P&O's slow volume growth may affect profits

UK-BASED port operator P&O Port's volume and profit may be affected due to slower growth in cargo volumes and yield.



Analysts say that while container throughput growth remained strong in Asia, especially in China and India, this was offset by slower growth in the UK and Australia.



P&O's management had previously indicated that slower volume trends were offset by improvements in tariffs.



"Management has lowered guidance for organic volume growth for the full year, from the previous range of 8-9 per cent down to 7-8 per cent," according to a report by Merrill Lynch.



Another report said volume expansion has been sluggish in Europe, where capacity constraints and lost business led to a decline in volumes in H1.



"We expect most of the capacity constraints to be removed over the next 18 months or so - but P&O is still dependent on pricing increases to meet expectations, particularly after the tariff reduction in India," a research note said.



In India, the country's port pricing authority has reviewed P&O's performance at Nhava Sheva and found it was making excessive revenue returns, which likely will lead to a reduction in tariffs for the company at that port.