P and O container loss

Press, Volume CXII, Issue 32848, 23 February 1972, Page 2

P and O container loss

(N.Z.P.A. Staff Correspondent!

LONDON, Feb. 21.

Britain’s biggest shipping group, the Peninsula and Orient Steam Navigation Company, wrote off $1.15 million last year as a loss on its abandoned container trade with New Zealand.

Presenting P and O’s accounts for the year ended September 1, the group’s chairman (Mr F. I. Geddes) said that this writing-off did not include a container ship ordered for the nowcancelled P and O interest in the New Zealand-American container trade. The figure referred to development and administration expenses, and orders placed for equipment and facilities ashore, which were cancelled when the company decided not to take part in New Zealand’s container shipping developments. The container ship in question was still being constructed because it was too far finished to be'abandoned, and the company would have

to decide its fate after it was launched later this year. Mr Geddes said at a press conference this morning that P and O had made a profit on its cargo routes around the world, but he declined to state what profit had been made on trades involving New Zealand, or even to state whether the profit from New Zealand had been more or less than the amount written off as the loss from container development. "We’ve never broken down profits by countries or by individual trades, and we are not going to start now,” he said.

Mr Geddes said the drop in the group’s pre-tax profit from £12.6 million last year to £5.2 million was largely caused by "phenomenal cost increases, especially in the cargo liner trades.” The 28 per cent increase in the New Zealand freight rates, negotiated last year, would help restore profitability, but it was too early for him to nominate just when freight rates might catch up with costs again.

“In the financial year under review we had our manning cost go up by £4 million and our bunkering £3 million, not to

mention big increases in insurance and repair costs,” said Mr Geddes.

“These increases have juSt not been matched by freight rates, and when you get such massive increases you can’t afford to recover overnight.” One hint that the company did satisfactorily in New Zealand and Australia last year is given in its provision for taxation. This amounted to £l.l million on a profit of £5.2 million, compared with £600,000 last year on a profit more than' twice as big.

According to London financial experts, this indicates bigger profits in the Southern Hemisphere, because P and O mainly pays tax on its overseas income, escaping tax on U.K. profits because of investment allowances.

Of its New Zealand activities, the group’s formal report, published today, says that tonnage moving southhound increased, as did the freight rate. The 28 per cent increase in the northbound rate indicated recognition by the producer boards in New Zealand of the need to permit shipowners a reasonable margin of profit to ensure continuity of service. Mr Geddes said he did not

intend to discuss recent newspaper speculation that P and O was “ripe for a take-over.”

He said he was confident, however, that the group would remain profitable, and that decision by the company in recent years to expand its interests into new types of ship and into road haulage were now laying a far wider base for operations and for security.

“We have spent £5O million in the last year on new projects, and during the year we sold 30 ships, not counting those of. the Union Steam Ship Company, which were sold after the end of our financial year,” he said.

“This is an indication of our bid to move into new fields. It has been said that our liquid position could attract bidders, but I believe we have got to keep this position if we are to take advantage of new opportunities.”

Asked if P and O had the ability to fight off a bid, Mr Geddes said this would depend on the determination and resources of the bidder. I can’t say more than that we have considerable confidence in the future,” he said.