CP SHIPS REPORTS WIDER LOSS FOR 1ST QUARTER
Despite surging container volumes, CP Ships’ net deficit for the first quarter deepened to $21 million, from $11 million in the same quarter of 2002.
The first quarter is seasonally the weakest quarter of the year for container shipping lines.
However, before exceptional items, CP Ships’ operating loss narrowed to $2 million, from $6 million in the first quarter of 2002. The company’s operating deficit after exceptional items doubled, to $12 million, from $6 million. The $10 million of exceptional costs in the latest quarter covered the closure of the head office of Contship Containerlines in Ipswich, United Kingdom.
Ray Miles, chief executive officer of CP Ships, said that the operating deficit reflected several adverse factors, including 60-percent higher fuel costs, the impact of a weaker U.S. dollar, and adverse operational conditions like bad weather in the transatlantic and record low winter water levels in the St. Lawrence river.
Group revenue for the first quarter increased by 19 percent, to $686 million, from $578 million a year ago. Container volume carried rose by 18 percent, to 514,000 TEUs, reflecting strong growth and the inclusion of Italia Line. Italia accounted for about 5 percent in additional volume.
In the transatlantic, CP Ships’ first quarter volume increased by 22 percent, to 270,000 TEUs, and its transatlantic revenue rose by 20 percent, to $345 million. But operating profit from transatlantic operations fell to $4 million, from $8 million a year earlier. CP Ships is the parent company of transatlantic carriers Canada Maritime, Cast, Lykes Lines, TMM Lines, Contship Containerlines and Italia Line.
Miles said that eastbound transatlantic volumes showed a higher than average percentage increase. This resulted in a better balance between eastbound shipments and volumes in the stronger westbound direction.
Asked about a potential U.S. boycott on products imported from France and Germany because of these countries’ opposition to the war in Iraq, Miles said that such developments are only “a big story for a short period of time.”
CP Ships is a Canadian-registered company with a management office located in London. Its U.S. affiliate, Lykes Lines, operated U.S.-flag ships.
At the group level, CP Ships said that average freight rates were up 1 percent when compared to the first quarter of last year, but down 2 percent from the fourth quarter of 2002. Miles downplayed the quarter-on-quarter fall in rates, saying that he is confident that freight rates would recover later this year.
He referred to the full-ship situation in the transatlantic trade and to resulting increases in freight rates on that route.
“We have been shortening our contracts to six months or three months so we have opportunities to get (rate) increases,” Miles said, commenting on the transatlantic.
The shipping group plans to lower annualized costs by $80 million this year, following completion of a program to lower costs by $125 million last year.
CP Ships said that it expects improved operating results for the rest of the year. It expects its results to be higher than in 2002 and close to the high profit level obtained in 2001.