Shipping and property group Peninsular and Oriental (P&O) says second-half trading will be difficult and the benefits of rationalisation will not be evident until 1998.
The company made the forecast as it announced a sharp drop in interim profit to GBP500,000 (about HK$6.01 million) at its ferries division amid fierce competition for routes across the English Channel.
The figure compared with earnings of GBP24.8 million a year earlier.
It said it had started to rationalise the division and announced a GBP25.25 million purchase of the 50 per cent of North Sea Ferries (NSF) it did not already own.
P&O chairman Lord Sterling said he was in discussion with other ferry operators in a bid to cope with the price-cutting policy by Eurotunnel, which operates the channel tunnel.
The company said that its rationalisation measures, which included last week's US$1.5 billion merger of its container business with Royal Nedlloyd, were not expected to feed through to the group's results for two years.