obtained from actual vessels in the 100 to 400 HP range and are not alterable other than by adjusting the efficiency factor The figure is obtained by assuming the engine will be operating at close to maximum efficiency and that fuel consumption while fishing is two thirds of that while steaming 15 If you find the annual fuel consumption in the program is smaller than your vessel is actually using the consumption figure may be increased by lowering the efficiency factor to less than 100 making your engine burn more fuel If you find the annual fuel consumption figure is larger than your vessel is actually using the consumption figure may be decreased by increasing the fuel efficiency factor to an amount more than 100 making your vessel burn less fuel T he lube factor shows what you will spend on lubricating oil as a percentage of what you spend on fud Gear and maintenance calculation The annual cost of gear and maintenance is calculated by adding a fixed annual cost the major factor being slippi
3. a full set of figures will have been calculated and the figures for Income Total C osts and Cashflow Profit will appear as a footer at the bottom right hand corner of every screen By using the appropriate annual fixed costs as previously generated in the fixed costs screen the final Profit Loss will show both the cashflow and actual profit loss situation as both a cashflow no depreciation and actual depreciation profit loss Figures shown in red indicate a loss situation 20 THE ANALYSIS SCREEN This screen allows you to see the results of all calculations displayed as pie charts The options on this screen are e To view apie chart of running costs with each cost shown as a percentage of the total running costs e To view apie chart of fixed costs with each cost shown as a percentage of total fixed costs e To view apie chart showing the profit as a percentage of costs against income You can also close the mode you are working on from this screen 21 SAMPLE ANALYSIS PIE CHARTS 22 23 EXAMPLE MODEL A specimen file called Example is loaded in the menu of this program Thisisa complete file based very loosely on figures for long line fishing vessels from H awaii which target tuna All of the data used to complete this file is listed below You may use this file as follows 1 Aspracticein entering the data by using the data listed below to complete your own model then compare this w
4. over the same period more durable items can still be worth almost as much as their original value M ost tax systems will allow depreciation at differing rates for different parts of the vessel T he hull of the vessel is often depreciated over fifteen years while the engine is depreciated over ten years An outboard motor and electronic equipment can be depreciated over three years In order to allow for depreciation in this program the user needs to decide on the period over which the vessel will depreciate and on what it might be worth at the end of that period U sed vessels never depreciate to nothing but usually reach a lower price at which they can remain for some time In this program this final value is called the scrap value this is not accounting terminology T he program offers two options for calculating the annual depreciation In the straight line option the difference between the vessel s value and its scrap value is divided by the number of years over which it will depreciate and an annual value for depreciation is found T his value will be the same each year T he diminishing value method is more sophisticated It is based on the premise that things do not lose their value at the same rate each year T hey will drop more value in the first years and this drop in value will level off in subsequent years until they reach a value at which they will remain for along period 18 Total Annual Fixed C osts This sc
5. return to the menu Save T his saves the model on which you are presently working by the name already given If a name has not already been given then the Save moda as screen is brought up Save As This brings up another window as shown below which allows you to save the model on which you are working by a chosen name Close M odel Closes the mode on which you are working Print Setup T his allows you to configure your printer to print copies of the various graphs associated with the program Exit This closes and exits the program T irre HOW TO USE THE PROGRAM You arein control of this program you enter the figures and the computer does the calculations W hen entering figures in any specific box a footer in the bottom left hand corner of the screen will advise you of the purpose of that box You may use the mouse to move from one box to another or for speed you may use the lt tab gt key to jump to the next box Using the lt tab gt key or clicking a new box with the mouse records the previous entry into memory for use in the calculations T he program has five screens Screen 1 calculates income Screen 2 calculates the working or running costs Screen 3 calculates the fixed costs Screen 4 calculates the final profit loss Screen 5 displays these results as graphs After all the figures required for calculating the profit loss situation have been entered in all screens for the first tim
6. you have inserted in the green boxes at any time and the computer will immediately recalculate and display the totals after you tab on or click on the grey calculate button 14 Ice calculation The ice calculation is based on the total weight of fish caught as calculated in the Income screen multiplied by an icing ratio which you supply and by the price of ice per kilo which you also supply In order to obtain premium quality fish an icing ratio of two kilos of iceto one kilo of fish is recommended Bait calculation M ost baits come in 10 or 20 kg cartons with each carton being graded for the size which gives you the number of baits per carton With this knowledge you are required to enter the number of baits per kilo and the price of each kilo of bait The computer will then calculate the cost of bait per trip yellow box and the total cost of bait per year blue box To take into account careless use of bait the program also gives you the opportunity to insert a wastage factor T his is the percentage of bait wasted and not put on hooks If you do not have any idea of bait costs you can refer to the average data supplied on page 24 The bait calculation is based on putting an individual bait on each hook The annual cost of bait is calculated by multiplying the number of hooks per set by the cost per individual bait by the number of fishing days per trip by the number of trips per year adjusted for the wastage factor if any
7. 0 018 048 010 PG 382 093 047 001 002 001 SB 194 029 167 001 001 002 TO 047 393 054 017 015 004 YFT Yalowfin tuna ALB Albacore tuna BET Bigeye tuna STRIPED Striped marlin BLUE Bluemarlin SWORD _ Swordfish FJ Fiji FM Federated States of M icronesia NC New Caledonia PF French Polynesia PG Papua N ew Guinea SB Solomon Islands TO Tonga Average prices Bait In H awaii a 10kg box of Sanma costs between U S 15 to U S 20 with 10 to 12 pieces per kilo In Fiji Sanma is 38 per 10 kg box while sardines and mackerel is 28 per 10 kg box Fuel In H awaii fuel costs U S 0 23 per litre In Fiji fuel costs F 56 per litre Ice Icein Fiji is 1200 per ton 0 12 per litre Maintenance An average sized tuna longliner out of H awaii was spending 26 000 per year on maintenance Crew wages and victualling T hese vary considerably from country to country and circumstance to circumstance 26
8. al Gross Income It is the first to be shown and should be completed first as many of the calculations which follow on other screens are dependant on the information on this screen eg the annual costs of fud screen 2 is dependant on the timeat sea this screen and the annual cost of bait screen 2 is dependant on the number of hooks st and the number of days fished this screen T rmm Fam 1 i el aa p E E eo E Bj DAAN amea te gen faee EAA i 11 As with all of the screens in this program you insert the basic information in the green boxes and the computer does the calculations and shows the results in the yellow and blue boxes After you have completed a set of figures you can calculate the annual gross income by clicking on the grey box When entering figures in any box a footer will appear in the bottom left hand corner explaining what the box contains Should you make a mistake when entering data such as forgetting to fill in an important box or where totals are impossible the computer will give you an error message and ask you to insert or change the figures Number of hooks per set It is assumed the vessel will complete one set for each fishing day thus in this box you will enter the average number of hooks your vessel sets each day Species and weight of fish caught You have the option of entering up to eight fish species The main species are available by clicking the drag down boxes other fish spec
9. be able to see all of the screen at once T he procedure for loading the program from the two discs attached is as follows O pen Windows95 Insert Disc No 1 into disc drive Click on M y Computer gt icon Click on lt 31 2 Floppy A gt icon Click on lt Setup bat gt file Then follow instructions from the screen or O pen Windows 95 Insert disk 1 into disc drive Click on lt Programs gt Click on M S DOS Prompt gt Type A then lt Ente gt Type Setup then lt Enter gt Then follow instructions from the screen OPENING THE PROGRAM FROM YOUR COMPUTER After loading this program onto your computer as per the instructions above you can start the program by either O pening Windows95 O pening WindowsE xplorer Opening the SPC directory you created O pening the Vessds Economics program by double clicking on the Southpac exe file This will take you into the welcome window as seen below OPENING AND SAVING FILES Clicking on the File option at the top left hand corner of this screen will bring down the operation options as shown below T hese are New Model T his opens the program at a blank income screen ready for you to create a new modd O pen Model T his opens a mode which has already been created and saved with a name It takes you to another screen with the options shown below On this screen you may open any of the existing models delete any of the existing models or use the cancel button to
10. e the computer will display the totals for income costs and profit in the profit and loss screen and also as a footer at the bottom right hand corner of each screen From this time on if you change any figure and tab on or press the mouse button the computer will immediately recalculate interconnected figures change these on each screen and display the final totals on the footer on each screen In this way after getting some basic figures into the moda you can then play with options make changes and have their effects on profit immediately displayed in the bottom right hand corner of the screen 10 To assist in the operation of this program the boxes have been colour coded as follows A green box is where you insert data such as fish price fuel cost vessel cost insurance etc A yellow box shows the result of intermediate calculations You cannot overwrite yellow boxes Results will only change if you change the figures in the green boxes A blue box shows the sum calculation of several factors such as the gross value of the catch the total cost of fuel or the depreciation Grey boxes are calculating buttons which you click to get a final calculation T here are only four of these buttons the lt Calculate Annual Gross Income gt button the lt Total Annual Running C osts gt button the lt Total Annual Fixed Costs gt button and the Calculate Profit Loss gt button INCOME SCREEN This screen calculates the Annu
11. ies can be added by typing their name into the corresponding green box The total weight of fish caught per trip is calculated by multiplying the number of hooks per set by the average fish weight caught per hook this is called the catch per unit of effort or CPU E by the number of fishing days per trip You must therefore insert a figure for the CPUE of each species of fish caught If you do not have an idea of the CPUE for your area a short table based on the average data for the Pacific Region is provided on page 24 The program gives three price options for each species T hese allow for circumstances where there are different prices for different sizes or quality It can be used to show the effect on profit of poor handling or icing by entering a percentage of fish at medium and poor quality If the percentage totals in these columns do not add up to 100 you will get an error message You can ignore the medium and poor price boxes without affecting the program as long as the percentage inserted into the high price column is 100 12 Fishing pattern The fishing pattern is reflected by filling the green boxes for the number of trips per year the number of days steaming per trip and the number of days fishing per trip Changing these to reflect more days at sea or changing fishing grounds will have a flow on effect to all of the calculations which come later Annual gross income After the catch details have been inserted in the g
12. ith the loaded modal Then 2 Nameand save your own file then use it to adjust the figures and see what happens to the totals especially the profit D ata for example model Financial figures in this case are U S Income screen H ooks set per day 1500 Fish caught BIGEYE CPUE 0 09 80 at 14 00 and 20 at 5 00 YELLOWFIN CPUE 0 14 10 at 15 00 and 90 at 2 80 SWORDFISH CPUE 0 018 100 at 3 17 MIXED SPECIES CPUE 0 19 100 at 2 85 No of trips per year 15 7 D ays teaming per trip 7 0 D ays fishing per trip 95 24 Running costs screen Ice Price per kilo Kg ice to kg fish Bait Price per kg Baits per kilo Wastage Fud HP Price per litre Lub factor Efficiency factor Gear and maintenance Basic cost Daily amount Wages Fixed age of gross Victualling Fixed costs screen Vessel value Amount owed Repayment period Interest Rate Depreciation M ethod Insurance Period for Depreciation Scrap value 0 25 1 0 2 27 9 0 10 500 0 25 2 90 20 000 0 200 0 Nil 25 70 00 per day at sea 236 000 00 180 000 00 10 years 7 DV 5 of value of boat 15 years 50 000 00 25 AVERAGE DATA Some representative prices and CPUE from around the region for 1999 are listed below CPUE kg hook Flag YFT ALB BET STRIPED BLUE SWORD FJ 055 275 038 006 012 006 FM 162 000 096 002 009 002 NC 238 344 024 049 005 005 PF 059 314 04
13. lude the interest on the loan the insurance of the vessel the annual repayments of the loan and the depreciation of the vessel Loan repayments and interest To calculate the annual loan repayment you enter the value of the vessel the amount borrowed the number of years the loan is running for and the rate of interest you are paying on your loan T he computer will calculate and display the Annual C apital Loan Repayment and the Annual Interest Repayment 17 Insurance M arine insurance is calculated as a percentage of the vessel s insured value T his can vary from 3 to 15 depending on the country and the record of loss in that country or by the individual owner If you insert a percentage the computer will calculate the Annual C ost of Insurance based on the vessel value previously entered Depreciation Asa vessel gets older it gets worn out and declines in value T his lossin value from one year to the next is called the annual depreciation Although the owner does not have to pay out any money to cover this depreciation it isa hidden cost which should be taken into account if a true picture of the profitability is to be known In countries which have a tax system the depreciation can be shown as a cost to the owner which reduces the profit and thus the tax to be paid Different equipment depreciate at different rates A computer or piece of electronic equipment has a very small re sale value after two or three years while
14. nderstand and manage the financial aspects of long line fishing vessel operation In a slightly restricted form it can be used for any type of fishing vessel The program will be useful to skippers owners and any others who have an interest in vessel economics It gives a quick and accurate indication of vessel profitability and can immediately calculate profit variations caused by changing parameters in vessel operation The programme is particularly useful in the teaching situation where it can be used to total individual costs to show the cash flow and profit loss situations With this achieved the student may then alter any figure to reflect changed circumstances and the program will immediately show how this affects profit By this means the key factors and the most effective ways of increasing profitability are quickly demonstrated As the program is based on the decimal system the financial figures in the program could be US Australian N ew Zealand or Fijian dollars as well as PNG Kina Vanuatu Vatu or Samoan Talla etc The wording used in the program follows financial terminology as much as possible H owever as fishing skippers and others from a non accounting background will also use this program some terms have been made more descriptive LOADING THE PROGRAM TO YOUR COMPUTER T his program is designed to work on Windows95 using a screen with a resolution of 800x600 pixels If your resolution is less than this you may not
15. ng to a cost per day at sea multiplied by the number of days at sea per year T he assumption is that you will have some cost regardless but costs will increase the more the vessel is used T hese costs will not include extreme circumstances such as running aground or losing the whole long line You are thus required to enter a fixed annual cost and a cost per day and the computer will do the calculation by using the number of days spent at sea from the income screen Should you not know what these costs might be refer to the sample data given on page 24 Wages T here are several ways of calculating crews wages this depends on the personal choice of the operator and crews In this program wages can be a lump sum per annum or a percentage of the catch or acombination of both of these You are thus required to enter the value of the lump sum payment or a percentage of income or both if a combination is wished and the computer will calculate the annual wage bill from the figures you have entered Leaving either box empty or inserting a zero will be acceptable to the computer Victualling Enter the daily cost of victualling the vessel when it is at sea The computer will calculate the annual cost of victualling by multiplying this figure by the days at sea 16 FIXED COSTS SCREEN Fixed costs are those costs which must be paid regardless of whether the vessel goes to sea or not and regardless of the gross income of the vessel T hey inc
16. reen boxes clicking on the grey calculate button will total the figures in the yellow boxes to show the income per set but you will also get an error message advising you to fill in the trip details W hen these are entered clicking the calculate button again will give you the totals for Annual Gross Income Note If data is changed in the green boxes the figures in the yellow and blue boxes will only change automatically if a complete set of data has been entered in the Running Costs and Fixed Costs screens Before this has been done if you wish to see the totals for intermediate changes for the Income Screen the grey calculate button should be used The annual gross income figure incorporates all of the previous information It is based on the number of hooks set per day the amount and value of fish caught and the number of days fished 13 irene RUNNING COSTS SCREEN T his screen calculates the running costs of the vessel sometimes called operating costs or variable costs T hese are costs which change depending on how many trips the vessel does and on how well it is looked after and operated In this aspect they differ from the fixed costs which are costs incurred regardless of what the vessel does As with all of the screens in this program you insert the basic information in the green boxes and the computer does the calculations and shows the results in the yellow and blue boxes You can change the figures
17. reen shows two figures for the total annual fixed costs 1 The cashflow figure which reflect the cash in hand situation and 2 The profit loss figure which gives an indication of how you are actually doing With the cashflow figure when calculating the Total Annual Fixed C osts the depreciation has not been taken into account as no cash payment is made for depreciation Also the money given to the bank for repayment of the loan on the vessel is shown as money paid out loss T his is actually a profit as you now own more of the vessel than you did the previous year T he total annual fixed costs cash flow shows the amount of cash you will havein your hand at the end of the year but isnot atrue indication of the actual profits for the year With the profit loss figure when calculating the Total Annual Fixed Costs the depreciation is taken into account and is shown as a cost your asset is worth less than it was worth a year previous The repayments of the loan are shown as income as you now own more of the vessel than you did a year ago The resultant total gives a better indication of the actual annual profit and it is on these figures you would be more likely to pay tax if this was required in your country 19 PROFIT AND LOSS SCREEN This screen shows in yellow boxes the annual totals of theincome running costs and fixed cost screens T he final Profit Loss figure will be calculated by clicking on the gray button At this time
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