CP Ships Posts First Quarter Loss

Maritime Activity Reports, Inc.

April 23, 2003

CP Ships Limited announced an unaudited first quarter 2003 operating loss of $2 million before exceptional items, a $4 million improvement on the $6 million operating loss in first quarter 2002 and compared with $34 million operating income before exceptional items in fourth quarter 2002. Basic loss per share before exceptional items was $0.12 compared with last year’s first quarter loss per share of $0.14 and fourth quarter 2002’s earnings per share of $0.23 before exceptional items. After exceptional items, the net loss was $21 million representing a basic loss per share of $0.23 compared with $11 million net loss in the same quarter last year or loss per share of $0.14. Net income for fourth quarter 2002 was $23 million, a basic earnings per share of $0.26. Volume at 514,000 teu was a record for the seasonally weak first quarter, up 18% from first quarter 2002, reflecting both strong growth and the inclusion of Italia Line. Average freight rates were up 1 percent on the same period last year but down 2 percent on fourth quarter 2002. EBITDA increased to $26 million in first quarter 2003 from $14 million in same quarter last year. Cash outflow from operations before exceptional payments was $19 million or $0.21 per share. Despite robust volume and a strong recovery in operating result in March, overall performance for the quarter was weaker than expected due to three factors. Firstly, significantly higher fuel costs of about $9 million after fuel surcharge recovery compared with first quarter last year. Secondly, an adverse impact of the weaker US dollar of about $12 million. Finally, exceptionally severe weather in the TransAtlantic, record winter low water levels in the Saint Lawrence River restricting loading capacity, one-time operational expenses relating to ship replacement and ship network changes, and disruption of trade in Venezuela all adversely impacted the result, in total by about $7 million. Withdrawal from the slot charter agreement in the Asia-Europe trade is now nearly complete. Despite further improvement in freight rates in the quarter, the service remained unprofitable. The previously announced fixed day weekly service between North East Asia including China and Vancouver and recently Anchorage started in January, incurred start-up losses. The two weekly fixed day round-the-world services linking Australia, New Zealand and the Pacific Islands with Europe and the US East Coast were successfully implemented in January and are expected to continue to drive improved operating results in the Australasian market during 2003. 2/12 In January, the Canex consortium moved its service from its previous marine terminal to CP Ships’ Montreal Gateway Terminals which, together with the consortium’s slot charter agreement with Canada Maritime, is expected to lead to overall improvements in trade lane operating efficiency. During the quarter, CP Ships completed the process of adapting its cargo acceptance and documentation procedures to comply with US Customs 24-Hour Advance Notification Rule and met the compliance deadline of 2nd February. So far, there has generally been no significant delay to container shipments while incremental operating costs are expected to be mostly recovered from customers. CP Ships took delivery during the first quarter of a further two new 3200 teu containerships and four 4100 teu long-term chartered ships under the company's $800 million ship replacement program. The remaining two new, one used and two long-term chartered ships are expected to be delivered on schedule by the end of the third quarter 2003. The annualized 2003 cost reduction target of $80 million is lower than last year’s achieved $125 million. The ship fleet decreased from 89 on 31st December to 86 ships on 31st March mainly due to service restructuring and the completion of ship repositioning in progress at the beginning of the quarter.
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