Higher freight rates help CP Ships report record 3rd-quarter profit

Higher freight rates help CP Ships report record 3rd-quarter profit    Canada-registered CP Ships group said an 11-percent increase in average freight rates since the third quarter of 2002 helped raise its third-quarter operating income to $44 million, its strongest since the company went public in October 2001.
   CP Ships’ latest operating result, which compares with an operating income of $34 million in the third quarter 2002 and a $40 million operating income in the second quarter of 2003, provides further evidence that container shipping lines are enjoying a solid market recovery this year.
   CP Ships reported that its average freight rates increased 16 percent in the transatlantic, 10 percent in the Autralasian market and 7 percent in the Asian trades, but fell 12 percent in the Latin American market.
   Ray Miles, chief executive officer of CP Ships, expects freight rates to continue to rise in the fourth quarter and next year. CP Ships also hopes to see Latin American rates increase, he said.
   Miles said the higher quarterly profit for the third quarter, despite an increase in operating costs, reflects the company’s successful strategy as well as the continuing general improvement in industry conditions.
   Combined with the 11-percent overall jump in average freight rates, CP Ships saw its container traffic volume increase 6 percent in the latest quarter to 554,000 TEUs. Excluding the Asia/Europe services, which were discontinued in early April, volumes improved 11 percent from the third quarter of last year.
   Revenue for the quarter soared 16 percent to $817 million, from $704 million in the third quarter of last year. Over the same period, CP Ships’ net income improved to $33 million from $24 million.
   However, operating costs at CP Ships also increased fast in the latest quarter, with average fuel price up 9 percent to $163 per ton and vessel charter rates soaring. Furthermore, the appreciation of several of the currencies in which CP Ships incurs costs — notably the euro, the Canadian dollar and the pound sterling — was the main factor of the latest quarter’s increase in costs, when expressed in U.S. dollars.
   “The weaker U.S. dollar continued to adversely affect costs despite hedging gains,” the company said.
   CP Ships said it has now completed its $800 million ship replacement program. In August, CP Ships also announced an agreement to charter nine new 4,250-TEU containerships for up to 10 years. The ships will be delivered between late 2005 and early 2007.
   “With the proportion of owned and long-term chartered ships currently at 63 percent of total capacity, these ships will further reduce reliance on the volatile and through the cycle, more expensive charter market,” CP Ships said.
   For the nine-month period ended Sept. 30, operating income before exceptional items rose to $82 million, from $49 million in the same period last year. Net income was $41 million, up from $29 million, and revenue reached $2.3 billion, up from $1.9 billion.
   Commenting on its future prospects, CP Ships said it expects its fourth-quarter operating income to be “broadly in line with the third quarter,” with a transatlantic improvement offset by the impact of continuing cost pressures. For the year as a whole, CP Ships predicts that its operating income before exceptional items should be about 50 percent above 2002, but still short of the record in 2001.
   “In 2004, we expect a generally positive trading environment and should make further progress,” the company added.
   CP Ships, the largest carrier group in the Atlantic, also reported stronger North American exports in the transatlantic trade during the third quarter.