Results of NYK, MOL and “K” Line suffer from loss by their joint venture, Ocean Network Express.
Japan’s three largest shipping companies — NYK, MOL and “K” Line reported financial results for their 2018-19 fiscal years on Friday. (ONE, the three companies’ jointly owned container carrier Ocean Network Express, reported a $586 million loss.) All three companies have fiscal years that begin on April 1 and end on March 31.
NYK
Nippon Yusen Kaisha said revenue decreased to 1.83 trillion yen ($16.4 billion at today’s exchange rate) for the year ending March 31, compared to 2.18 trillion yen the prior fiscal year. The company said this reflected the startup of ONE last year, which is accounted for as an equity method affiliate, meaning that container liner revenue is no longer recorded. The company also saw revenue fall because its subsidiary Nippon Cargo Airlines suspended use of its aircraft because of questions about their soundness. The company has now returned to service eight aircraft.
NYK had lower operating profit of 11 billion yen in the year ending March 31 compared to 27.8 billion yen the prior year as a result of the terminating NYK’s stand-alone liner business and what it said were sluggish results at ONE due to “teething issues” during its launch period and the problems at NCA. The recurring loss for the year ending March 31 amounted to 2 billion yen compared to a recurring profit of 28 billion in the prior year. Net income attributable to the owners of the parent company was a negative 44.5 billion yen compared with the positive 20.1 billion yen the prior year.
For the current year, NYK said it expected a revenue decrease, but profit increase in FY2019 as it revises its business portfolio. In the current year, NYK expects:
• Its liner segment will return to profitability as ONE’s results improve.
• Air cargo losses will be reduced as it increases utilization of its eight aircraft it operates and three it leases to Atlas Air.
• Logistics profits will increase as it expands air and ocean forwarding volume, improves service quality and restructures contract logistics.
• An increase in bulk shipping profits as “the current dry bulk market with its excess capacity is expected to recover from the second quarter. The liquid transport market is also expected to recover too in the second half of this FY2019 due to responding to the environmental regulations. LNG/Off-shore business generate stable profit.”
• In the car transport division, focus on optimized vessel allocation is expected to improve profitability.
MOL
Mitsui O.S.K. Lines (MOL) had revenue of 1.23 trillion yen in the 2018-19 fiscal year, a decline from 1.65 trillion yen the prior fiscal year. Operating profit was 37.7 billion yen in fiscal 2018-19 compared with 22.7 billion the prior year.
Ordinary profit was also up, 38.6 billion yen in the year ending March 31 compared to 31.45 billion yen the prior year. Profit attributable to the owners of the parent was 26.8 billion yen compared to the loss the prior year of 47.4 billion yen.
In the current year, MOL is predicting revenues will drop 3 percent to 1.19 trillion yen but net income will rise 49 percent to 40 billion yen.
Looking ahead, MOL said ONE’s cargo volumes and utilization rate are expected to recover to a level comparable with the total of the three parent companies before integration. The container joint venture “aims to move into profit by focusing on initiatives such as cargo portfolio optimization, product rationalization, starting with a new North America West Coast-North Europe pendulum service and reduction of fuel consumption and overhead costs.”
MOL said the Capesize bulker market is expected to recover in the second half of the fiscal year despite continued concern over the impact of a mining dam collapse in Brazil. The rate for Panamax and smaller bulkers also is expected to remain firm at the FY2018 level because a certain degree of demand for coal and grain shipments is expected.
“In the very large crude oil carrier (VLCC) market, overall seaborne crude movements are expected to increase, albeit slightly, because although the volume of oil shipments from the Middle East is expected to decrease slightly due to the extension of oil cuts by OPEC, increased exports of Atlantic oil including North American shale oil are expected to cover growth in demand for oil. Meanwhile, on the vessel supply side … the number of new vessels is expected to remain at a high level,” MOL said.
It also expects increased scrapping of old vessels ahead of the introduction of sulfur oxide emission regulations that go into effect in 2020 as well as restrictions on ballast water treatment systems.
As a result, VLCC rates are expected to be comparatively steady and the product tanker market is expected to be stronger because of the upward trend in exports of oil products from countries such as India and China as well as increased demand for oil products in emerging economies.
“K” Line
Kawasaki Kisen Kaisha reported revenue for the year ending March 31 of 837 billion yen ($7.5 billion), a decline from 1.16 trillion yen the prior fiscal year. The company had an operating loss of 24.7 billion yen in the 2018-19 fiscal year compared to an operating profit of 7.2 billion yen the prior year; an ordinary loss of 48.9 billion yen compared to an ordinary profit of 2 billion yen the prior year; and a loss attributable to owners of the parent was 111 billion yen compared to a profit attributable to owners of the parent of 10.4 billion yen the prior year.
“K” Line said in the current fiscal year it is projecting 9.2 percent slippage in revenue to 760 billion yen but a profitable year, 6 billion yen in operating income, 5 billion yen in ordinary income and 11 billion yen in profit attributable to owners of the profit.
In the dry bulk segment, the company expects the market rate to generally improve, mainly in the Cape-size sector. It plans to secure stable profit by expanding long-term contracts.
In the energy transportation business, which includes LNG carriers, crude oil tankers and thermal coal carriers, it said it will “strive to secure stable profit” after recording year-on-year growth in revenue and profits in 2018-19.
The company’s car carrier business benefited from higher volumes last year, but the company said “due to a rise in fuel costs and deterioration of vessel operation efficiency, the overall car carrier business recorded a year-on-year decline in revenue and a loss was recorded.”
It said because of U.S. tariffs and Brexit, “there are concerns over the risk that demand for ocean transportation will decline.” But “K” Line said it expects to secure profitability by improving “vessel allocation and vessel operation efficiency by the route rationalization conducted since the second half of the last fiscal year.”
“K” Line also expects ONE to significantly improve earnings and said it expects stable profit in both its domestic and international logistics businesses.
