NYK issues profit warning

Costs related to shutting down stand-alone container liner operation, grounding air cargo fleet cited.     Japan’s NYK has issued a profit warning for its current fiscal year, citing costs related to changes with its container shipping business, problems at its Nippon Cargo Airlines (NCA) subsidiary and higher fuel costs.
    In a prior forecast released on April 27, NYK had predicted revenue of 1.8 trillion yen (16.3 billion), operating profit of 37 billion yen ($333.5 million) and profit attributable to owners of its parent company of 29 billion yen ($261 million) for the current fiscal year, which began April 1 and runs through March 31, 2019.
    It now says it expects revenue in the current fiscal year to be 1.76 trillion yen, operating profit to be 2 billion yen and profit attributable to owners of its parent company of 12 billion yen.
    NYK has formed a new container shipping joint venture with fellow Japanese shipping companies MOL and “K” Line called Ocean Network Express (ONE) that began operating on April 1.
   When ONE began operating, NYK shut down its former stand-alone container shipping operation. In announcing the revised forecast it said the one-off cost required for terminating its former container business “has been discovered to be higher than initially projected.” In the first half of the current fiscal year, which ends Sept. 30, NYK expects a 7.5 billion yen operating loss instead of the 13 billion operating profit it had been forecasting.
   The other major cause of the downward revision cited by NYK was the decision to ground the fleet of NCA last month.
    NCA said it temporarily suspended all of its aircraft operations to confirm the airworthiness of its planes.
    According to its website, NCA has a fleet of 13 freighters: five Boeing 747-400Fs and eight Boeing 747-8Fs.
    On June 16, NCA said it had found one inappropriate maintenance record dating back to April 3 concerning the lubricating oil supply to the aircraft parts for one of its airplanes at Narita airport. It said it decided to shut down operations temporarily “until all maintenance records have been confirmed appropriate.”
    Initially NCA thought verification of the records would take about a week, but it said on June 22 it was taking longer than expected. It began resuming some flights on July 5, but said as of Wednesday “only two aircraft have returned to service.”
    On Friday NCA said it received a business improvement order from Japan’s Ministry of Land, Infrastructure, Transport and Tourism (MLIT) due to violations of sections of Japan’s civil aeronautics law that NCA related to “(a) inappropriate maintenance for the aircraft structure, (b) the report delay to the MLIT, and (c) organized manipulation and concealment of corresponding maintenance records.”
   NCA said it has “swiftly started to work on identifying the cause and to prevent recurrence” of the problems.
   NYK also said it is assuming a higher average annual bunker fuel price in its revised forecast, $443.99 per metric ton compared to $380 per metric ton, which was the price it used when it made its prior forecast in April.