P&O GROUP SUFFERS FIRST-HALF LOSS
P&O Group, after suffering a first-half pre-tax loss of '44.2 million ($68.7 million), is considering divesting itself of its money-losing joint venture shipping line, P&O Nedlloyd.
The group's first-half loss compares to a profit of '90.4 million in the first half of 2001. Operating profit fell 82.5 percent to '23.8 million ($37.0 million), while revenue slipped 3.3 percent to '2.06 billion ($3.19 billion). The after-tax loss was '52.7 million ($81.9 million, compared to a profit of '128.2 million in the first half of 2001.
P&O attributed the fall primarily to the downturn of container shipping, which started in the second half of 2001 and led to a first-half loss of '47.9 million ($74.4 million) for the company's 50-percent share of P&O Nedlloyd. The container line in August reported a pre-tax loss of $145 million, compared to profit of $50 million in the first half of 2001. The pre-tax lost included a $15 million restructuring charge.
'The weakness in container shipping rates has been a major disappointment,' said Lord Sterling, P&O's chairman. 'P&O Nedlloyd is a fine international company, but here has to be further industry consolidation.'
The losses came despite a consolidation and cost-cutting program by P&O Nedlloyd that is expected to provide $250 million in annualized cost savings by the end of 2002 and up to $350 million by the end of 2003.
The group said it's committed to further consolidation and cost savings for the carrier, which could include divesture.
'Although current market conditions are not conducive to divestment transactions, we are continuing to work on several strategic possibilities,' P&O said.
P&O Nedlloyd's throughput improved 11 percent to 1.7 million TEUs, which slot capacity rose 9 percent. However, freight rates fell 15 percent due to uncertainties in world trade growth and the introduction of additional capacity into the industry, P&O said.
P&O Ports, the group's terminal-operating unit, saw operating profit slip 3.2 percent to '51.2 million ($79.6 million), while revenue improved 3.3 percent to '320.6 million ($498.3 million).
Container throughput for the first half of 2002 rose 19 percent to 5.6 million TEUs. Growth was driven by strong flows in Asia and was ahead of estimates, the group said.
While P&O's Buenos Aires terminal was impacted by the economic crisis in Argentina, established terminals achieved increases in profile while newer terminals expanded strongly, the company said.
The Chennai, India terminal, which P&O acquired in November, has seen service levels improve and ship-waiting times eliminated. Redevelopment of Port Newark terminal by the end of the year will add about 800,000 TEUs and operational improvements. New developments in Shakou, China, and ATI (Philippine), will add 2.1 million TEUs, P&O said.
The restructuring of the port unit's senior management and reorganizing business along consumer lines should show benefits in the late 2002, P&O said.
Despite uncertainties with economic and trade growth and its container shipping line, and concerns over Iraq and Argentina, P&O said it anticipates 'an improved performance in 2002 and we would hope to make further progress in 2003.'