P&O Nedlloyd reports record annual results
Royal P&O Nedlloyd Thursday reported the best annual results for its sister company P&O Nedlloyd since it was founded in 1997, with an operating profit from container shipping of $388 million in 2004, four times the $96 million operating income earned in the previous year.
Revenue from container shipping climbed 22 percent to $5.9 billion in 2004 from $4.8 billion in 2003. Container shipping activities improved their operating margin to 7 percent of revenue last year, up from 2 percent in 2003.
Royal P&O Nedlloyd also said its logistics and other activities broke even at the operating result level in 2004 with an operating income of $13 million, compared to a loss of $19 million in 2003. Revenue from logistics and other businesses rose 20 percent to $832 million in 2004.
Including container shipping and logistics, P&O Nedlloyd made a net profit after minority interest of $306 million last year, 20 times its earnings for 2003.
“This year has been one of major progress for Royal P&O Nedlloyd,” said Philip Green, chief executive officer of Royal P&O Nedlloyd.
“These results are the best ever for P&O Nedlloyd,” he noted. “We have delivered on our promises for 2004: operating profit significantly ahead of 2003 at $401 million, and our new yield management systems are deployed.”
During 2004, the Dutch group also completed a reverse listing on the stock market, which allowed P&O Nedlloyd to be wholly owned and integrated into Royal P&O Nedlloyd, a public company. In addition Royal P&O Nedlloyd became part of the AEX stock exchange index this month.
Royal P&O Nedlloyd’s group-wide revenue increased 22 percent to $6.7 billion in 2004, from $5.5 billion a year earlier. The company said a major factor in this improvement was a 13 percent increase in average container freight rates to $1,452 per TEU. Carryings also increased 8 percent to 4.05 million TEUs last year from 3.74 million TEUs in 2003.
“Growth was strong on the Asia/Europe and transpacific routes, which benefited from a continuing increase in retail demand, together with significant growth in outsourcing to low cost areas, notably China, by manufacturers and retailers,” Royal P&O Nedlloyd said.
The carrier’s average freight rate in the trade between North America and Europe/Middle East/Africa jumped 13 percent to $1,556 per TEU in 2004. Its average transpacific rate rose 9 percent to $1,619 per TEU last year, while the average price for shipments between Asia and Europe increased 12 percent to $1,370.
The group also said its average cost per TEU increased 8 percent in 2004.
Commenting on the transpacific trade, Royal P&O Nedlloyd said a 17 percent volume growth on that route last year “was moderated by the impact of congestion on the West Coast of the U.S., and tight capacity in the second half of the year.”
“As a result, the service from Asia to the East Coast via the Panama Canal showed the strongest growth helped by the introduction of a new Grand Alliance loop,” it added.
However, with very limited growth in the non-dominant trade from the U.S. to Asia, “the imbalance on the route worsened,” Royal P&O Nedlloyd said.
The group’s logistics business saw a “substantial” reduction in losses at U.S. affiliate Gilbert Cos. Both P&O Nedlloyd Logistics and Damco freight forwarding enjoyed “significant organic growth in 2004.”
The Dutch group described its outlook for 2005 as “positive.”
“Volumes and freight rates remain strong, although increased operational costs, congestion and the weak U.S. dollar continue to have a negative impact,” it said. Royal P&O Nedlloyd believes its new yield management program will allow it to start bridging the profitability gap with its competitors this year.
“In overall terms, we currently expect a significant improvement in operating profits for 2005, assuming that current industry and market conditions continue,” Royal P&O Nedlloyd said.
'This company has underperformed its best-in-class competition by about 5 percent over the cycle,' Green said. P&O Nedlloyd plans to bridge two-thirds of the profit gap by the end of this year.
Commenting on supply and demand, Green said Clarkson Research is forecasting a fall in the worldwide growth rate of demand this year (10 percent instead of 13 percent in 2004). 'At the moment we don’t see that' slow down, Green said.