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Management Message

I would like to take this opportunity to thank all NYK Line shareholders and investors for their enduring support. Yasumi Kudo, President

On behalf of the NYK Group, I would like to express my sincerest gratitude to all of the Company's shareholders and investors for their understanding and support. I am pleased to have this opportunity to report on NYK Line's consolidated financial results for the third quarter of the fiscal year ending March 31, 2018.

During the nine-month period of the current fiscal year, consolidated financial results improved compared with the same period of the previous fiscal year, with both revenues and profits increasing. Specifically, NYK Line posted ¥1,630.6 billion in revenues, ¥24.8 billion in operating income, ¥35.6 billion in recurring profit, and ¥16.8 billion in profit attributable to owners of parent. Since we expect some increase in expenses at the new container business joint-venture (Ocean Network Express Pte. Ltd.), our forecast of consolidated financial results for the full fiscal year ending March 31, 2018, includes recurring profit of ¥27.0 billion and profit attributable to owners of parent amounting to ¥11.0 billion.

While the payment of a fiscal year-end dividend had not been decided at the time of reporting on second quarter results, the Company now plans to pay a year-end dividend of ¥20 per share. Management reached this decision after determining that the Company has sufficient prospects for regaining profitability based on the results of various structural reforms and the recovery of the maritime shipping market.

Looking back on the Company's operating environment during the nine-month period under review, the maritime shipping market continued to recover moderately following an unprecedented slump last year. In the container shipping market, an upswing in spot freight rates stalled somewhat as total shipping capacity for overall trades increased due to the production of new ultra-large container ships. Nevertheless, shipping traffic was brisk on the back of robust demand for freight shipments. In the dry bulk shipping market, although excess tonnage still exists, market conditions improved substantially owing to increased shipments of coal and grains along with iron ore imports to China, for which demand has been rising in line with the country's steady progress in reforming its industrial structure and enforcing environmental regulations.

Meanwhile, Yusen Logistics Co., Ltd., was made into a wholly owned subsidiary effective from December 14, 2017, with the completion of a tender offer for its shares, which had been announced in October 2017. Having positioned Yusen Logistics at the center of NYK Group's core logistics business, we intend to implement a variety of measures designed to strengthen its business footing going forward. By leveraging the international network to deepen ties with customers, Yusen Logistics is expected to play a leading role at the forefront of the Group's operations.

With regards to the integration of container businesses, as announced in a news release issued by NYK Line on January 18, 2018, all legal procedures necessary for the commencement of new services by the new joint-venture Ocean Network Express Pte. Ltd., have been completed in each of the countries and regions in which it will operate. The Other aspects of the business integration have also been proceeding smoothly, and the three parent companies are now working together to prepare for the commencement of services in April 2018.

Looking ahead, we will focus on digitalization and green initiatives with the intention to make solid progress in stepping up environmental measures and applying information and communication technology (ICT). By drawing on this expertise and making practical use of such applications in operations while realizing a wide range of innovative ideas, we will work to establish the NYK Group as an industry leader in the future.

The NYK Group intends to work in unison to revive financial results so that it can continue being a corporate group that all stakeholders can depend on in the future.

As we undertake these endeavors, we sincerely hope for the ongoing support and understanding of the Company's shareholders and investors going forward.

Financial Results Overview

Please see the below chart and graph for our year to date third quarter results ending January 31, 2018.

(Billion yen)
 
FY 2016 3Q
FY 2017 3Q
Change
Revenues
1,414.5
1,630.6
216.1
Operating Income
-15.5
24.8
40.3
Recurring Profit
22.0
35.6
33.3
Net Income
-226.0
16.8
242.9
Average Exchange Rate
¥106.92/US$
¥111.68/US$
¥4.76/Yen Down
Average Bunker Oil Price
US$234.02/MT
US$327.60/MT
US$93.58 Up

(Note)Figures are rounded down to the nearest 100 million yen.

Revenue

Revenue

Recurring Profit

Recurring Profit

Earnings Forecast for the Fiscal Year 2017

One-time expenses associated with preparations for integrating the container shipping business are forecast to increase, but container shipments are projected to remain solid going forward. In the automobile transport business, shipments originating from Japan bound for Europe and North America are solid, but an upswing of shipments to resource-rich countries has been delayed. Meanwhile, the dry bulk shipping market is projected to continue recovering moderately in line with seasonal trends, supported by steady shipping traffic. The liquid transport business will incur a one-time loss by an equity-method affiliate while facing a sluggish market for tanker shipments. Nevertheless, LNG tanker and offshore operations are forecast to remain busy and steadily contribute to revenues and profits. Among the Company's non-shipping businesses, the Logistics segment expects to continue facing a tough operating environment, while the Air Cargo Transportation segment expects brisk cargo volume to continue.

(Billion yen)
 
FY2016(Result)
FY2017(Forecast)
Change
Fiscal Year
ending
March 31,
2018
Revenues
2,153.0
2,172.0
19.0
Operating Income
33.0
30.0
-3.0
Recurring Profit
35.0
27.0
-8.0
Net Income attributable
to owners
of the parent company
11.0
11.0
0
Average Exchange Rate
¥110.60/US$
¥111.26/US$
¥0.66/US$
Average Bunker Oil Price
US$335.76/MT
US$343.2/MT
US$7.44/MT

(Note)Figures are rounded down to the nearest 100 million yen.

Dividends for the Fiscal Year ending March 31, 2018

The management of NYK Line regards the stable return of profits to shareholders as one of its most important priorities. Although the payment of a fiscal year-end dividend had not been decided thus far, the Company now plans to pay a year-end dividend of ¥20 per share. Management reached this decision after determining that the Company has sufficient prospects for regaining profitability based on the results of various structural reforms and the recovery of the maritime shipping market.

January 31, 2018
Tadaaki Naito
President
Tadaaki Naito President