Japan’s three largest shipping conglomerates, NYK, MOL and “K” Line all saw their bottom line hurt by overcapacity and continued weakness in the container and dry bulk markets.
Deteriorating conditions in many segments of the shipping business, including the container liner industry, are reflected in the results posted by Japan’s three largest shipping companies today.
The three companies, NYK, MOL and “K” Line all have fiscal years that run from April 1 to March 31, and today reported their earnings for the nine months and third quarter ending Dec. 31, 2015.
All three are diversified conglomerates, operating many different sorts of ships such as bulkers, tankers and roll-on/roll-off vessels in addition to containerships. Some are also active in other businesses such as third party logistics or airfreight.
Nippon Yusen Kaisha (NYK), Japan’s largest shipping company, posted a net loss attributable to the owners of the parent company of nearly 32 billion yen (U.S. $264 million at today’s conversion rate) in the third quarter of its 2015-2016 fiscal year compared with a profit of 8.5 billion yen in the third quarter of FY 2014-15. Third quarter revenues stood at 568.4 billion yen versus 603.8 billion yen a year earlier.
For the first nine months of 2015-2016, NYK made a net profit attributable to the owners of the parent company of 22.8 billion yen, 20 percent less than the 28.5 billion yen earned in the first nine months of FY 2014-2015. Revenues for the first nine months of FY 2015-16 were 1.77 trillion yen, down about one percent from 1.78 trillion yen in the first nine months of FY 2014-15.
NYK said “an oversupply in the container shipping market continued due to ongoing steady production of new ultra-large vessels, and freight rates in the shipping market fell to very low levels as a result of a widening gap between supply and demand.”
In the first nine months of the current fiscal year, NYK said it had a recurring profit in the liner business of around 800 million yen compared with 6 billion yen in the first nine months of FY 2014-15. This drop came even though revenues in the liner business rose 6.1 percent to 546.9 billion yen.
NYK noted spot freight rates dropped sharply as a result of declining demand for freight shipments to Europe, owing to the steady appearance of newly built ultra-large container ships in European shipping routes, along with the depreciation of the euro and sluggish economic conditions in the region.
It said the North American shipping market lost momentum by the end of 2015 after comparatively brisk business along shipping routes since the beginning of the fiscal year under review.
NYK Group has suspended its container shipping service in West Africa, and realigned its shipping routes in Asia and along the eastern coast of South America with the goal of improving efficiency.
NYK said it “strove to ensure highly efficient and competitive operations by optimizing the economic performance of each of its container ships and shipping routes, while continuing efforts to reduce fleet and operating costs.”
It also said it “worked to improve profitability and increase total cargo volume by setting targets for each country where it operates and enhancing management methods designed to enable higher cargo volume. Owing to these and other factors, including brisk business at container terminals operated in and outside Japan, revenues in the liner trade segment increased compared with the same period of the previous fiscal year. Segment profit, however, was down year on year.”
“Conditions in the dry bulk carrier market were extremely harsh, with market demand remaining stagnant as the slowdown in China led to a decline in shipping traffic,” said the group.
The company said it “strove to generate profits from businesses in which freight rates are stable, while continuing to work toward further improving its balance of income and expenditures through a number of measures, including streamlining its shipping fleet, reducing fuel consumption, and selling off and returning (in the case of chartered ships) surplus vessels.”
Its liquid transport business posted better results than the same period of the previous fiscal year owing to ongoing favorable market conditions, said NYK. It added its air cargo and logistics segments both performed strongly.
Mitsui O.S.K. Lines (MOL) had a profit attributable to the owners of the parent company of 13.5 billion yen in the third quarter of FY 2015-2016 fiscal year ending compared with a profit of 13.4 billion yen in the third quarter of FY 2014-15. Third quarter revenues were 412.5 billion yen versus 454.8 billion yen a year earlier.
For the first nine months of FY 2015-2016, MOL posted a net profit attributable to the owners of the parent company of 13.3 billion yen compared with 24.9 billion yen earned in the first nine months of FY 2014-2015. Revenues for the first nine months of FY 2015-16 were 1.32 trillion yen, compared with 1.35 trillion yen in the first nine months of FY 2014-15.
MOL said its containership segment lost 18.4 billion yen in the first nine months of the current fiscal year, which is still a smaller loss than the 20.9 billion yen lost in the same period a year earlier. Containership revenues were 562.4 billion yen in the first nine months of this fiscal year compared with 586.8 billion yen a year earlier.
Kawasaki Kisen Kaisha (“K” Line) said in the first nine months of FY 2015-2016, it had a net profit attributable to the owners of the parent company of 9.3 billion yen compared with 33 billion yen earned in the first nine months of Y 2014-2015.
Revenues for the first nine months of FY 2015-16 were 977.8 billion yen, compared with 1.02 trillion yen in the first nine months of FY 2014.
“K” Line does not report financial results for each individual fiscal quarter.