P&O may cut loss-making ferries

P&O Stena: "Good result" given the fallout of foot-and-mouth

Shipping giant P&O is considering cut backs at its ferry operations, which have been hit by the slump in UK tourism blamed on the foot-and-mouth crisis.

Growing ferry division losses, which more than doubled to £18.1m between January and June, contributed to a 6.5% decline in P&O's pre-tax profits to £90.4m for the first half of 2001.

P&O, which is Britain's largest ferry operator, revealed it has undertaken a "detailed review" of the worst performing units in its loss-making ferries portfolio.

Although he declined to give details of possible rationalisation measures, chairman Lord Sterling said the ferry division "can play a key role in industry consolidation".

Ireland and Europe routes weak

The company said the P&O Stena Line unit had achieved a "good result", given the impact of foot-and-mouth on UK visitor figures.

But ferry operations on the UK-to-Ireland and Portsmouth-to-the-Continent routes, among others, have been struggling.

"Despite [foot-and-mouth] the underlying performance of our Western Channel and North Sea operations remains unacceptable," said P&O, which estimates it has lost £6m to the effects of the epidemic.

The foot and mouth outbreak is continuing to harm tourist traffic to the UK and was responsible for "a noticeable lack of Continental passengers at the height of the tourist season", the firm warned.

Ports growth

Although the ferry division's losses hit the company's financial results, it reported a brighter performance by its ports division, where operating profits surged by almost one third to £52.9m.

P&O credited the rise to growth in world trade, albeit at slower rates than in recent years, and success in grabbing market share from state-run ports.

A strong performance from Indian and Chinese operations helped the firm to offset poor performance at Argentine terminals caused by the country's economic turmoil.

The firm said the prospect of developing further ports concessions left the unit with "considerable upside potential".

"Despite the slower rate of growth in world trade, our ports and logistics businesses have shown considerable resilience and we are confident that they will continue to do well," Lord Sterling said.

Steel slump

P&O's results statement came seconds after Associated British Ports Holdings, the UK's largest ports operator, revealed pre-tax profits up 8% to £66.5m.

Timber imports buoyed ABP trade

ABP admitted it too had been affected by the foot-and-mouth outbreak, which had affected volumes of agricultural products handled.

Capacity cuts announced by steelmaker Corus six months ago have also affected trade.

"In particular, the decision to cease steel production at Llanwern impacts on raw material imports through Port Talbot," Tuesday's statement said.

But the losses were balanced by growth in container shipments, and buoyant levels of coal, cars and timber.

Strong vehicle and coal imports in particular helped Grimsby & Immingham build on its position, won last year, as the UK's largest port.

In the City, ABP shares closed down 11.25p at 418.5p, while shares in P&O ended 2.25p lower at 228p.