Japan’s Big Three Lower Full Year Outlooks

Japan’s three largest shipping companies – Mitsui O.S.K. Lines (MOL), Nippon Yusen Kabushiki Kaisha (NYK Line), and Kawasaki Kisen Kaisha, Ltd. (“K” Line) – have downgraded their financial outlooks for the Fiscal Year 2015 mainly due to the tonnage oversupply and the lack of demand in container and dry bulk shipping markets.

MOL was also hit by an extraordinary loss of JPY 26.2 billion in the second quarter of FY2015 ended September 30, after its dry bulk shipping equity method affiliate, Daiichi Chuo Kisen Kaisha, filed for civil rehabilitation proceedings in September.

In the first six months of FY2015 MOL recorded JPY 904.7 billion revenue, as compared to JPY 890.2 billion for the same period a year earlier. The rise in revenue was mostly due to the company’s tanker division.

However, due to the hit from Daiichi Chuo’s bankruptcy, and declining demand in container and dry bulk divisions, the company ended the first six months of FY2015 with JPY 241 million net loss.

MOL has lowered its full-year financial outlook and now expects JPY 1.758 trillion in revenues in FY2015, 2.7% less than the initially expected revenues of JPY 1.806 trillion.

MOL now expects to end FY2015 with JPY 17 billion net profit, a 65% reduction compared to the previously projected JPY 43 billion full-year profit.

”K” Line managed to improve its operating revenues in the first six months of FY2015 by 1.3%, reaching JPY 668.3 billion, up JPY 8.56 billion year-on-year. But the improved operating revenues did not translate to better net profit. The net profit for the first six months of FY2015 was JPY 11.7 billion, a 45% decrease as compared to JPY 21.2 billion recorded in the same period a year earlier.

”The tonnage supply and demand balance had deteriorated as tonnage supply pressure increased while demand faltered, causing the market to continue to slump in the dry bulk business and the marine freight rates to fall in the containership business, despite the low fuel prices due to the fall in oil prices and the continuing depreciation trend of the yen. Notwithstanding the continued efforts to reduce vessel operation costs, such as slow steaming, business performance deteriorated year on year,” ”K” Line said in its financial report.

The company now expects JPY 1.3 trillion in operating revenues for the full financial year, 3.7% less compared to JPY 1.35 trillion projected back in July. The full year net profit projections were downgraded from JPY 23 billion to JPY 12 billion, a 47.8% cut.The best performer in the first six months of FY2015 was NYK Line, posting JPY 1.198 trillion in operating revenues, compared to JPY 1.179 trillion recorded in the same period a year earlier.

The company’s net profit surged from JPY 20 billion in 1H2014, to JPY 54.7 billion in the six months ended September 30, 2015.

But despite the improved operating results, NYK Line has also downgraded its full year outlook, as the extraordinary loss from structural reform carried out in 1H2015 will be realized in the second half of the year, and the tough business environment in both container and dry bulk shipping business is expected to continue for the next six months.

The company has lowered its full year outlook for operating revenues from JPY 2.4 trillion to JPY 2.37 trillion, a 1.3% cut. The full year net income is now expected to reach JPY 47 billion, 14.5% less than JPY 55 billion expected in the forecast published in July.

World Maritime News Staff