NYK posts record revenue, profit
Nippon Yusen Kabushiki Kaisha (NYK Line) posted record revenue and profit for its fiscal year ended March 31, citing a significant improvement in the liner shipping trade and the result of cost cuts.
NYK also predicted a further increase in revenue and profit for the current fiscal year ending March 2005.
Consolidated net income for the year ended March 31 soared 144 percent to Yen34.8 billion ($329 million) from Yen14.3 billion in the fiscal year ended March 31, 2003. Operating income went up 33 percent to Yen91.9 billion ($870 million) from Yen69.1 billion. Consolidated revenue reached an all-time high of Yen1.4 trillion ($13.2 billion) up 12 percent from Yen1.2-trillion.
The publication of NYK’s record financial results follows the announcement last week of record earnings by fellow Japanese shipping groups Mitsui O.S.K. Lines and “K” Line.
NYK also reported that its return on equity rose to 10.8 percent from 4.7 percent in the previous fiscal year.
Japan’s largest shipping group said the 11.9-percent rise in revenues reflected higher volumes and freight rates in the shipping segment, as well as expansion in core logistics and terminal operations. However, the increase in the group’s profit came from its core shipping business, rather than from logistics and port activities.
“The significant improvement in liner trade led to year-over-year improvement in shipping revenue and profitability,” NYK added.
“Operating income rose 33 percent on the strength of intensive cost-cutting, which offset higher costs and expenses and selling, general and administrative expenses,” the group said. “The operating margin improved 1.1 percentage point from a year earlier to 6.6 percent.”
Liner shipping generated revenue of Yen379.2 billion ($3.6 billion) in the fiscal year, up 17 percent from the previous fiscal year. Commenting on liner shipping, NYK reported “soaring demand on all routes,” and said a tighter supply/demand situation “allowed us to restore freight rates on trips on each route.” During the fiscal year, NYK cut liner-shipping costs more than Yen6 billion ($56 million), despite higher fuel prices.
The Japanese group reported that its shipping business, which comprises liner, bulk/car-carrier and tanker activities, made an overall operating income of Yen91.3 billion ($863 million) in the latest fiscal year, up 50 percent, and had a revenue of Yen879.8 billion ($8.3 billion), up 11 percent on the previous year.
Logistics activities saw operating income halve to Yen3.1 billion ($29 million), and revenue rise 13 percent to Yen294.9 billion ($2.8 billion). “Revenue expanded but earnings declined year over year due to high start-up costs,” NYK said.
Terminal and harbor activities at NYK also saw operating income decline during the fiscal year to about Yen600 million ($6 million), from Yen1 billion, because of labor problems in North America. But revenue from terminal and harbor activities soared 55 percent to Yen102.3 billion ($1 billion), as container traffic increased both in Japan and in North America, where the group recently acquired Ceres.
NYK reported that the appreciation of the Yen currency against the U.S. dollar during the latest fiscal year had a negative impact of Yen10.8 billion (about $100 million) on its profit for the year.
The Japanese group will raise its year-end dividend for the fiscal year just ended to Yen5 per share, which, combined with the interim dividend of Yen5 per share, results in an annual dividend of Yen10. This is an increase of Yen2.5 per share from a year earlier.
The Japanese company forecasts it will raise its revenue and profits again in the current fiscal year ending March 31, 2005. It expects revenue of Yen1.46 trillion ($13.9 billion), operating income of Yen121 billion ($1.15 billion) and net income of Yen55 billion ($524 million). “Revenues, operating income, recurring profit and net income will all be the highest in the company’s history,” NYK asserted.
“In the shipping segment, we assume favorable demand will continue in the liner trade, tramper and specialized carrier and tanker markets,” NYK said. “Despite worries about the high yen and bunker oil prices, revenues and profits for fiscal year ending March 31, 2005, may surpass fiscal year ended March 31, 2004, by stabilizing fares through long-term contracts and cost-cutting.”
The forecast for the current fiscal year is based on the assumption that average bunker price this year will be $174.37 per ton, up from $163.78 in the fiscal year ended March 31. NYK calculated that a $1 change per metric ton in the price of bunker oil alters annual recurring profit by Yen300 million ($3 million).