Pick-up in Asia trade allows P&O to ride out the global downturn

P&O, the ports and shipping group, has returned to profit after strong growth in world trade, driven from Asia.

The group said it had benefited from a "strong cyclical upturn" in cargo shipping and higher demand at its ports. It put much of the increase down to the ever greater relocation of manufacturing from the West to the developing world, with the finished goods needing to be shipped back to developed countries to be consumed. Container shipping volumes were up about 7 per cent, while the throughput of goods in P&O's ports was up by 25 per cent or more. World trade growth typically exceeds growth in global GDP.

Pre-tax profit for the six months to 30 June was £3.3m, compared with a loss of £44.2m last year. Operating profit more than doubled to £45.1m.

Lord Sterling, chairman, said: "The huge growth in trade from Asia is strongly benefiting our ports and shipping businesses, with most commentators forecasting this trend to continue for some considerable time to come. We are therefore confident that we will achieve a significantly better result this year than in 2002, with further progress in both profits and group restructuring in 2004."

But the cross-Channel ferries business, under investigation for alleged price fixing by the European Commission, showed increased losses, on a weaker tourist market. It plunged £17.5m into the red in the first half, from a loss of £11.9m last year. Analysts said this may bolster P&O's argument that the cross-Channel transport market is competitive.

In Asia, P&O's terminals achieved 32 per cent organic volume growth, with two ports in China, Qingdao and Shekou, experiencing particularly high growth. They are now operating at a loss to their maximum capacity.

"Despite the slow rates of growth in some of the world's leading economies, levels of international trade remain high as manufacturing moves increasingly to lower-cost locations. Our rapidly expanding ports business, where almost half of our assets are in Asia, is benefiting from this as well as from our competitive strengths in individual local markets," Lord Sterling said.