NYK Line posts Operating Profits of JPY 3.5 bn in Q1 FY 2018

Posted by Daily Shipping Times on 02-08-2017        Tweet

TOKYO: In the first quarter of the fiscal year ending March 31, 2018 (April 1, 2017, to June 30, 2017), consolidated revenues amounted to ¥521.7 billion, up from ¥470.7 billion in the same period of the previous fiscal year. NYK Line posted operating profit of ¥3.5 billion compared with an operating loss of ¥10.9 billion in the first quarter of the previous fiscal year, and recurring profit of ¥10.2 billion, compared with a recurring loss of ¥9.9 billion. Likewise, profit attributable to owners of parent amounted to ¥5.3 billion, compared to a net loss of ¥12.7 billion in the same period of the previous fiscal year.

Overview

Conditions in the maritime shipping market were mixed during the first quarter under review. While shipping alliances were reorganized and total shipping capacity increased in the container shipping market, spot freight rates were mostly favorable on the back of brisk shipping traffic. Shipping traffic was also brisk in the dry bulk shipping market, however, excess tonnage was not eliminated as the scrapping of old ships was slow and new vessels were constructed. Consequently, the market recovery remained moderate. Among the Group’s non-shipping businesses, the Logistics business faced a sluggish market due to persistently high cost prices, while the Air Cargo Transportation segment benefited from busy shipping traffic overall.

Against that backdrop, results substantially improved and profits were posted during the first quarter of the current fiscal year. Consolidated revenues were up ¥50.9 billion, or 10.8%, compared with the same period of the previous fiscal year, while operating profit increased ¥14.5 billion, recurring profit increased ¥20.2 billion, and profit attributable to owners of parent jumped ¥18.1 billion year on year.

Overview by Business Segment

Business segment information for the three months ended June 30, 2017 (April 1, 2017–June 30, 2017) is as follows.

Liner Trade

Conditions in the container shipping market improved owing to brisk shipping traffic and steady spot rates along European shipping routes. Other shipping routes also mostly recovered, including routes in Central and South America. Shipping traffic was brisk along transpacific routes, however, the supply of tonnage increased, delaying a recovery in the market.

NYK Line and four other companies began offering new services as THE Alliance from April 1, 2017. THE Alliance has formed an extensive network and a full-range of non-stop service loops for Asia and Europe, Asia and North America, Asia and the Middle East, and transatlantic routes.

The NYK Group worked to limit fleet and operating costs by continuing efforts taken in the previous fiscal year to boost cargo-loading efficiency, switch to new highly fuel-efficient vessels with capacity for 14,000 TEUs, and optimize vessel assignment and economic performance. By implementing measures for cutting freight costs, particularly the efficient operation of container ships, the Group improved profitability and its resistance to market fluctuations. Meanwhile, overall handling volume at container terminals in Japan and around the world increased year on year. Owing to these factors, results in the Liner Trade segment as a whole improved substantially, with the segment posting a profit and higher revenues than in the same period of the previous fiscal year.

As previously announced, NYK Line decided to integrate its container shipping business (including its terminal business outside Japan) with those of Kawasaki Kisen Kaisha, Ltd., and Mitsui O.S.K. Lines, Ltd.

as a means of boosting competitiveness in the market and ensuring stable and sustainable container shipping operations. The three companies jointly established OCEAN NETWORK EXPRESS PTE. LTD. on July 7, 2017, and are now carrying out preparations for it to commence services from April 1, 2018.

Air Cargo Transportation

In the Air Cargo Transportation segment, although shipping traffic tends to slow down in the first quarter of every year, cargo volume increased as shipments were brisk overall, especially machinery and equipment, automobile-related cargo, and fresh produce. The segment raised its freight rates, and posted a profit and an increase in revenues compared with same period of the previous fiscal year.

Logistics

In the Logistics segment, although handling volume increased in both the air freight forwarding business and the ocean freight forwarding business, cost prices remained high and gross profit decreased. In the logistics business, land transport operations were busy in Europe, however, business in the Americas was affected by a decline in land transport freight rates and handling volume. Meanwhile, in the coastal transportation business, shipping traffic was solid despite the impact of a decrease in voyages due to vessels being docked for regulatory inspections. In the ferry transportation business, which offers services between Japan and South Korea, cargo volume remained firm but passenger numbers fell due to the appearance of LCC.

As a result of the factors above, revenue in the Logistics segment as a whole increased compared with the same period of the previous fiscal year, but the segment posted a slight loss.

Bulk Shipping

In the automobile transport market, the volume of automobile shipments to resource-rich countries in particular slowed down amid low prices of crude oil and other resources, but the total number of vehicles shipped increased slightly compared with the same period in the previous fiscal year due to solid shipments to North America and Asia.

The NYK Group commenced service of the world’s first LNG fuel supply vessel in Belgium, which will support the operations of an LNG-fueled pure car and truck carrier it commissioned in 2016. In the automobile logistics business, existing operations performed solidly overall, especially automobile logistics centers in China and India.

The business also made steady progress in expanding into growing markets with the launch of services by a new company in Vietnam.

In the dry bulk shipping market, cargo volume of iron ore, coal, and grains were up, but excess tonnage was not fully cancelled out as more new ships were commissioned than the number of vessels scrapped. Consequently, the market only recovered moderately.

Under those circumstances, the NYK Group strove to secure long-term shipping contracts and took steps to reduce costs, including exhaustive measures for improving the operational efficiency of its fleet. At the same time, the Group worked to improve the bottom line through a number of initiatives, such as reducing ballast voyages by combining cargoes and more efficiently assigning vessels.

In the liquid transport market, conditions worsened across the board as the commissioning of new very large crude carriers (VLCC) put strong pressure on supply despite brisk shipping traffic. Petrochemical tanker shipments from the Middle East were sluggish, and long-distance shipping routes of liquefied petroleum gas (LPG) were shortened, including those bound for East Asia from the United States. Nevertheless, the NYK Group was able to secure favorable conditions in long-term contracts, providing a stable source of earnings from its fleet of LNG tankers. In addition, the Group’s operations of floating production storage and offloading (FPSO) vessels, drill ships and shuttle tankers contributed substantially to its offshore business.

Taken altogether, the Bulk Shipping segment posted a profit and an increase in revenues compared with the first quarter of the previous fiscal year.