P&O Nedlloyd improves 1st quarter result, but aims higher
Higher freight rates pushed P&O Nedlloyd to a first-quarter net profit of $5 million, compared to a net loss of $69 million in the same quarter of 2003, but the company said this was only one step on the way to higher profits.
Operating profit for the first quarter, traditionally the weakest quarter for container shipping lines, was $21 million compared to a loss of $58 million a year ago.
P&O Nedlloyd reported a further increase in its average revenue per TEU, as the cyclical container shipping upturn and tight ship capacity utilization continued in the first quarter.
Average freight rates for P&O Nedlloyd were up 15 percent to $1,374 per TEU. In particular, average revenue per TEU in the American trades, covering cargo movements between North America and Asia, Europe, Africa, Australasia, and Latin America, jumped 17 percent to $1,547 per TEU. Volumes shipped rose 5 percent to 927,000 TEUs, despite the closure of money-losing Europe/West Africa services. Combined with the increase in freight rates, this led to a 21-percent jump in container shipping revenue for the quarter to $1.3 billion.
“We had a very encouraging quarter,” said Philip Green, chief executive officer of Royal P&O Nedlloyd, which now owns P&O Nedlloyd.
Paul Windfield, director of P&O Nedlloyd in charge of sales, said eastbound transpacific contracts effective May 1 showed that “about half” of the requested $450-$600 rate increases were accepted by customers.
The weakness of the U.S. dollar exchange rate is having no effect on cargo volumes in the transpacific, but it is pushing volumes from America to Europe, which improves the two-way balance of the transatlantic trade, Windfield added.
“We continue to set our sights higher, and we are determined to deliver a further improvement in profitability during the course of this year,' Green said. The company has acknowledge that it has lagged other carriers in its level of profits, but aims to close the gap through a better management of cargo yields.
Green said P&O Nedlloyd has experienced rising chartering expenses, but added that the company’s exposure to short-term charters is only 14 percent of the company’s total fleet.
P&O Nedlloyd’s non-container shipping activities, including logistics and trucking, made a $3 million operating loss in the latest quarter, as compared to a deficit of $6 million a year ago, and their revenue rose 24 percent to $206 million from $166 million. The non-container business includes the former activities of Gilbert Cos., acquired in 2002 in the United States.
'Supply and demand for container shipping looks favorable for 2004 and, provided world trade continues to grow, the outlook for freight rates is positive and in line with our previous expectations,' Green added.
The financial figures reported cover the accounting period to the end of March, before the company was restructured from a joint venture to a public company listed on the Euronext stock market in Amsterdam.