Japan’s ‘Big 3’ carriers continue to grow earnings in FY2017

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   Japan’s three largest ocean shipping companies – Nippon Yusen Kabushiki Kaisha (NYK Line), Mitsui O.S.K. Lines, Ltd. (MOL) and Kawasaki Kisen Kaisha, Ltd. (“K” Line) – continued to grow their individual earnings and revenues during the third quarter of their fiscal year 2017.
   The carriers’ latest financial results, which cover the nine months from April 1 to Dec. 31, 2017, come as the three firms prepare to officially join their container shipping divisions to create a new operating company called the Ocean Network Express starting in the first quarter of their 2018 fiscal year.
   Through the first three quarters of their fiscal 2017 year, NYK, MOL and “K” Line all turned a profit on growing revenues, compared with the same period a year ago, in which NYK and “K” Line each reported substantial losses.
   Although each reported rising container transport volumes, spot rate growth was limited by the introduction of additional vessel capacity as carriers received and deployed new containerships.

NYK
   NYK recorded profits attributable to owners of the parent of 16.8 billion Japanese yen (U.S. $154.3 million) for the nine months ending Dec. 31, a marked turnaround from a loss of 226.1 billion yen for the same period a year earlier.
   Earnings per share (EPS) stood at 99.64 yen per share compared with a loss of 1,336.68 yen during the first three quarters of FY2016 as consolidated revenues surged 15.3 percent year-over-year to 1.63 trillion yen.
   NYK’s liner trade segment posted an income of 17.3 billion yen, up from a loss of 11.4 billion yen, on revenues that rose 18.4 percent to 527.4 billion yen compared with the same 2016 period.
   “In the container shipping market, while shipping traffic was brisk along transpacific and European routes, the upswing in spot freight rates largely came to a standstill due to the impact of growing shipping capacity, caused by the production of new ultra-large container ships,” the firm said.
   “The NYK Group worked to limit its fleet and operating costs by continuing efforts to boost cargo-loading efficiency, switch to new highly fuel-efficient vessels with capacity for 14,000 TEUs, and optimize vessel assignment and economic performance in accordance with the circumstances of shipping routes,” it added. “By implementing measures for cutting freight costs, particularly the efficient operation of container ships, the group improved profitability and its resistance to market fluctuations.” 

MOL
   MOL’s profits attributable to owners of the parent jumped 34.9 percent year-over-year to 29.2 billion yen (225.7 yen per share) for the first three quarters of FY2017, as the company’s revenues grew 12.8 percent to 1.24 trillion yen.
   In its containership division, MOL narrowed its segment loss from 26.1 billion yen in the first nine months of FY 2016 to just 372 million yen during the corresponding FY2017 period, despite segment revenues surging 21.1 percent to 567.4 billion yen.
   “On the Asia-North America routes, demand continued to proceed firmly as cargo volumes from Asia reached a record high,” MOL said of the results. “On the other hand, upward momentum with respect to spot freight market was limited, even during the busy summer season, as the supply and demand balance did not tighten due to increased vessel supply as a result of the deployment of new containerships, etc.
   “On Asia-Europe routes also, upward momentum with respect to spot freight rates was marginal despite the highest ever cargo volumes from Asia,” the carrier added. “The backhaul cargo volumes from Europe to Asia have also increased since the beginning of the year, which led to a rise in the spot freight market and greatly contributed to route profitability.”

“K” Line
   “K” Line recorded profits attributable to owners of the parent of 9.3 billion yen for the nine months ending Dec. 31, 2017, compared with a loss of 54.6 billion yen for the same period a year prior. Basic EPS stood at 99.43 yen per share compared with a 582.35 yen per share loss the previous year as operating revenues grew 13.9 percent year-over-year to 884.1 billion yen.
   In the containership segment, “K” Line recorded a segment profit of 7 billion yen, up from a loss of 23.9 billion yen for the first three quarters of FY2016 on operating revenues that jumped 16.7 percent to 458.1 billion yen.
   “K” Line’s overall container handling volumes grew 4 percent year-over-year during the period, led by demand increases of 14 percent on the Asia-Europe trade, 10 percent on intra-Asia lanes and 1 percent in the transpacific trade between Asia and North America. That growth was offset in part by a 3 percent decline in north-south volumes.
   “As for the business environment for the shipping industry, cargo movements in the East-West services remained firm in the containership business, but as the supply-demand balance did not improve, freight rates remained top-heavy,” the company said. “As a result, the containership business lacked strong momentum even in the busy season ahead of the Chinese national day holiday.”

   According to data from ocean carrier capacity database BlueWater Reporting’s Carrier Ranking Report, NYK currently has an operating fleet capacity of 594,467 TEUs, while MOL’s vessel fleet stands at 578,898 TEUs and “K” Line’s totals 332,409 TEUs.
   Once combined in under the ONE banner, the new entity is expected to rank as the sixth largest container carrier worldwide with an aggregate fleet capacity of 1.4 million TEUs, following Maersk (3.5 million TEUs), MSC (about 3.1 million TEUs), CMA CGM (2.5 million TEUs), COSCO (1.8 million TEUs) and Hapag-Lloyd (1.5 million TEUs), and just ahead of Evergreen Line (1 million TEUs) and OOCL (700,000 TEUs), according to data supplied by the joint venture. As of early this year, ONE partner, NYK, was ranked the eighth largest carrier in the industry, while the other partners, MOL and “K” Line, were ranked 10th and 15th, respectively.
   The three companies entered into the agreement, which will integrate their container shipping businesses, including worldwide terminal operations outside of Japan, on Oct. 31, 2016, and on July 7, established a new holding company in Tokyo, dubbed Ocean Network Express Holdings, Ltd., and a new operating company in Singapore, referred to as Ocean Network Express Pte. Ltd.
   The newly merged company is scheduled to begin offering container shipping services from April 1, 2018.


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