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Message to Our Shareholders

Dear Shareholders:

Eizo Murakami
President & CEO

Your Board of Directors always appreciates your continuing support.


We would like to herewith report our Fiscal Year 2016 consolidated financial results and our Prospects for Fiscal Year 2017 that ends March 31, 2018.

1) Summary of Consolidated Operating Results for FY2016

Results for FY2016 Year ended
March 31, 2016
Year ended
March 31, 2017
Change
Operating revenues 1,243.9 1,030.2 (213.7)
Operating (loss)income 9.4 (46.0) (55.5)
Ordinary (loss)income 3.3 (52.4) (55.7)
Loss attributable to owners
of the parent
(51.5) (139.5) (88.0)
Exchange Rate (¥/US$)
(12-months average)
¥120.78 ¥108.76  
Fuel oil price (US$/MT)
(12-months average)
US$295/MT US$265/MT

(Billion Yen; rounded to the nearest 100 million yen)

  During the fiscal year ended March 31, 2017 (from April 1, 2016 to March 31, 2017; hereinafter “the fiscal year”), the global economy was a year of great changes influenced by factors, such as concerns about a slowdown in Chinese economic growth, confusion in financial markets due to the U.K.’s vote to leave the E.U., and establishment of the new government in the U.S. The U.S. economy made solid movement, despite sluggish start at the beginning of the fiscal year, as expectations of fiscal expansionary policy being brought in by the new government saw an uptick in private consumption and corporate investment activities. Conversely, the European economy was temporarily in confusion due to the U.K.’s vote to leave the E.U.; however, it gradually settled, with a slight recovery in the latter half of the year, led by an increase in private consumption due to an improvement in employment figures. The Chinese economy was quiet, mainly buoyed by infrastructure investment, in spite of a slowed rate of growth. Also, the agreement between major oil producing countries to reduce production saw a rise in crude oil prices, and other resource prices firmed; however, the economic recovery of developing nations and resource-rich nations in particular will take some time.
  In the Japanese economy, the yen increased in value in the middle of the year; however, it continued to fall thereafter, due to firm personal consumption and expectation for the new U.S. government, which saw a moderate recovery, focused on exports and capital investment.
In the business environment for the shipping industry, the overall freight rate market showed a gentle recovery from the historically low levels at the beginning of the year 2016. Nevertheless, in the containership business, cargo movements shifted to an upward trend in the second-half of the fiscal year, mainly in the East-West services; however not sufficient to recover the slump in the freight market at the beginning of the fiscal year and loss increased year on year. In the dry bulk business, the market has lifted out of the historically low levels at the start of the year and is on a course for recovery. While the vessel supply-demand gap is on the way to improve, the market conditions were weighed down. The Group worked on measures to improve profitability, such as more efficient vessel allocation, and strove to reduce vessel operation costs. Nevertheless, business performance declined year on year.

  As a result, operating revenues for the fiscal year were ¥1,030.191 billion (down ¥213.741 billion year on year), operating loss was ¥46.037 billion (compared to operating income of ¥9.427 billion year for the previous fiscal year), ordinary loss was ¥52.388 billion (compared to ordinary income of ¥3.338 billion year for the previous fiscal year). Loss attributable to owners of the parent was ¥139.478 billion (down ¥87.979 billion) due to recording of extraordinary losses such as allowance for loss related to business restructuring and impairment loss on fixed assets, despite efforts to saving costs and maximizing profitability especially in the containership business, and minimizing exposures in the dry bulk business.

2) Prospects for Fiscal Year 2017

  For the fiscal year ending March 31, 2018, the Group is projecting operating revenues of ¥1,130billion, operating income of ¥24 billion, ordinary income of ¥21billion and profit attributable to owners of the parent of ¥21billion.

Prospects for FY2016 Fiscal 2016
(Ended March 31,2017)
Fiscal 2017
(Ended March 31, 2018)
Change
Operating revenues 1,030.2 1,130.0 99.8
Operating (loss)income (46.0) 24.0 70.0
Ordinary (loss)income (52.4) 21.0 73.4
Net income(Loss) attributable to owners of parent (139.5) 21.0 160.5
Exchange Rate (¥/US$)
(12-months average)
¥108.76 ¥110.00
Fuel oil price (US$/MT)
(12-months average)
US$265/MT US$320/MT

(Billion Yen; rounded to the nearest 100 million yen)

  In the business environment for the shipping industry in fiscal 2017, the global economy is likely to continue its gradual expansion, however there remains concern of sluggish demand for cargo movement due to uncertainty in both politics and economics such as geographical risks and protectionism. In addition, with the currently ongoing vessel supply pressure, it is expected that the market, which began a slight recovery, will remain unstable for a while. In addition to these structural changes in the business environment, we are conducting a review of our medium-term management plan, which lists reforming the Group’s business portfolio as a core theme, with an eye to the integration of our container shipping business with other two domestic containership companies from fiscal 2018 onwards.
For revisions to the medium-term management plan, please refer to the presentation material.

  Our important task is to maximize returns to our shareholders while maintaining necessary internal reserves to fund our capital investment and strengthen our financial position for the sake of sustainable growth, which is a priority of our management plan. However we consider it an urgent management priority to improve our financial strength in light of the current fiscal year’s loss attributable to owners of the parent. Accordingly, it is with sincere regret that the Company announces it has decided to pay no dividend for the current fiscal year. The annual dividend in the fiscal year ending March 31, 2018 has yet to be decided and we assign the highest priority to improve financial strength and business foundation for the time being.

  We express our appreciation for your support and look forward to your continued cooperation to our “K” Line Group.

  Thank you very much for your kind attention.


  April 28, 2017

  Eizo Murakami
  President & CEO
  Kawasaki Kisen Kaisha, Ltd

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