CP SHIPS SEES $17-MILLION 3RD-QUARTER PROFIT AS RATES STOP FALLING
CP Ships reported a $17 million net profit for the third quarter, compared to a net deficit of $9 million a year ago, as the London-based carrier experienced a small increase in average freight rates in the latest quarter that broke a cycle of five previous, consecutive quarters of falling prices.
Total revenues increased by 6 percent, to $704 million in the third quarter, from $663 million in the same quarter in 2001. Container volume increased by 12 percent, to 524,000 TEUs, including traffic handled by newly-acquired Italia Line.
Operating income before exceptional charges was $33 million, down from $34 million a year earlier.
CP Ships reported that average freight rates in the third quarter were up 3 percent when compared to the second quarter of this year, but still 10 percent below levels of a year ago.
“Stronger than expected volume particularly in the transatlantic and generally improved average freight rates led to better results for the quarter,” said Ray Miles, chief executive officer of CP Ships.
For the nine months ended Sept. 30, CP Ships’ revenues decreased to $1.93 billion, from $1.98 billion in the same period in 2001. Operating income before exceptional charges fell to $48 million, from $104 million, and net income dropped to $22 million, from $51 million.
CP Ships reported third-quarter increases in average freight rates for its Asian and Australasian container services, but a continuing decline in average transatlantic and Latin American freight rates.
Commenting on its transatlantic services, CP Ships said that stronger volume and lower underlying operating costs offset the adverse impact of 16 percent lower underlying freight rates when compared to levels a year earlier. Third-quarter freight rates were down “only 1 percent from the previous quarter” — a slower rate of decline than in previous quarters.
At the end of the third quarter, the U.S. West Coast port labour dispute affected several services of CP Ships. However, the group said that U.S. West Coast volume represents only 9 percent of group annual total, including Italia Line, and there was no effect on third quarter results.
The company expects “a modest impact” on its fourth quarter results, although operations are taking longer to return to normal than expected.
CP Ships said that its previously announced 2002 annualized cost reduction target of $100 million remains on course and is likely to be exceeded.
Its ship fleet increased from 73 in June to 92 in September. Of the additional 19 ships, 11 are Italia Line short and medium-term charters, while a further six ships are short-term charters deployed mainly in the Asia-Americas trade lane to accommodate additional peak season volume.
CP Ships commented that industry capacity, even with substantial new ship deliveries last year and this year, “is tight in the lead legs of most major trades.”
“In our own trade lanes, we expect volume to remain firm and freight rates generally to improve slowly,” it said. Yet, with the seasonal downturn in December and some uncertainty on U.S. West Coast operations, the company warned that its fourth quarter results could be weaker than in the third quarter.
CP Ships noted that “the industry appears to be moving out of its current trough,” but there will be further significant new ship deliveries in the remainder of this year and next year, and uncertainty on economic growth.
“We remain cautious about the timing and strength of the industry’s recovery and consequently cautious on our own profit expectations for 2003,” CP Ships said.