Japan’s three large shipping companies on Friday reported their results for the nine month period which ended Dec. 31, 2013. All had increased revenues, but the profit picture was mixed. The three companies — NYK, MOL and “K” Line — all have fiscal years that run from April 1 until March 31.
The container operations of all three companies had a loss in the for the nine month period that ended December 31.
NYK. NYK reported
a profit of 28.4 billion yen ($288 million) for the nine-month period ending Dec. 31, up sharply from 3.2 billion yen in the nine-month period a year earlier.
Revenue for the nine months was 1.65 trillion yen ($16.8 billion), compared to 1.4 trillion yen in the nine-month period a year earlier.
In its liner business, NYK said it had an operating loss of 2.5 billion yen in the nine-month period, compared to a profit of about 0.9 billion yen in the same period a year earlier. Revenue, however, was up 14 percent to 458.4 billion yen.
“In the container shipping division, although lifting volumes increased slightly on intra-Asia and transpacific routes, the capacity surplus persisted due to the continued delivery of ultra-large container ships, primarily on Asia-Europe routes, which caused an increase of larger size vessels on other routes,” said NYK.
“As a result, freight rates declined, but showed signs of bottoming out in the third quarter. NYK Line continued to enhance services to better meet customer needs while reducing costs by utilizing shipping alliances to rationalize vessel assignments and implementing the EAGLE project to minimize the transfer of empty containers and boost profitability.”
Ship costs "were also reduced by the return of uneconomical vessels and utilizing short-term charters, while efficient vessel operation was thoroughly implemented through optimal route planning and speed management for each ship.
“In the terminal division, total handling volume at container terminals increased slightly compared with the same period of the previous fiscal year," the company said.
“As a result of these measures and the yen depreciation," it continued, "the segment’s revenues increased compared with the same period of the previous fiscal year.”
Looking forward, NYK said in container shipping freight rates are forecast "to remain low due to a weak recovery in cargo volume after the Chinese New Year, when demand typically declines. Profitability is expected to remain under severe pressure despite the continued promotion of the slow-steaming of vessels and other meticulous cost-cutting measures.”
In its air cargo business, NYK said Nippon Cargo Airlines saw a loss for the period, and while it “experienced signs of an upturn in shipments of automotive and other goods, the decline in freight rates significantly impacted results.”
The air cargo transportation business had a 5.2 billion yen loss for the nine months, compared to a 2.7 billion yen loss a year earlier. Though the company said there was a “deterioration in revenue,” a table in the financial report showed air cargo revenue climbing 11.8 percent to 66 billion yen.
In logistics, NYK had a profit a 3.9 billion yen in the nine months ending Dec. 31, compared to 2.8 billion yen a year earlier. Revenue rose 18.7 percent to 322.9 billion yen.
“In the airfreight forwarding business, there were signs of a rebound in handling volume, as the decline in Japan-originated freight and other cargo volume bottomed out. In the ocean freight forwarding business, handling volume rose year-on-year, thanks in part to the synergies resulting from the group's integration of the logistics business," it said.
“The logistics business faced a persistently tough environment during the nine-month period, as the European business was impacted by the region’s economic slump. In the U.S. and South Asia, however, the logistics business performed well as a result of sales expansion," the company continued. "As a result of the above, the logistics segment posted year-on-year increases in revenues and profit compared with the same period of the previous fiscal year.”
The company’s bulk shipping business has had a good year. Revenues were up 20 percent to 727.9 billion yen in the nine months ending Dec. 31. Operating profit from the bulk business more than doubled — moving to 37 billion yen in the nine months ending Dec. 31, up from 15.3 billion yen.
The bulk business includes the company’s car carrier division. “Finished automobiles shipments increased year on year. Although no new vessels were entered into service during the third quarter, we chartered vessels from the market to optimally serve customer needs,” said NYK.
“Slow-steaming of vessels and efficient vessel operation were thoroughly implemented to reduce costs," it said. "In the auto logistics business, handling volume rose steadily in the finished car land transport business and the finished car terminal business in China, Thailand, Singapore and Europe.”
Dry bulk shipping benefited from a sharp rebound in the fall, especially for Capesize ships.
MOL. MOL reported
a profit of 29.5 billion yen ($280 million) for the nine-month period ending Dec. 31, compared to a 58.7 billion yen loss in the same period a year earlier.
Revenue for the nine months was 1.28 trillion yen ($12.1 billion), compared to 1.12 trillion yen in the nine month period a year earlier.
In the container business, the company had an ordinary loss of 11 billion yen in the April-December period last year compared to a loss of 10 billion in the same period a year earlier. Container revenue was up 18.5 percent to 533.6 billion yen for the nine months.
“In the containership business, the freight market experienced a continued downswing from the beginning of 2013 due to an increase in deliveries of large containerships. We worked to restore freight rates on all routes and cut costs through action to reduce the supply of capacities including rationalization of services which led us to see a temporary recover in rates," it said.
“Following this recover, however," the company continued, "freight rates on all routes fell again, and freight rate levels declined for all major routes during the first nine months overall. Against the background of repeated fluctuations in freight rates, we redoubled our efforts to cut costs by such means as reducing fuel costs through further slow steaming and worked to improve operating efficiency. In spite of these efforts, a loss was recorded in this segment for the first nine months.”
Looking forward, MOL said in the container business “restoration of freight rates has not progressed beyond a temporary recover. Thus we project that the freight market will be weaker than assumed” in earlier forecasts last year.
MOL also saw a turnaround in its bulk-shipping business, making ordinary income of 37.7 billion yen in the nine month period compared to an 18.1 billion yen loss in the nine month 2012 period.
The company noted that in the car carrier business “regardless of the yen’s depreciation, the shift of Japanese carmakers toward local production for local consumption and prolonged stagnation in the European market had an impact. As a result, the number of competed cars transported from Japan on a consolidated basis remained at a low level.”
MOL added that, “On the other hand, revenue and ordinary income both increased year on year, reflecting our diligent efforts to enhance the quality of service in cross trade and continued efforts to cut costs.”
“K” Line. “K” Line reported
a profit of 15.7 billion yen ($149 million) for the nine-month period ending Dec. 31, 67-percent higher than the 9.4 billion yen profit in the same period a year earlier.
Revenue for the nine months was 918 billion yen ($8.7 billion), 14-percent higher than the 802 billion yen billion recorded in the same nine-month period a year earlier.
In container shipping, “K” Line had a segment loss of 1.1 billion yen in the nine months ending Dec. 31, compared to a 2.9-billion yen profit a year earlier. That loss came despite a revenue in the most recent nine-month period of 436.4 billion yen, a 10.8-percent increase over the same period a year earlier.
“The number of loaded containers transported in the current cumulative period by the K Line Group recorded a light increase from the year-ago period in the Asia-North America service; while approximately 7-percent decrease in Asia-Europe service owing to downsizing of our service capacity to meet decreased demand stemming from weak European economies,” the company said.
“In addition, we carried approximately 15 percent less cargo in intra-Asia and North-South services as a result of streamlining of unprofitable service lines. In all, the overall result of transportation volume carried by the entire 'K' Line Group was about 5-percent less than in the year-ago period," the company continued. “The freight rate level was lower compared to that in the year-ago period, as freight rates for both East-West and North-South trade routes were unstable due to continued deliveries of newly-built large-size vessels.”
The company said earnings declined “despite our aggressive attempt for the improvement of operating efficiency through the deployment of newly-built, large energy-efficient vessels, and for the cost-cutting measures including slow steaming navigation.”
"K" Line said its logistics business in Japan and elsewhere in region was fairly strong, but that it suffered from a drop in outbound air cargo from Japan.