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NYK releases 2009 fiscal year results (30-01-2010)
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NYK Line posted consolidated revenues of ¥442.7 billion, compared with ¥611.4 billion for the year-ago third quarter, operating income of ¥4.9 billion, compared with ¥36.5 billion for the year-ago third quarter, recurring profit of ¥2.8 billion, compared with ¥27.2 billion for the year-ago third quarter, and quarterly net income of ¥2.6 billion, compared with ¥18.9 billion for the year-ago third quarter .
Overview
In the fiscal third quarter (October 1 – December 31, 2009), shipping operators’ business environment recovered to a degree amid signs that the global economic downturn was bottoming out. Overall revenue in the shipping segment (composed of the liner trade and bulk shipping) was down ¥168.6 billion, or 27.6%, versus the year-ago third quarter, despite positive contributions from efforts to restore container freight rates, container and car transport volumes that exceeded the fiscal second quarter’s, and a moderate upturn in the dry bulk market.
On the other hand, costs and expenses were down ¥124.6 billion, or 24.2%, compared with the year-ago third quarter, and we also worked to reduce selling, general and administrative expenses.
However, because of the substantial decline in overall revenues, operating income decreased by ¥31.5 billion, or 86.4%, compared with the year-ago third quarter, and the ratio of operating income to revenues decreased from 6.0% to 1.1%, a decline of 4.9 percentage points. As a result, recurring profit decreased by ¥24.4 billion, or 89.5%, and net income decreased by ¥16.3 billion, or 85.9%, compared with the year-ago third quarter, both significant declines.
Liner Trade
We continued the efforts we undertook through the fiscal first half to consolidate our fleet, and average freight rates were up versus the fiscal second quarter on almost all routes as the supply-demand balance improved further with transport volumes retreating only minimally during the low-demand winter season. We also continued efforts to cut costs by reducing the number of vessels in operation and other means, and results for some routes, including European and Latin American routes, were up year over year, but the liner trade segment overall significantly underperformed the year-ago third quarter.
Bulk Shipping
Car Carrier Division
The car carrier division added three newly built vessels to its fleet but continued endeavoring to cut operating costs through low-speed navigation. Although transport volumes turned up slightly, they fell short of a full-fledged recovery, and car transport volume was down to around 70% of last fiscal year’s third-quarter level.
Dry Bulk Carrier Division
As emerging economies in Asia, such as China and India, continued to grow and developed economies recovered, steel and energy demand rose, volumes of iron ore, coal, and grains transported increased, and we also saw shipping congestion in Australia. Freight rates in the dry bulk market remained firm, despite turbulent swings, and touched its highest point for 2009 in November. Consequently, the dry bulk carrier division’s profit was up versus the year-ago third quarter, when freight rates in the bulk market hit historical lows.
Tanker Division
The tanker division usually encounters strong demand during the winter season, but large stockpiles of crude oil and petroleum products in developed countries resulted in subdued transport volumes. Increased inventory at sea limited available shipping capacity, and freight rates in the tanker market trended upward toward the end of the calendar year. But the heavy pressure on the market from the supply of new buildings was unabated, resulting in lower profit in the tanker division versus the year-ago third quarter.
Logistics
NYK Logistics worked to further streamline its operations and cut costs, and although handling volumes increased in tandem with economic recovery in China and Asia, it was unable to make up for the slump in the Americas and Europe. Its results were down versus the year-ago third quarter. Yusen Air & Sea Service Co., Ltd. saw demand recover, partly due to emergency cargo transport out of Japan, but its revenue and profit were both lower versus the year-ago third quarter, mainly due to lower margins caused by an increase in airfreight rates that pushed up input costs. As a result, the logistics segment as a whole underperformed the year-ago third quarter.
Terminal and Harbor Transport
Handling volumes at container terminals both in Japan and overseas declined due to the global slump in container cargo transport, and as a result, the terminal and harbor transport segment underperformed the year-ago third quarter.
Cruises
In the Japanese market, some Asuka II cruises were cancelled due to the effects of typhoons, while in the U.S. market, Crystal Cruises’ seat-load factor and spending-per-customer declined due to the U.S. economic slump. The cruises segment overall underperformed the year-ago third quarter as a result.
Air Cargo Transportation
Nippon Cargo Airlines Co., Ltd. capitalized on recovering demand by expanding not only regular flights but its charter business also, and it continued working to reduce fuel consumption and cut costs, including aircraft operating and maintenance costs. As a result, it succeeded in reducing its loss versus the year-ago third quarter, when the impact of the global economic downturn was beginning to emerge.
Real Estate and Other Business Services
The real estate business achieved results on par with the year-ago third quarter by virtue of maintaining high occupancy rates at major office buildings amid subdued market conditions. In other services, the manufacturing and processing business’s performance was up versus the year-ago third quarter, but the trading business and other businesses underperformed year-ago results in the wake of market slumps. For consolidated business results for the first three months ended June 30, 2009 and the six months ended September 30, 2009, please refer to the first quarter financial results (issued on July 27, 2009) and the second quarter financial results (issued on October 27, 2009).
2. Review of Change in Financial Position
Assets, Liabilities, and Net Assets
Total assets at the end of the fiscal third quarter (December 31, 2009) amounted to ¥2,180.0 billion, an increase of ¥108.8 billion from the end of the previous fiscal year (March 31, 2009). This mainly reflects an increase in current assets of ¥120.3 billion due to an increase in short-term investment securities. Total liabilities were ¥1,492.9 billion, around the same level as at the end of the previous fiscal year. In December 2009, NYK Line received payment for shares issued via public offering and completed an exchange of shares with Taiheiyo Kaiun Co., Ltd., which increased NYK Line’s common stock by ¥55.7 billion and capital surplus by ¥58.4 billion. Consequently, at December 31, 2009, shareholders’ equity—the aggregate of shareholders’ capital and valuation and translation adjustments—totaled ¥645.7 billion, and adding minority interests of ¥41.3 billion to this resulted in total net assets of ¥687.0 billion. As a result, the debt-equity ratio finished at 1.65.
Cash Flows
Net cash provided by operating activities for the nine month period was ¥24.0 billion, reflecting quarterly loss before income taxes and minority interests of ¥-26.6 billion as well as depreciation and amortization of ¥72.9 billion, which were offset somewhat by ¥-16.2 billion in interest expenses paid.
Net cash used in investing activities was ¥-29.1 billion, primarily reflecting increased expenditure for noncurrent assets, mainly accounted for by investments in vessels. Net cash provided by financing activities was ¥121.6 billion, reflecting issuance of common stock of ¥110.7 billion. As a result, the balance of cash and cash equivalents stood at ¥242.0 billion at the end of the fiscal third quarter, an increase of ¥115.2 billion compared with the beginning of the fiscal year (April 1, 2009), after taking into account the effect of exchange rate change on cash and cash equivalents.
3. Forecast of Consolidated Financial Results
Revision of Earnings Forecasts
We have revised our performance forecast for the fiscal year ending March 31, 2010, to revenues of ¥1,700.0 billion, operating loss of ¥22.0 billion, recurring loss of ¥36.0 billion, and net loss of ¥29.0 billion.
In the liner trade, we will continue working to restore container freight rates, but we expect expenses to increase due to rising bunker oil prices. In bulk shipping, car transport volume is gradually increasing, and freight rates in the dry bulk market are firm. In the cruises segment, we expect harsh times to persist because of delayed economic recovery in Europe and the U.S. In air cargo transportation, we expect cargo transport to wane temporarily due to the effect of the Chinese New Year, but we will work to reduce the size of the segment’s losses. We will continue streamlining our operations and rationalizing fleet sizes, and we have revised our full-year consolidated earnings forecast as detailed above.
Source: NYK Line
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