Japan Credit Rating Agency Upgraded NYK's Ratings to 'AA' from 'AA-'
November 24, 2004
Japan Credit Rating Agency, Ltd. (JCR) has upgraded its ratings on the bonds issued by Nippon Yusen Kaisha (NYK) from AA- to AA, effective November 24, 2004.
JCR specifies the following reasons for the upgrade of NYK's ratings.
| 1) |
The Company has a leading clientele base of cargo owners in each relevant category for trampers, including car carriers and vessels used for the transport of coal for power generation. Many of these cargo owners have concluded long-term agreements and contracts of affreightment (COA) with the Company, so the Company's earnings base is stable. Among the top three shipping companies in Japan, the Company shares a relatively high ratio of the non-ocean-going shipping business. In particular, the Company positions the transformation of its logistics business as a long-term key strategy with the aim of becoming a comprehensive logistics company, and has been continuing to reorganize its system in recent years. |
| 2) |
The business environment for the Company has been highly favorable since last year. The tight monetary policy held by the Chinese government had a temporary impact on the dry bulk market; however the Company has recovered its business in this field in a short span of time. Additionally, insufficient capacity for port-harbor operations in North America does not accommodate a rise in freight movement for regular liners; however, despite this negative influence on earnings, the Company's current overall business environment continues to be healthy enough to absorb these negative factors, including trends in foreign exchange and fuel oil prices. |
| 3) |
In accordance with the early application of asset-impairment accounting for fiscal 2004, ending March 31, 2005, the Company has devaluated cruise ships, which continued to be unprofitable as of the end of the first half of the fiscal year. However, the Company is expected to renew its record-high performance for the fiscal year in the strong business environment being experienced by the Company. Moreover, interest-bearing liabilities are steadily being reduced in line with a rise in revenue in recent years. To respond to an increase in medium- to long-term demand, the Company plans to enhance the scale of its vessel fleet on a 975 billion yen total new ship cost basis through fiscal 2007. Although this move is considered a factor which would slow down the pace of financial improvement, the Company is considered to be capable of securing healthy cash flow in the foreseeable future. Consequently, there is little concern about a rise in the Company's financial risk in the short run.
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| 4) |
From a medium- to long-term perspective, the trend in the Company's logistics business is a focal point. Since the structure of the industry has stabilized and demand continues to increase, there is less risk that market conditions will deteriorate drastically; however, this situation does not completely eliminate the risk in terms of the industry structure. A certain period of time is required to raise earnings sufficiently from the logistics business; however, JCR highly evaluates the Company's recent initiatives of diversifying sources of revenue and further strengthening the stable earnings base for the Company's main business. JCR continues to pay close attention to the Company's progress.
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NYK's long-term ratings
| Rating and Investment Information, Inc. |
AA- |
| Japan Credit Rating Agency, Ltd. |
AA |
| Moody's Investors Service, Inc. |
A3 |
| Standard & Poors Corporation |
BBB |
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