A serious decline in the value of the company's common shares has management of Bermuda-registered Sea Containers Ltd. perplexed.

President James B. Sherwood said the severe downturn was unjustified and Sea Containers was well placed to generate excellent profits in the current economic climate.

In June, he forecast diluted earnings per common share of at least $3.00 compared with $2.07 in 1997, an increase of 45%, sending the share price up to $44.25. But by yesterday, the share price had plummeted to less than $26.

Mr. Sherwood said, "Although we are well aware of the turmoil in the world equity markets, and can understand that all shares suffer when negative sentiment prevails, we can see no justification for the decline in Sea Containers' share price.

"We have just finished a strong third quarter and are still forecasting diluted net earnings per common share for the year of at least $3.00.'' Sea Containers is negotiating to buy "several more interesting hotels'' with announcements expected before the end of the year.

The company maintains a large amount of floating rate debt in US dollars and reductions in US interest rates improves its bottom line. The US cut in interest rates last week will improve profits by $2.2 million or 12 cents a share per year.

Mr. Sherwood said, "At the operating profit level for the quarter ended September 30, 1998, it appears that container leasing profits will be about $20 million, up 20% from $16.6 million in 1997.

"Our passenger transport division is expected to report about $28 million for the period, up 27% from $22.1 million in 1997.

"Our leisure division should earn about $12 million, up 7% from $11.2 million in 1997 (excluding gain on sale of a small hotel property in the 1997 period).

"Net earnings on common shares should be up about $5 million from $15.4 million to over $20 million. Diluted earnings per common share should be up between 10% and 15% over the prior year period.

"This performance is especially good when you consider that 1997's third quarter contained an exceptional gain of $5 million ($0.26 per common share) arising from the sale of a hotel property.

"For the nine months our diluted earnings per common share should be about $2.25 compared with $1.80 in the 1997 period ($1.54 excluding gain on sale of the hotel).

Mr. Sherwood explained, "Because of the imbalance of world trade which has occurred due to devaluations of currency, the ocean carriers have lost a massive amount of revenue as imports to the troubled nations dived.

"Worse, their container costs have increased as they are compelled to move empty containers which formerly traveled full of revenue cargo, or they must depend more on the container lessors for their equipment. This state of affairs is positive for the container lessors, not negative as might be assumed.

"Another big part of GE SeaCo's (the 50/50 joint venture with General Electric Capital Corporation) container leasing business is refrigerated container leasing. Demand is weakest in the northern hemisphere in summer when fruit is readily available locally.

"Container demand then rises as the northern hemisphere harvests end and it becomes necessary for fruit to come from the southern hemisphere and tropics to feed the bulk of the world population which is in the northern hemisphere.

We expect strong demand for our refrigerated containers this fall, winter and next spring. That demand has been growing year to year as increasingly fruit is being containerised.

"Despite miserable weather in north Europe this summer and violence in Northern Ireland, our ferries, ports and rail businesses have shown good growth. Northern Ireland was flat but the English Channel was well ahead of 1997, as was the rest of the Irish Sea and Scandinavia. Rail was similar to 1997 but subsidy was much less this year than last. Rail profits amount to about 30% of the division's profits in the third quarter but a higher proportion of the annual profits since the first quarter is loss making for ferries.

"We have two large fast ferries under construction for delivery next spring and they should boost ferry earnings nicely in 1999.'' The leisure division had a strong third quarter, with the four Italian hotels at capacity. A new, small hotel in Portofino, Splendido Mare, has been full since the day it opened. The US (including Caribbean) has been exceptionally strong. Two new hotels in Portugal have performed well, and results of a third have been flat due to construction.

Tourist trains have been strong in Europe, but weak in Southeast Asia. A small cruise ship there should have improved results over 1997.

Game lodges in Botswana are doing well, but the third quarter is the low season for the Mount Nelson in Cape Town and the new Westcliff Hotel in Johannesburg is experiencing anticipated start up losses.

The Copacabana Palace in Rio continues with excellent profits and managed hotels and other properties are on target.

BUSINESS BUC