Japan’s three largest ocean carriers expect lower profits this year because of higher fuel prices, uncertain bulk and car carrier markets, and the impact of the March 11 earthquake and tsunami.
NYK Line, MOL and “K” Line reported improved results from their fiscal year ended March 31, but said slowing growth during the January-March quarter points to weaker profitability in the months ahead.
Container shipping won’t be immune, the carriers warned. NYK expects its liner trade to be “robust overall,” but said “profits may be squeezed by soaring bunker oil prices and an increase in the supply of shipping space, coupled with a decline in transport volumes in the wake of the Great Eastern Japan Earthquake.”
MOL and “K” Line said they expect rising bunker prices to result in lower profits despite higher revenue. “K” Line said the impact of the earthquake and tsunami on liner shipping is expected to be limited but that the “circumstances such as trends relating to harm caused by rumors require continued vigilance.”
NYK ranks 12th in U.S. container imports and 11th in exports; MOL, 15th in imports and 14th in exports; and “K” Line, 14th in imports and 15th exports, according to PIERS, a Journal of Commerce sister company.
None of Japan’s Big 3 rank in the top 10 in global container ship capacity or U.S. container volume, but their combined U.S. volume would rank No. 1 in imports and No. 3 in exports, behind Mediterranean Shipping and Maersk. All are transportation conglomerates, with bulk, tanker, car carrier and other operations in addition to their liner units.
NYK said it “expects car transport volume to plummet as a result of the disaster, and it expects freight rates in the dry bulk and tanker markets to remain subdued, as they have been in the second half of the last fiscal year.”
Largely because of the impact of the earthquake and tsunami, NYK forecasts its revenue this year will drop 1.5 percent to $23.2 billion; operating income, 33 percent to $705 million; and net income, 32 percent to $400 million.
MOL and “K” Line also revised their 2011 forecasts to reflect the impact of the disaster. MOL expects operating income to plummet 50 percent to $705 million and net income to drop 48.5 percent to $353 million, despite a 3.6 percent increase in revenue to $18.8 billion. “K” Line forecasts revenue up 9.6 percent to $12.8 billion, but expects operating revenue to plunge 90 percent to $71 million and net income to fall to $23 million from $368 million.
The carriers are coming off a year in which profits returned after the industrywide collapse of 2009.
NYK reported a $912.7 million profit, reversing a $187.5 million loss a year earlier. Revenue rose 13.7 percent to $22.4 billion for the fiscal year ended March 31. Operating income totaled $1.4 billion, compared with a $54.6 million loss in the previous year.
The carrier said container volume was robust in the first half of the last fiscal year amid strong demand from emerging economies, particularly in Asia. Car carrier volumes were strong, but dry bulk and tanker rates softened during the second half of the fiscal year.
NYK said rising demand paved the way for higher freight rates, which rose on all routes and helped offset the impact of higher bunker fuel prices and a strengthening yen. A strong yen hurts Japanese exports and carriers, whose revenue is largely in other currencies.
MOL earned a $700 million net profit, an increase of 358 percent year-over-year, while revenue rose 14.5 percent to $18.6 billion. Operating income jumped nearly fivefold to $1.5 billion. The carrier said it expects “strong performance from container ships backed by the gradual global economic recovery,” but looks for a continuing slump in the tanker market, a recovery in tanker trade from current “sluggish levels,” and a drop in car shipments because of the earthquake.
“K” Line reported $368 million in net income, compared with a $717 million loss a year earlier. Operating revenue rose 17.5 percent to $11.8 billion. “K” Line’s container shipping unit posted ordinary income of $350 million on operating revenue of $5.35 billion. The carrier expects container shipping to remain comparatively healthy but warned that recent weakness in spot rates and rising fuel prices will reduce margins in the months ahead.
Contact Joseph Bonney at email@example.com.