CP SHIPS RETURNS TO PROFITABILITY
U.K.-based CP Ships returned to profitability in the second quarter, with a net income of $16 million, but its results and average freight rates remained substantially below those of the second quarter of 2001.
CP Ships posted an $11-million net loss in the first quarter of this year — traditionally a weak quarter — after years of successive profitable quarters.
The $16-million net profit in the latest quarter compares with a $35-million net income in the second quarter of 2001.
Operating income for the second quarter dropped to $21 million, down 46 percent from the $39-million operating profit earned in the same period last year.
A 6-percent jump in container volume helped reduce the impact of an ongoing fall in freight rates. Container volume increased to 498,000 TEUs, from 468,000 TEUs in the second quarter of last year. Over the same period, the company’s average freight rate dropped by 14 percent.
Revenue for the quarter decreased 4 percent, to $651 million, from $675 million a year earlier.
“Given difficult market conditions, which lead many of our competitors to sustain losses, we consider our second-quarter $21-million operating income to be an excellent result,” said Ray Miles, chief executive officer of CP Ships.
The average freight rate in the second quarter was 2 percent below that of the first quarter. This followed a quarter-on-quarter drop of 7 percent in the first quarter.
The operating income of CP Ships’ transatlantic activities decreased to $14 million in the second quarter, from $18 million a year earlier. Volume increased by 5 percent, mostly thanks to increased imports into North America. Freight rates in the transatlantic were down 16 percent from the second quarter of 2001.
CP Ships posted an operating loss of $10 million on its Asian container services in the second quarter, compared with a profit of $1 million in the same period last year. As in the first quarter, heavy losses in the Asia/Europe trade lane were the primary cause. Asian volume was up 32 percent on a comparable basis, with growth in both the Asia/Europe and Asia/Americas trade lanes. Average freight rates were down 21 percent from the second quarter of 2001 “due to industry and trade lane overcapacity,” CP Ships said.
CP Ships’s operating income for the first half of this year dropped to $15 million, from $70 million in the corresponding period of last year. Net income dived to $5 million, from $60 million, and revenues were down by 6 percent, to $1.2 billion.
CP Ships said its previously announced 2002 cost reduction target of $100 million remains on course and is likely to be exceeded.
Commenting on its business outlook, CP Ships said, “significant new ship deliveries” are still anticipated in the second half of this year, mainly for Asian trades.
The company also cited continuing uncertainty about U.S. and world economic growth, and said it is cautious in its outlook.
“But, in our own trade lanes, volume generally has improved and freight rate declines are expected to slow or reverse,” CP Ships said. “So, we do remain confident that we will be profitable for the year overall, albeit significantly less than in 2001.”
CP Ships is the parent company of ANZDL, Canada Maritime, Cast, Contship Containerlines, Lykes Lines and TMM Lines, and is in the process of completing the takeover of Italia.