P&O Nedlloyd moves back into the black
Following most major container shipping lines, Anglo-Dutch mega-carrier P&O Nedlloyd Container Line moved back into the black in the third quarter, with a pre-tax profit of $41 million, its first positive result since the third quarter of 2001.
The latest pre-tax profit compares with a loss of $5 million in the second quarter of this year, and a deficit of $67 in the third quarter of 2002.
“The key factor in achieving this significantly improved result was the substantial further increase in revenue rates,” the ocean carrier said. P&O Nedlloyd's average revenue rate per TEU went up 18 percent, to $1,346, from $1,138 in the third quarter of last year.
Despite expectations from the stock market, the Peninsular & Oriental Steam Navigation Co. provided no update on the planned reduction or disposal of its 50-percent stake in P&O Nedlloyd. A spokesman for P&O said that the reduction of the investment is still a priority, but the group would not announce a timetable for a future transaction.
Meanwhile, revenue at P&O Nedlloyd soared by 20 percent in the third quarter, to $1.3 billion, from $1.1 billion, largely thanks to higher rates. Traffic volume increased by 1 percent, to about 941,000 TEUs.
The higher revenue per TEU reflects the rate increase in the Europe/Asia trades, as well as higher currency adjustment factors designed to offset the weaker U.S. dollar.
P&O Nedlloyd reported an operating profit for the quarter of $56 million before restructuring costs, compared to a loss of $46 million in the third quarter of 2002. This was despite adverse currency movements, which lowered profits by about $21 million when compared to the third quarter of 2002. The latest operating result also reflected increased fuel prices and the imbalance of container flows.
P&O Nedlloyd said that it has cut its costs by the equivalent of $320 million a year since the start of 2002.
It added that its “continued focus on higher-yielding dominant leg cargoes” meant that volume throughput was only 1 percent up on the same quarter of the previous year. The carrier has reduced volumes on what it described as the “marginal contribution non-dominant legs, particularly Europe/Asia.” The late peak season in the transpacific trade also resulted in a slower growth in the company's volume for the latest quarter.
For the nine months ended Sept. 30, P&O Nedlloyd made a $33 million pre-tax loss on revenue of $3.5 billion, as compared to a $213 million deficit and revenue of $3 billion in the corresponding period of 2002.
Commenting on market trends, P&O Nedlloyd said that the supply/demand balance in the industry is expected to remain favorable “until at least the end of 2005, with an increasingly positive outlook for 2004.”
The carrier noted that the favorable trend seen in the third quarter is being maintained in the fourth quarter.
“Looking ahead, prospects for the industry remain positive,” it added. World trade continues to grow, the supply/demand balance appears favorable for the next two years, but costs may be affected by adverse currency trends, higher fuel prices and charter rates, the carrier said.