In segments described as liner or containership operations, NYK, MOL and “K” Line reported a combined loss of 77 billion yen (U.S. $691 million) for the fiscal year ending March 31, 2017, resulting from historically low freight rates.
Japan’s three major shipping companies – Nippon Yusen Kabushiki Kaisha (NYK Line), Mitsui O.S.K. Lines, Ltd. (MOL), and Kawasaki Kisen Kaisha, Ltd. (“K” Line) – reported their financial results for the fiscal year ending March 31, 2017.
In aggregate, the three companies collectively lost 77 billion yen (U.S. 691 million) in segments described as liner or containership operations, down from a loss of 40.1 billion yen the prior fiscal year.
The container operations of each company are part of larger, diversified companies with operations in many other segments of the shipping and transportation businesses.
For overall operations, NYK and “K” Line posted fiscal year losses, while MOL turned a profit, and all three carriers reported a decline in total revenues.
While they operate separately today, the three carriers plan to merge their container operations in April 2018. At the beginning of this April, they began operating together with Hapag-Lloyd of Germany and Yang Ming of Taiwan under their new east-west vessel sharing agreement, dubbed “THE” Alliance.
NYK
NYK, Japan’s largest shipping company, reported a loss attributable to owners of the parent company of 265.7 billion yen for the fiscal year, compared to a profit of 18.2 billion yen the prior fiscal year.
NYK said it sank into the red primarily because of an approximate loss of 200 billion yen, comprised on an impairment loss and provision for losses related to contracts associated with containerships, dry bulkers and cargo aircraft.
The carrier reported an operating loss of 18 billion yen and a recurring profit of 1 billion yen for the fiscal year, compared to an operating profit of 49 billion yen and a recurring profit of 60 billion yen a year earlier.
Meanwhile, revenues for the fiscal year totaled 1.924 trillion yen, 15 percent less than the 2.272 trillion yen the prior year.
In its container liner business, NYK recorded a loss of 12.7 billion yen for the year, compared with a loss of 300 million yen a year prior, while revenues plunged 17.1 percent year-over-year to 585.9 billion yen.
Although spot rates fell to historically low levels in the first quarter of the fiscal year, the bankruptcy of South Korean liner carrier Hanjin Shipping, along with increased shipping traffic led to an improvement in the balance of supply and demand, while market conditions appeared to gradually recover for the transpacific and European shipping routes, NYK explained. “The balance of supply and demand also improved for Central, South and North American routes, but market conditions remained severe for routes in Asia as the commissioning of increasingly large vessels led to an oversupply,” the carrier added.
To maintain competitiveness in the container business, NYK said it rationalized its service loops according to demand, and reduced voyages for some routes, while not making major changes to its G6 Alliance routes.
The company said it cut costs switching to new ultra-large vessels that have fuel efficient engines and hulls designed for higher cargo loading rates, upgrading older vessels to reduce fuel consumption, and allocating vessels efficiency.
In the dry bulk market, increased shipments of iron ore, grains and other items helped narrow the gap between supply and demand, and the market showed signs of a slow recovery, NYK said.
However, in the liquid transport market, demand for tanker shipments, which had been brisk in the first half of the fiscal year, grew weaker mainly due to pressure on supply from the commissioning of new vessels, the carrier explained.
“In the air cargo transportation market, which is one of NYK Group’s non-shipping businesses, freight rates declined amid tough conditions in the first half of the fiscal year, but cargo volume picked up in the second half,” the company said. “Meanwhile, handling volume increased in the logistics market, however, profit ratios fell amid challenging market conditions.”
MOL
MOL’s overall operations had a profit attributable to owners of the parent company of 5.2 billion yen for the fiscal year, compared to a loss of 170 billion yen a year earlier.
Operating profit improved to 2.6 billion yen while revenues fell to 1.5 trillion yen, compared to the prior fiscal year’s operating profit of 2.3 billion yen on revenues of 1.7 trillion yen.
In regards to its container business, MOL reported a loss of 32.8 billion yen, a larger loss than the 29.8 billion loss a year prior. “The considerable decline in one-year contract freight rates at the beginning of the fiscal year, notably on the Asia-North America routes, due to the impact of stagnation in the spot freight rate in the previous fiscal year weighed on the containership segment throughout the period,” MOL said.
MOL said that during the fiscal year, it made efforts to lower vessel costs through business structural reforms, boost capacity utilization rates through stronger sales capabilities, and cut operation costs by continuously lowering the expenses of positioning empty containers through improved yield management. “As a result, from the third quarter onward, the division’s ordinary loss improved year on year, but ordinary loss for the full year slightly increased year on year,” the carrier explained.
“K” Line
“K” Line said it had a loss attributable to owners of 139.5 billion yen for the fiscal year, compared to a loss of 51.5 billion yen the prior fiscal year.
The carrier’s operating loss for the fiscal year totaled 46 billion yen, compared with an operating profit of 9.4 billion yen a year earlier, while revenues fell to 1.03 trillion yen, down from 1.24 trillion yen the prior year.
In its container business, “K” Line recorded a larger loss and a decline in revenues, posting a loss of 31.5 billion yen and revenues of 519 billion yen, compared to a loss of 10 billion yen and revenues of 614.9 billion yen a year earlier.
“Although the freight rate market turned favorable in the final stretch of the fiscal year, reflecting steady cargo movements, the gap between vessel supply and demand is yet to be fixed and reduced revenues year-on-year led to a loss larger than the previous year,” the carrier said.
In its logistics business, including inland transportation and warehousing, “K” Line said demand for domestic logistics services was somewhat weak compared to the previous year. Although international logistics services performed strongly, with an increase in transport demand for air cargo from Japan, the logistics business overall recorded year-on-year decreases in both profit and revenues.
