STRONGER ATLANTIC TRADE, LOWER COSTS SALVAGE CP SHIPS’ 4Q RESULTS

STRONGER ATLANTIC TRADE, LOWER COSTS SALVAGE CP SHIPS’ 4Q RESULTS    Ending a year of intense competitive pressures and lower rates, the CP Ships group reported fourth-quarter net income of $23 million, as stronger container volumes and revenues in the transatlantic trade and cost cuts helped offset adverse market factors.
   The latest net result compares with a net income of $35 million in the fourth quarter of 2001.
   For 2002, CP Ships reported full-year net income of $52 million, down from $66 million in 2001. Full-year operating income before exceptional items declined 40 percent to $83 million, from $139 million in 2001.
   CP Ships’ fourth-quarter operating income before exceptional items of $34 million was unchanged from the third quarter and slightly down from $35 million in the fourth quarter of 2001.
   CP Ships provided further information that it has boosted its volume in a difficult market.
   Container volume in the latest quarter improved 18 percent, due primarily to higher transatlantic carryings. Group revenue rose 13 percent during the quarter, to $754 million, due to lower average rates. Average freight rates were 4 percent lower than in the fourth quarter of 2001, but increased 1 percent from the third quarter of 2002.
   The transatlantic trade, which accounts for half of CP Ships’ revenue, produced a fourth-quarter operating income of $21 million for the Canadian-registered group. This was lower than the $29 million income earned in the fourth quarter of 2001, but remained the strongest quarter of 2002. Transatlantic volume of 284,000 TEUs was up 22 percent, reflecting the contribution of newly acquired Italia Line, and underlying growth. Atlantic revenue amounted to $371 million in the latest quarter, up 11 percent, as transatlantic freight rates were 6 percent lower than in the fourth quarter of 2001 and 6 percent higher than in the third quarter of 2002.
   CP Ships also reported a higher westbound capacity utilization in the Atlantic trade. The quarter-on-quarter increase in average transatlantic freight rates for the fourth quarter was the first since early 2001, when rates started sliding downwards.
   CP Ships is the parent company of transatlantic carriers Cast, Canada Maritime, Contship Containerlines, Italia Line, Lykes Lines and TMM Lines.
   During the fourth quarter, Canada Maritime agreed to charter a fixed number of slots to members of the Canex consortium in the Montreal/North Europe trade, and the consortium agreed to use CP Ships’ terminals in Montreal. CP Ships said that the arrangements would result in better operating efficiency.
   CP Ships lowered its costs per TEU by 5 percent in 2002. The 2002 result includes $100 million of cost cuts, with more to feed through to 2003 results.
   In December, CP Ships said its exit from a loss-generating slot-charter agreement with CMA CGM in the Asia/Europe trade, ending in March.
   CP Ships reported an operating deficit of $5 million on its Asian services for the fourth quarter — the sixth consecutive quarterly operating loss in this trade route.
   CP Ships said that operations on the U.S. West Coast “have mostly returned to normal” following the settlement of the labor dispute in December. “The estimated negative net impact on fourth quarter results was about $2 million,” it said.
   In the fourth quarter, CP Ships provided additional sailings in the Asia/Americas trade in response to strong growth in demand. Building on this, the group will launch a five-ship weekly service between Northeast Asia, including China, and Vancouver, British Columbia.
   The move will expected to strengthen CP Ships’ presence in the transpacific trade, where it has only a marginal involvement.
   CP Ships’ revenue for the year 2002 amounted to $2.68 billion, an increase of 2 percent over the $2.65 billion corresponding figure for 2001. Volume was up 9 percent in 2002, to 2 million TEUs, from 1.8 million TEUs, but freight rates fell 10 percent.
   Return on average capital employed amounted to 6 percent, down from 13 percent in 2001.
   CP Ships has begun the process of adapting its cargo acceptance and documentation procedures to comply with U.S. Customs 24-hour advance manifest rule and expects to meet the compliance deadline of Feb. 2.
   CP Ships warned that it expects “fewer new cost saving opportunities in 2003, the negative impact of a weaker U.S. dollar and increases in some operating costs including fuel price.” However, it also expects higher average freight rates this year and the effect of cost saving initiatives started in 2002.
   “Overall, we expect 2003 operating income to be higher than 2002’s $83 million, but below 2001’s $139 million,” CP Ships said. Providing there is sound U.S. and world economic growth, the group expects the global balance between supply of ship capacity and container demand to be broadly achieved during 2003. But any weakness in economic activity would likely expose the significant increase in new ship capacity being delivered this year, it cautioned.