Record profits for Japan's big three

Record profits for Japan's big three

SURGING freight rates and cargo volumes led Japan"s big three shipping lines ? Nippon Yusen Kaisha, Mitsui OSK Lines and Kawasaki Kisen Kaisha ? to post record results for the year to March 31. But they warned rising costs and the strengthening yen could dampen prospects this year.

NYK, the country"s biggest shipping line, led the trio after the carrier said net profit soared 76% to a record Yen114.14bn ($1bn) after revenue climbed 19% to Yen2,585bn.

Pointing to the impact of higher bunker prices, the company said fuel prices rose 26% to an average of $402.77 per tonne, compared with $318.77 per tonne a year earlier, cutting pretax profit by Yen29.4bn.

Speaking today NYK Lines managing director Makoto Igarashi said: "While a set of numbers showing higher yen rates and bunker fuel prices served as negative factors for us, a recovery in freight rates for both the container service and dry bulk cargo allowed us to absorb such negative factors and achieve our best-ever performance."

The firm could have been speaking for all three carriers when it said the record result followed ?unprecedented high levels of demand in the market for dry bulker transport as well as the recovery of freight rates for container transport and expanded fleet size?.

As a result, bulker operations saw a 32.7% rise in revenue to Yen1,039bn to retain its position as the biggest contributor to group revenue. Operating income from bulk shipping climbed 73.8% to Yen178.4bn.

The liner trades also recovered, posting a 21.4% rise in operating income to Yen11.5bn compared with a Yen9.6bn loss a year earlier. Revenue rose 16.1% to Yen573.9bn.

Mr Igarashi said: ?Cost cuts and a levy on bunker surcharge also contributed to the turnaround" in the liner division. He thought Asia-Europe routes would continue to buoy the container trades despite a looming downturn in parts of Europe. "Given solid demand, the recovery in freight rates will continue mainly for the European route," he said.

Logistics saw revenue rise 9.2% to Yen526.9bn although operating income remained flat at Yen16.1bn.

The carrier predicted a net profit for the year to March 2009 of Yen140bn, up 22.7% from this year"s result. It also forecast a 5.9% rise in operating profit to Yen214bn on a 4.5% rise in revenue to Yen2,700bn. Bunker costs would rise to an average of $500 per tonne the carrier said.

Mitsui OSK Lines posted a solid 57.4% gain in group net profit to Yen190.3bn following a 24.1% increase in revenue to Yen1,945.7bn.

Bulker operations remained the cornerstone of the group after revenue from the sector rose 30.2% to Yen1,072.2bn while operating income soared 74.5% to Yen268.6bn.

The firm said longer voyages and port congestion in Australia contributed to the increase in dry bulk rates, while a robust market supported the petrochemicals business buoying the liquefied natural gas fleet. The car carriers business saw higher profits as a result of cross trade business in the Atlantic.

Revenue from the box ships division climbed 20.6% to Yen688.5bn which helped return the business to the black after operating income topped Yen1.3bn compared with a Yen2.9bn loss last year. There was also a 9.9% rise in revenue from logistics to Yen62.7bn although operating income was down 20.6% to Yen1.1bn.

Forecasting prospects for the year to March 2009 MOL said net profit would climb 5.1% to Yen200bn on a 5.4% increase in revenue to Yen2,050bn.

The carrier said the outlook for the bulk market, including dry, wet and gas, is expected to stay strong, but it plans to review rate levels in the container shipping sector and rein in costs. The company has predicted a bunker price of $580 per tonne this financial year.

K Line, Japan"s third largest shipping firm, also benefitted from surging freight rates and volumes, after reporting a 61% rise in net profit to a record Yen83bn. Revenue leaped 22.6% to Yen1,330bn.

But the net profit figure was slightly down from the Yen84bn forecast the company gave in January largely as a result of higher than predicted bunker prices.

The marine transportation division, which includes K Line"s bulker, container, gas and car carriers businesses, saw revenue climb 25.6% to Yen1,176.9bn, while operating income soared 150.3% to Yen113.6bn.

The firm said intra-Asian container services were helped by export cargo from Japan, while European trades were also buoyant. Consequently, operating revenues and profits rose from container shipping last year.

Higher freight rates and volumes helped the dry bulk market. A 9% increase in completed cars shipped from Japan offset a decline of auto shipments to the US for the car carrier business. High bulker costs impacted K Line"s tanker business which saw reduced profit levels.

K Line"s logistics business saw a modest 3.3% rise in operating revenue to Yen131.3bn although operating income edged down 0.8% to Yen13.7bn as a result of the shift of cargo from air to ocean transport.

K Line has projected a net profit of Yen78bn for the year to March 2009, down 6% amid uncertainty over dry bulk rates after the Beijing Olympics and higher overall costs. Revenue is forecast to grow by just 1% to Yen1,340bn, while bunker costs are forecast to rise to an average of $520 per tonne.

Source: Keith Wallis - Lloyd's List

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