Japan 'Big Three' carriers see losses ahead

Japan 'Big Three' carriers see losses ahead

Japan’s three largest container lines significantly downgraded their earnings forecasts for the current fiscal year ending on March 31, with Mitsui O.S.K. Lines now expecting a sizable net loss of 175 billion yen ($1.45 billion).

The three shipping firms, which also include NYK Line and "K" Line, reported their financial results for the first nine months of fiscal 2015 as warnings that carriers are in for a tough 2016 continue to grow.

Slumping freight rates and cargo volumes offset lower fuel costs and a weaker yen against the U.S. dollar for the big three, as the shipping industry as a whole is expected to continue to struggle against oversupply and weak demand.

MOL’s revenue dropped 2.1 percent in the first nine months of fiscal 2015 from a year earlier to 1.31 trillion yen on a consolidated basis while group net profit plunged 46.6 percent to 13.2 billion yen.

MOL now expects its full-year group revenue to total 1.72 trillion yen, down 2.2 percent from its previous forecast of 1.75 trillion yen. The company also expects a full-year group net loss of 175 billion yen, compared with a net profit of 17.0 billion yen it had forecast previously.

It will be MOL’s first full-year group net loss in three years. The company posted a group net profit of 42.3 billion yen in the last fiscal year.

MOL expects to slip into the red in the current fiscal year as it plans to book an extraordinary charge of up to about 180 billion yen resulting from the disposal of vessels in the container shipping and dry bulk divisions.

“In regard to the container ship business, we will reinforce its business structure and forge ahead to improve the bottom line, centered on thorough efforts to capture more profitable cargoes, based on reducing fixed costs through rationalization, mainly on North-South routes, and fleet reductions focused on mid-size vessels. As soon as the details of each measure are determined, we will separately announce them,” MOL said in an earnings release.

NYK Line’s revenue edged down 0.9 percent in the first nine months of fiscal 2015 from a year earlier to 1.76 trillion yen on a consolidated basis as net profit tumbled 19.8 percent to 22.8 billion yen.

NYK Line now expects its full-year group revenue to total 2.32 trillion yen, down 2.1 percent from its previous forecast of 2.37 trillion yen. The company also expects a full-year group net profit 25.0 billion yen, down 16.8 percent to from its previous forecast of 47.0 billion yen.

"K" Line’s revenue shrank 3.7 percent to 977 billion yen on a consolidated basis as net profit plunged 71.9 percent year-over-year in the April to December period to 9.27 billion yen.

"K" Line now expects its full-year group revenue to toal 1.27 trillion yen, down 1.9 percent previous forecast of 1.30 trillion yen. The company also expects a full-year group net profit of 5.00 billion yen, down 58.3 percent from its previous forecast of 12.0 billion yen.

Contact Hisane Masaki at yiu45535@nifty.com.