Bermuda Container Line's net income dropped six percent in the 2003 financial year as rising costs offset increases in cargo volumes.

But the company is enjoying record volume through the first part of this year as a spike in imports after Hurricane Fabian continues.

BCL, which owns the Oleander, which sails to Bermuda from New Jerseyand is a joint venture partner in the Somers Isles service from Florida to Bermuda, said net income for the year ending December 31 was $4.072 million, a decline of $279,000 from 2002.

Freight revenue rose 2.66 percent or by $748,000 as cargo volumes rose in the second half of the year.

However, expenses rose by 4.32 percent or by $1.027 million due to both the increased cargo volume and other cost increases.

BCL chief executive officer Geoffrey Frith said the increase in revenue was entirely attributable to higher volumes as the company did not raise freight rates during the year.

Asked if it was frustrating to see costs rise faster than revenues due to higher volumes, he said: "It is not frustrating in the sense we did expect that. We had budgeted for a decline in net earnings and the final results were better than we had budgeted for."

Since the end of the year, the company has increased freight rates for some cargo classes where costs have increased at an above average rate, but it is resisting an across-the-board increase.

The company has also increased its fuel surcharge to compensate for the soaring cost of oil.

He said stevedoring was the biggest single cost for the company and absorbed about 40 percent of revenue.

He noted that the line's stevedores in the US and in Bermuda had increased their rates "each year for the last couple of years" to cover their cost increases for wages and benefits, including health insurance.

Mr. Frith said that after cargo volumes had slipped in the first half of 2003 they started to increase in the third quarter and then soared after Hurricane Fabian.

He added that the cargo increases had continued through the first half of 2004 and the company was now enjoying record volumes.

"The Bermuda economy is on a roll right now," he said. "We are running at record volumes and overall, we are seeing a ten percent increase on last year."

He added that the strength of the economy was beginning to create some logistical problems for suppliers, and the company had some concerns that the economy would overheat.

"As a Bermudian, I am a bit concerned about where this is going to end," he added.

The company's annual general meeting is on June 29.

BCL's shares are trading at $11.50 on the Bermuda Stock Exchange. At the end of 2003, they were trading at $10.