CP SHIPS MOVES INTO THE RED

CP SHIPS MOVES INTO THE RED    A 13-percent fall in freight rates and losses in its Asian container trades pushed CP Ships into the red in the first quarter, as the U.K.-based shipping group posted a $11-million net deficit.
   The first-quarter loss compares with a net income of $25 million in the first quarter of 2000.
   CP Ships said that the first quarter is seasonally weaker, and it had a volume of 436,000 TEUs, flat compared with the same period last year. The group’s average freight rates were down 7 percent from the fourth quarter of 2001 and 13 percent lower than in the first quarter of 2001.
   Revenue decreased to $578 million in the latest quarter, 10 percent down from the first quarter of last year.
   Operating expenses fell to $584 million, down by 4 percent. CP Ships incurred an operating loss of $6 million in the first quarter, as compared to an operating income of $31 million in the same quarter of last year.
   “Market conditions deteriorated in most trade lanes due to the effect of slower global container trade growth and significant additions to industry capacity,” CP Ships said. “However, despite weaker freight rates CP Ships achieved an operating profit in March with seasonally stronger volume than in January and February and lower operating costs.”
   CP Ships aims to lower costs by $100 million this year on an annual basis. As part of this, during the latest quarter, CP Ships renewed charters for 13 ships at “significantly lower rates,” a change that will save the company nearly $25 million this year.
   CP Ships earned an operating income of $8 million on its transatlantic services in the first quarter, down from $18 million a year earlier. It incurred an operating loss of $19 million on its Asian services, compared with an operating income of $1 million in the same period of 2001. CP Ships said that it lost money in the Asia-Europe and Europe-India trades due to competitive pressure from excess trade lane capacity.
   Average transatlantic freight rates were 14 percent lower than in the first quarter of last year, and volume was down 6 percent.
   “Slow economic growth in Europe, continued strength of the U.S. dollar and increased competition led to lower volume and freight rates in the weaker export legs from North America,” CP Ships said. However, reduced volume and average freight rates overall were partly offset by lower ship network and operating costs.
   CP Ships said that its average transatlantic freight rates were also 6 percent lower than in the fourth quarter of 2001, due to excess trade lane capacity and the annual renewal of service contracts at lower rates.
   “The Atlantic Space Charter Agreement announced earlier this month, between CP Ships and its existing partners, the Grand Alliance carriers, and COSCO, “K” Line and Yang Ming is expected to contribute to a reduction in transatlantic over-capacity and will lower CP Ships’ net operating costs,” the company said.
   Commenting on its trading prospects for the year, CP Ships said: “Although this year is anticipated to be a trough in the industry cycle, we still expect to be profitable for the year overall, with continuing cost reductions and modest market improvements mostly from trade lane rationalization of capacity.”
   CP Ships’ board of directors has declared a dividend for first quarter 2002 of 4 cents per common share.
   CP Ships is the parent company of Canada Maritime, Cast, Contship Containerlines, Australia-New Zealand Direct Line, Lykes Lines and TMM Lines.