P&O warns of big container losses

TOO many ships on the high seas being paid too little money will make P&O's international container shipping line rack up losses this year that are almost double those budgeted for. The news, which accompanied patchy results elsewhere in the ports and shipping group, sent P&O shares tumbling more than 7% in a rising stock market.

P&O Nedlloyd, its 50/50 joint venture with Royal Nedlloyd of Holland which P&O has been trying to extricate itself from for some time, reported a $46m (£30m) loss in the second quarter of the year. That stretches losses for the year to $110m - before restructuring costs of $17m.

With P&O Nedlloyd warning of 'a more difficult trading outlook', analysts revised estimated losses for the year of between $130m and $140m upwards to $220m or £143m, a figure with which P&O said it was comfortable. The business made £22m profits last year.

At the root of P&O Nedlloyd's problems is the overcapacity in the market which, coupled with uncertain economic conditions, has led to a collapse in rates paid for containers to be shipped around the world. The shipping line said that while volumes were 13% better in the second quarter than in the corresponding period in 2001, average revenue rates had dived by 15% year-on-year and were 1.5% lower than those achieved in the first quarter.

The company said there was some light on the horizon. 'Revenue rates are now improving on some trades, including-Europe/Asia.' it said. But it warned: 'These improvements will, however, take some time to come through because of the duration of normal shipping contracts.' P&O said most of its present contracts, usually secured on a rolling one-year basis, were signed during the economic aftershocks of 11 September. It is trying to dilute its stake in the business through a merger with an industry rival, although its preferred option is to quit the business entirely.

Elsewhere in the group, port volumes were up 16% with a strong Asian performance being partially offset by problems in Argentina.

Cross-Channel ferry carryings were flat although freight and tourist price rises were forced through and the ferries claimed a 13% leap in onboard spending by passengers. Trading remains troubled at its other UK ferry operations.

After falling steeply, P&O shares came back in later trading to end down 16 1/2p at 219p.