P&O NEDLLOYD REPORTS STEADY 2ND-QUARTER PROFIT, WARNS OF RATE PRESSURES

P&O NEDLLOYD REPORTS STEADY 2ND-QUARTER PROFIT, WARNS OF RATE PRESSURES

   P&O Nedlloyd Container Line, the world’s second largest container shipping line, reported a small improvement in its second-quarter operating profit, to $46 million, despite the sharp slowdown in world trade and pressures on freight rates.

   The operating profit for the latest quarter compares with a profit of $44 million in the corresponding quarter of last year.

   The Anglo-Dutch carrier also reported a 4-percent increase in total traffic volume for the quarter, to 794,000 TEUs, and a 5-percent decrease in its vessel utilization, to about 80 percent.

   “Overall volumes for the second quarter of 2001 were 4 percent higher than in the second quarter of 2000,” P&O Nedlloyd said. “Within this, however, was a reduction of 3 percent on the Europe/Asia trades.”

   “This compares to the steady growth in the preceding five years and reflects weaker demand in Europe, particularly Germany,” it added.

   Volumes on P&O Nedlloyd’s other trades were up, including in the transpacific.

   P&O Nedlloyd’s average revenue rate was 4 percent lower than in the first quarter of this year, but virtually unchanged from the second quarter of last year.

   P&O Nedlloyd reported a total revenue of $1.06 billion, up 5 percent over the second quarter of 2000. Pre-tax profit for the quarter was $32 million, up 14 percent from the $28-million profit recorded in the year-earlier period.

   The carrier said that its ship costs have increased because of a lower load factor, but other costs decreased. It said that it expects to implement annual savings of $182 million by the year end.

   However, profitability prospects for the rest of the year appear uncertain. The company made no forecast about profits this year, but warned that “slower growth in world trade and new capacity entering the market are expected to adversely impact future load factors and revenue.”

   The addition of significant new tonnage into the market and the uncertain outlook for growth in the world’s main economies “will put downward pressure on freight rates,” P&O Nedlloyd said.

   In a joint statement, Haddo Meijer, executive committee chairman, and Robert Woods, group managing director of P&O Nedlloyd, said that “the outlook for our industry is now much less buoyant.”

   “There has been zero growth in our all-important Far East Europe trades during the first half of this year and a substantial drop in our revenue rates compared with the first quarter this year,” they said.

   World demand growth “has definitely reduced with the general economic slowdown this year, although this varies from trade to trade,” they said. “So deliveries of ships from (ship) yards will exceed demand growth.”

   P&O Nedlloyd is adding about 12 percent in vessel capacity this year, but said that it is redelivering chartered ships to address the capacity issue.

   “We are also analyzing various options, not excluding laying up (vessels),” the P&O Nedlloyd executives said.

   Royal Nedlloyd, the Dutch group that owns 50-percent of P&O Nedlloyd, said that P&O Nedlloyd holds a “powerful financial position” in the container shipping industry, but it cited the prospect of adverse industry trends.

   “P&O Nedlloyd is not immune to the decline in the world economy which, combined with the increase in new capacity in this industry, is expected to…impact P&O Nedlloyd’s revenue and load factors,” Royal Nedlloyd said. “Current programs in place to increase efficiency will partially compensate for these factors.”