JAPANESE shipping company "K" Line is forecasting an ordinary loss of JPY71 billion (US$766.24 million) and net deficit of JPY79 billion for fiscal 2010 on operating revenues of JPY810 billion.
This comes amid projections that the worldwide container shipping industry will record a maximum annual deficit of JPY2 trillion in 2010.
"In view of the adverse circumstances and in the absence of a clear road map for overcoming this unprecedented global economic crisis, it is necessary to be realistic and pragmatic," said president and CEO Hiroyuki Maekawain his New Year's message.
"We should not expect much improvement in the business environment for the next several years, and as such, it is imperative that we concentrate our efforts on paving our own new way for the future of the company."
Henceforth, the group will focus on earnings improvement, business restructuring, and the pursuit of "aggressive" reform across the entire organisation in a bid "to rebuild the company and reinforce its strong competitive standing," the group's president said.
"In the short term, we have held back on capital investment plans in order to focus on the immediate restructuring of the containership sector, which has suffered the greatest damage, by scaling down and reorganising freight services to North America and Europe in accordance with the decline in demand.
"Our fleet has been reduced by selling, demolishing or returning up to 30 vessels for a swift streamlining of our shipping operation.
Additionally, for the purpose of improving cash flow, orders that had been placed for the construction of new vessels have been postponed or changed to other vessel types, and early termination of chartered vessels has been implemented as well.
To achieve this restructuring it has been decided to allocate around JPY50 billion," said Mr Maekawa.
"All the containership group members have been requested to continue conducting a zero-based review of their operations including rate restoration and augmenting cost-competitiveness as well as an overhaul of existing services with a view to future potentials," he added.
The original investment plan of JPY500 billion for the three-year period between 2009 and 2011 has been cut 50 per cent, to improve the group's financial indicator.
Another task of 2010 will be to expand the Energy Transport Sector as "the new pillar of profitability, through new businesses including offshore support vessels, ultra deepwater drill ships, and floating LNG producers."
Lastly, "new business strategies" are currently under consideration within the logistics department, which will be incorporated into "K" Line's mid-term management plan and announced in the near future.
The president also added that "K" Line's "profit-earning capacity has already seen rapid improvement," and owing to the measures the group is planning to take in 2010 to turn the business around, "our hopes are now much higher that we will likely return to profitability for FY2010 ending March 2011."
Source : HKSG, 12.01.10.
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