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Major Q & A

[Containership business]
  
Q.1   With regard to recent Container freight decrease, is it bottoming out?
  
A.1   Loading factor level in for the entire industry has been rising recently based on our perceived impressions. Current loading factors are 90% + in Asia-North America trade and 92-95% in Asia-Europe trade. Volume catch-up after Chinese New Year delayed slightly this year, but now loading factor is high and decline of freight rate has bottomed out.In fact, the situation indicates that spot freight of Asia-North America trade is somewhat rising.
    
Q.2   Although impact of bunker price hike is 19.3 bil yen for the whole company shown in B-2, page 8 of the Financial Highlights Brief Report, impact of bunker price hike to Containership business is 24.0 bil yen in B-3-1(2), page 10 of the material. What is the difference between them?
    
A.2   Negative factor of about 19 bil yen for the whole company is the amount from which compensation like BAF (Bunker Adjustment Factor) or others are deducted. On the other hand, bunker price hike of 24.0 bil yen in Containership business does not exclude part of BAF which means 24.0 bil yen is cut out a part of increased cost just by bunker price hike from total cost.
    
Q.3   I am afraid it is possible Asia-Europe trade may show a loss if Containership business sector is almost break-even in 2011; therefore, does 81 freight index of Asia-Europe trade 2011 include freight restoration in peak season?
    
A.3   Yes, freight index of Asia-Europe trade 81 includes increase effect generated by PSS (Peak Season Surcharge) in summer. We count freight increase to some extent because current freight rate of Asia-Europe is too low, although standpoint for freight market from now on may be different among each Containership operator.We think that reasons of freight decline from January to March are as follows: they think supply exceeds demand this year as this kind of information which is psychological effect has much impact to the market and pace of cargo catch up after Chinese New Year took long time this year compared with usual year, which was partly caused by labor shortage in China. In addition some large newbuildings came into the market.We view current spot freight market in that way and think that market is too sensitive.From now to summer will be comparatively tight situation through the year as cargo volume is rising these days, besides container box shortage which occurred last summer, considering those conditions, we factor in PSS from summer.
  
  
  
[Car Carriers]
  
Q.1   How do you see volume for Car carrier business in 2011?
  
A.1   We factored in cargo volume decline of more than 100,000 in 1H of 2011,considering many things from current information available to us.We carefully monitor the situation because there is a great deal of information about recovery in production after the earthquake. We fear there is possibility of a loss in 1H 2011.
    
[Others]
  
Q.1   I am afraid that loss of 1H 2011 might be greater considering estimate of ordinary income 1H 2011 of 5.0 bil yen while on the other hand 5.2 bil yen 4Q 2010. Will losses be even worse depending on business situation of Car carriers.
  
A.1   For Car carrier business, we factored in cargo volume decline in 1Q 2011 as per what we now know, so for 2Q, we are afraid that deficit will pile up slightly if volume of 2Q remains unchanged from 1Q,although we do not currently have clear picture of the situation.
  
Q.2   Do you have any plan of idling or laying up vessels although there are many new ship deliveries for Dry Bulk, Containerships and Car Carriers? Is your plan on basis of squeezing the supply? Do you intend to manage by cancellation charge depending on future plan?
    
A.2   With regard to loading factor of Containerships being high and all vessels are now in operation,there's no plan of any idling or laying up. For Car carriers, we have 2 ships which are laid up now because cargo declined so much, especially 1H. In addition, more than 10 vessels are coming into over-capacity at this moment, so how we manage the situation from now on is the latest and most important problem for us.In view of structural reform including cancellation of charter parties, we think that we will have to do something for business reform and intend to set up task force for income improvement soon. In the task force we think we must consider cancellation of charter contracts, reform of charter contracts (e.g. prolong contract term with lower charterage) and selling ships we have.
    
Q3.   As you said impact of the earthquake is 10 bil yen, does this effect ordinary income ? For the impact of the earthquake, is it only Car Carriers? Do you factor in Dry Bulk?
  
A.3   Impact of 10 bil yen will be the effect on ordinary income.Basically cargo volume for Car Carriers declined so much, which is the main part.For Dry Bulk there is some impact, for example our thermal coal carriers are affected by coal-fired thermal power station where the earthquake hit. At any rate, main part is worsened Car Carrier business.
  
  
Q4.   With regard to profit improvement from 3.0 billion yen for FY2011 to 46.0 billion yen for FY2012, 71.0 billion yen for FY2013 is indicated on page 19 of your medium-term management plan.Do you consider increase of stable profit over a long period other than market improvement?
  
A.4   Although we cannot grasp situation in detail for those points, for Dry Bulk carriers we will continue to pile up medium-tem and long-term contracts until 2013. We are planning to negotiate several years' contract on LNG carriers as the market is improving now so we factor in those strategies.

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