[060811.EN.SEA] Japanese Carriers Sink Into The Red

JAPAN's largest carrier, Mitsui OSK Lines (MOL), has posted its results for first quarter of fiscal 2011 from April to June, suffering a net loss of US$103.17 million with a 12.1 per cent decline in revenue to $4.48 billion.

MOL recorded an operating loss of $110.81 million between April and June versus an operating profit of $462.81 million a year ago.

The carrier said in a company statement: "Profits deteriorated due to a decline and stagnation in the ocean shipping market, further appreciation of the yen, and rising bunker prices."

Having a pessimistic outlook, it forecast "a significant deterioration in profits due to factors such as the current declining demand in the containership segment, the current downturn of the dry bulker market, and appreciation of the yen."

MOL predicted full-year revenue will stand at $19.23 billion, down 2.8 per cent from fiscal 2010; $448.71 million in operating profit, down 71.6 per cent year on year; and $217.95 million in net profit, down 70.8 per cent from the past fiscal year.

JAPAN's Nippon Yusen Kabushiki Kaisha (NYK Line) has announced a loss of US$91.68 million in the first quarter of fiscal 2011 from April to June against a net profit of $294.79 million the same period of last year.

Revenue declined 11.3 per cent year on year to $5.74 billion, suffering an operating loss of $133.49 million against a profit of $513.6 million a year ago.

NYK said the poor performance was due to the continuing appreciation of yen, rise of bunker prices, adverse impact of the Japanese earthquake on the broken supply chains, as well as softening freight rates and overcapacity problem attributed by deliveries of mega vessels.

"Reviewing the global economy, the US failed to show a clear recovery, while Europe was beset by concerns over debt and other fiscal issues, and China continued its credit-tightening policy," said the carrier's statement.
"Freight rates in the dry bulk and tanker markets continued to be weak due to a growing supply of new vessels. Overall shipping operations remained sluggish," it said.

But NYK recorded profitable returns in its non-shipping businesses, including terminal and harbour transport, as well as air cargo service.

To turn the company around, the carrier said it will continue the slow steaming, enhance cost reduction, and pay close attention to yen's appreciation, increase of fuel price, as well as to the uncertainties to those fast-changing leading economies in the US, Europe and even China.

JAPAN's second largest carrier Kawasaki Kisen Kaisha ("K" Line) has announced that it suffered from a net loss of US$47.78 million in the first quarter of fiscal 2011 from April to June compared to a net profit of $202.6 million in the same period of last fiscal year.

"Although there were many adverse factors in the first quarter, including the increase in the value of the yen and flagging containership rates, the car carrier business is recovering due to rapid restoration of operations by Japanese automobile manufacturers following the earthquake in March, and overall results were generally in line with expectations," said the company.

Revenue contracted 3.8 per cent year on year in the said quarter to $3.13 billion, suffering an operating loss of $126.83 million versus an profit of $295.68 million recorded in the same period of previous year.

The weaker-than expected operating environment has forced the carrier to revamp its April's optimistic forecast of having an operating profit of $676.92 million in fiscal 2011 from April 1, 2011 to March 31, 2012.

Now, the carrier predicts to have an operating loss of $64.10 million in fiscal 2011 against an operating profit of $751.4 million recorded in previous fiscal year.

Also, it forecasts its revenue to reach $13.59 billion in fiscal 2011, down 2.8 per cent from the earlier forecast of $13.97 billion, but it will still rise 7.6 per cent from $12.63 billion in previous fiscal year.

Looking ahead, "K" Line says it forecasts a full-year group net profit of $25.64 million, down 93.5 per cent from $392.35 million in fiscal 2010.

The company said it believes the value of yen will remain high and the currency's continual appreciation is likely to help the carrier to post "extraordinary profit" in the second quarter from July to September due to exchange gains on security investments made by its subsidiaries.

Source : STA, HKSG.