Rising market fails to lift stocks of Japanese carriers

Rising market fails to lift stocks of Japanese carriers

'K' Line has the most bullish expectations for this fiscal year of Japan's major container lines.

Share prices of Japan’s top three shipping companies are languishing, far underperforming the local stock market even as evidence of a recovering market mounts and market watchers predict a profitable year.

Shares of NYK Line, MOL, and 'K' Line jumped on April 26 as the Nikkei Business Daily reported the same day that the three companies were all likely to post net profits in fiscal year 2017, but the three companies’ share prices have since been declining, even after their profit forecasts for fiscal 2017 reinforced Nikkei’s view.

Lending credence to forecasts of greater container line profitability, the global container trade in the first quarter grew at the fastest rate since 2010 at 10 percent, and Evergreen Line reported higher rates and volume in the first quarter.

On Tuesday, the 225-issue Nikkei Stock Average, Japan’s benchmark stock index, closed at 19,919, up 3.2 percent from 19,289 on April 26, and the broader TOPIX index ended at 1,584.23, up 3.0 percent from 1,537.41 on April 26. NYK Line closed at 211 yen, down 7.5 percent from 228 yen on April 26. MOL ended at 328 yen, down 5.5 percent from 347 yen on April 26. 'K' Line closed at 286 yen, down 1 percent from 289 yen on April 26.

The lackluster performance of the three shipping companies’ share prices is taking place even as Tokai Tokyo Research Institute Co., a think tank of the Tokai Tokyo Financial Group, released a report that said the three shipping companies all expect the dry bulk and container shipping market conditions to “recover moderately” in fiscal 2017. They also all expect to conclude “higher-level” annual container shipping contracts this year.

As for the three shipping firm’s earnings results for fiscal 2016 and outlook for fiscal 2017, Tokai Tokyo Research Institute described NYK Line, MOL, and 'K' Line as “positive,” “neutral,” and “positive,” respectively.

The research firm also cautioned that 'K' Line’s outlook for the market conditions is somewhat bullish, compared with NYK Line and MOL, and that the credibility of 'K' Line’s fiscal 2017 financial forecasts needs to be scrutinized.

In the last fiscal year, NYK Line and 'K' Line suffered record net losses, although MOL managed to remain in positive territory as the carriers battled slumping freight rates and cargo volumes amid vessel oversupply and stagnant demand. NYK Line and 'K' Line incurred net losses of 265 billion yen (US$2.33 billion) and 139 billion yen respectively, whereas MOL eked out a net profit of 5.25 billion yen after suffering a net loss of 170 billion yen in fiscal 2015.

Amid the global industry slump, the three shipping companies agreed last October to merge their container shipping businesses to weather the storm.

Despite their dismal fiscal 2016 financial results, they are optimistic about this fiscal year, with NYK Line, MOL, and 'K' Line expecting to post net profits of 5 billion yen, 10 billion yen, and 21 billion yen, respectively.

Contact Tomoo Yatsuhashi at yiu45535@nifty.com.