Asia drives surprise profit for P&O

Asia drives surprise profit for P&O

LONDON - P&O, Britain's biggest transport and logistics group, on Thursday swung to a profit in the first half of the year as Asia's economic boom boosted traffic through its global port network and drove up ocean container freight rates.

Chairman Jeffrey Sterling fueled speculation the company will soon cash in on the boom in container shipping to achieve its long-stated "top priority" of cutting its 50 percent stake in P&O Nedlloyd Container Line, the world's fourth-largest carrier, to focus on its core global ports business.

"As the container shipping cycle is now in an upswing that is likely to last through 2005, the prospects of achieving progress are better than they have been for some time," he said.

Pre-tax profit totalled ?3.3 million ($5.5 million) in the six months to June 30 compared with a loss of $70.3 million in the year-earlier period. Analysts had forecast a loss of $25.5 million.

The company said the "huge" growth in trade from Asia would contribute to a " significantly better result this year than in 2002" and bolster earnings and aid restructuring in 2004.

Revenue from continuing operations grew 10 percent to $2.9 billion and operating profit more than doubled from $30.4 million to $71.7 million.

Ports lifted operating profits by 15 percent to $93.7 million as traffic increased by 25 percent, compared with industry-wide growth of about 10 per cent, to 5.2 million TEUs. Asian terminals, which account for half of total traffic, posted a 21 percent rise in profit to $53.7 million, but earnings in the Americas slumped from $10.7 million to $7 million as construction work at the group's New York terminal hampered productivity.

The strong ports performance offset a $27.8 million loss by the freight and passenger ferry business. The company did not comment on the European Commission's anti-trust investigation into some of its English Channel services.

P&O's share in P&O Nedlloyd narrowed its operating loss to $30 million from $76.2 million, reflecting rising freight rates and increased Asian trade which are expected to drive profits in the second half.

Nedlloyd, the Rotterdam-based co-owner of P&O Nedlloyd has offered to return its stake in the container line to its shareholders so long as P&O follows suit. There has also been speculation of a trade sale to rival carriers including Maersk Sealand, which recently denied reports it had sounded out European regulators on a possible takeover of the Anglo-Dutch line.