Tokyo stock exchange-listed multi-ship operator Nippon Yusen Kabushiki Kaisha (JPX: 9101), or NYK, recorded a huge decrease in revenues for the three months ending in June. But the company’s profit/loss account has swung out of the red and back into the black.
NYK reported revenues of 406.4 billion Japanese Yen (US$3.74 billion) for the three months to the end of June 2019, which is a 12.6 percent decline from the JPY 464.90 billion (US$4.28 billion) revenue figure recorded in the corresponding period of April to June 2018. NYK uses Japanese generally accepted accounting principles.
Operating profit showed a radically different trend, however. Operating profits swung from a JPY 8.12 billion loss (US$74.69 million) to a JPY 5.47 billion gain (US$50.32 million). That’s an increase in operating profit of JPY 13.6 billion (US$125.02 million).
Profit attributable to shareholders also swung from red to black. In the three months to June 2019, profit attributable to shareholders stood at JPY 9.14 billion (U$84.10 million), a large turnaround from the loss recorded in the prior corresponding period of JPY 4.59 (US$42.26 million). That’s an increase in operating profit of JPY 13.74 billion (US$126.36 million).
All further figures will be in Japanese Yen. One billion Japanese Yen is, at the time of writing, worth about US$9.2 million. Japan’s financial year starts in April and ends in March.
Plummeting revenues; liner trade drags NYK into profit (just)
The scale of NYK’s plummeting revenues can be seen in its segment-by-segment results. In the ocean container shipping trades (the liner trade) NYK’s revenue figures fell off a cliff. They were down from JPY80.1 billion in the first quarter of the 2018 financial year to JPY 51.9 billion in the first quarter of the 2019 financial year. That’s a 35.2 percent decline.
However, the liner trade segment just about dragged the company as a whole into profit. The liner trade segment swung from a JPY 16.6 billion loss in the first quarter of the 2018 Japanese financial year to a JPY 1.9 billion recurring profit in the three months to June 2019. That’s a JPY 18.5 billion increase.
Air cargo transport revenue figures were a lot better but, nonetheless, they also fell off a cliff. Those revenue figures stood at JPY 17.7 billion in the current financial quarter and were down by 18.3 percent from the JPY 21.7 billion recorded in the prior corresponding period. The company lost JPY 4.4 billion in this segment.
Revenues at NYK’s logistics division also slumped. They stood at JPY 117.7 billion, which was down 9.7 percent on the JPY 130.4 billion recorded the first quarter of the 2018 financial year. With lower revenues and no profit, the company made neither a loss nor a gain in this segment.
NYK’s bulk shipping revenues were down too, by 5.5 percent to stand at JPY 195.1 billion in the three months to June 2019. Recurring profits were down by JPY 1.2 billion to stand at JPY 9.2 billion.
Segment by segment: the liner trade
NYK reported that its equity affiliate, Ocean Network Express (ONE), experienced a recovery in overall liftings and slot utilization. FreightWaves reporter Mike Angell has reported in detail elsewhere on ONE. However, in short, liftings particularly increased on the North America, Europe and intra-Asia trades. Freight rates improved compared to the previous period and “synergistic effects of the business integration continued to be accumulated,” the company said. It added that improvements such as optimizing the cargo portfolio was executed. Further improving the bottom line was the non-recurrence of large costs incurred in terminating NYK’s box shipping business when ONE was set up.
“Although revenue declined year-on-year in the Liner Trade as a whole, the business performance greatly improved, and a profit was recorded,” the company said.
Segment by segment: air cargo along with both air and ocean logistics
In the air cargo segment, the company instituted new measures for handling of aircraft maintenance. In air cargo, air freight forwarding and ocean freight forwarding, demand, volumes, revenues and profits were all adversely affected by the trade tensions between the U.S. and China.
On the logistics side, the company said that the results were “generally strong,” adding that there was progress in initiatives aimed at improving profitability in Europe. Coastal transport volumes increased due to the set-up of new services, but increased costs from new investment put the bottom line under pressure.
Segment by segment: cars and bulk shipping
Car transport volumes were strong to North America and within Asia. Ship deployment efficiency increased. In the dry bulk markets, overcapacity continued to be an issue and the number of new ships commissioned has increased more than the number of older ships that have been scrapped. As reported by other dry bulk transport companies, iron ore cargo volumes are in recovery following Brazilian and Western Australia supply disruptions. Coal and grain volumes have been “firm” but lower than in previous years. NYK has sought to reduce costs through more efficient navigation and reduction of ballast (i.e. empty) voyages. Some high-cost ships were also returned “early” to owners.
In liquid bulk shipping, the company said market conditions improved for very large crude carriers but this was limited due to increased shipping capacity and an increase in regular maintenance at oil refineries. Major growth was not recorded in petrochemical tankers. LPG tankers did experience an increase in tonne-miles due to changes in the pattern of trade driven by U.S.-China trade tensions. In the company’s LNG division, business was “firm” due to support from long-term contracts.
Looking forward
NYK forecasts a recovery in the liner trade segment and envisages that volumes handled at terminals in Japan and overseas should “remain strong.” The company expects that transport demand for air cargo will “remain challenging” and that volumes in both air freight forwarding and ocean freight forwarding are expected to fall.