President and CEO
Kawasaki Kisen Kaisha, Ltd. ("K" LINE) is pleased to share with you our First Half (April-September) Fiscal Year 2013 consolidated financial status, and full-year financial position for Fiscal 2013 together with notice regarding payment of dividend.
(Results for 1H Fiscal 2013) (1 April 2013 - 30 September 2013)
Unit: Billion Yen
|Consolidated||(Previous Estimations*)||(F2012 1H Results)|
(F2013 1H Yen/U.S. Dollar average exchange rate Y98.03; bunker oil price U.S. $629 per KT)
*Data as of end of July, when 1Q Financial Results were announced.
During this 2nd cumulative consolidated fiscal quarter (April 1, 2013 to September 30, 2013) the world saw the U.S. economy on a mild recovery trend and signs of the prolonged economic downturn receding owing to the sovereign debt issues in Europe. Among emerging countries, the Chinese economy showed signs of reversal from slowdown while India and other countries continued to show decelerated growth.
The freight rates in containership sector continued at low levels, especially in European service routes, due to the stagnant European economy. In car carrier business, the growth of ex-Japan cargo movements lost momentum. On the other hand, freight rates in the dry bulk sector substantially recovered in and after August due particularly to increased shipments of China-bound iron ore.
Overall, the business environment surrounding the shipping industry remained unstable despite positive factors towards our business performance such as moderation of soaring fuel oil price which improves profitability and some correction of excessive appreciation of yen that has lasted for past several years which increases revenues.
(Updated Forecasts for Yearly Fiscal 2013) (1 April 2013 - 31 March 2014)
Unit: Billion Yen
|Consolidated||(Previous Estimations*)||(FY2012 Results)|
(F2013 2H Yen/U.S. Dollar average exchange rate Y100; bunker oil price U.S. $600 per MT)
(F2013 Yen/U.S. Dollar average exchange rate Y99.02; bunker oil price U.S. $614 per MT)
*Previous Estimation was as of 31 July 2013 when we released our revised forecasts for consolidated financial results.
Assumptions for foreign exchange rate and fuel oil price are as mentioned above, and sensitivity on our 2nd Half Ordinary Income for this Fiscal 2013 is estimated as follows:
Exchange rate: 1 yen/US$ => Ordinary Income change approx 0.4 billion yen*
Fuel oil price: US$10/MT => Ordinary Income change approx 0.6 billion yen
* Yen depreciation is preferable for us.
In containership business, in our view of global economic situations where the U.S. is on a mild recovery trend while uncertainty prevails in Europe, we will continue to focus on the principle of “selection and concentration” whereby we will pour more business resources in our trunk lines toward North America and Europe, while we will be engaged in prudent business operations for the other trades. Together with our continuous efforts for reducing vessel operating expenditures by cutting back services in keeping with actual cargo demand in each service route, enhancement of slow steaming, further implementation of cost cutting measures throughout our entire global business network, and we will intensify our efforts for freight rate restoration. At the same time we will step up route management for profitability improvement by greater utilization of information technology.
In logistics business, there are some signs that there will be improvement in ex-Japan air cargo services towards the second half of the current fiscal year, and we expect that domestic logistics business including land transportation and international logistics of inter-/intra-Asia service will continue to be strong. We have been pursuing further deepening and expansion of our logistics business in certain Asian regions where economic growth continues and we will further enhance our stable profit based on this business segment as well.
In dry bulk business, while freight rate market seems to be on a recovery trend for Cape-size and Panamax/Handymax sectors, concern over tonnage oversupply is persistent. However, we are finally seeing supply-demand balance between vessels and cargoes has started to improve, given that concerns about the Chinese economy slowing have temporarily receded with subsequent recovery of cargo movements, we expect the dry bulk market to continue strong for the time being. Under such a volatile dry bulk market, we have continuously tried to achieve stable profit condition that are not impacted by short-term market situation, based on mid-/long-term contracts. We will keep working on implementing all available means for profitability improvement, such as efficient vessel allocation and reduction of operating costs.
In car carrier business, while car sales in the markets of North America and Middle East show steady growth, concerns over the growth are prevailing, particularly in the European market where slump in sales is prolonged, and to the emerging markets like China, India, Russia, etc. where sales are slowing down. However, we expect marine transportation of automobiles will continue to be strong on a global basis. Together with completed car transportation, we will further reinforce the transport of construction machineries and non-wheeled cargoes.
In energy transportation segments, LNG carrier business, as well as VLCCs and LPG carriers in tanker business, we expect to generate stable revenues under long-/mid-term charter contracts. For oil tankers, we anticipate it will be some time before the market recovers in a full-fledged manner. As for Aframax and product tankers in which we have many contracts linked to market freight level, we have already decreased the number of fleet in order to minimize negative impact from the market, and we will make further efficient allocation of fleet for the sake of better profitability.
In short sea business, we will keep ourselves engaged in prudent business operations through making adjustments to our tonnage and reducing ship operating costs for enhancement of competitiveness.In coastal business, we will develop new customers while maintaining stable relationships with existing customers for tramper service. For liner services, we will make aggressive sales operations considering our fleet strategy which includes building of new vessels for replacement of existing ones, to cope with increasing demand in Hokkaido, Kanto and Kyushu areas. For ferry services, we will work to have our fleet engaged in steady operations thereby fulfilling our mission to serve as daily local transportation for people in Tohoku and Hokkaido.
In energy E&P support vessel business, we expect continuous contribution to the earnings by offshore support vessels and drill ships through their stable operations. Regarding offshore support business, it has been about five years since we entered into this new business area, and we now feel a good response indicating that it has started to get fairly well on track.
In heavy lifter business, we expect it will take some more time before the market recovers in mid-/small-sized vessel sectors where competition is rather tough, and we will continue to tackle even more rationalization and structural reform.
Our important task is to maximize returns to our shareholders while, for the sake of sustainable growth which is a main task of our mid-term management plan set in April 2012, maintaining necessary internal reserves to fund our investments in equipment and strengthen our financial position. Our dividend policy is to raise distribution payment ratio gradually with an intermediate target of 30% of consolidated net profit to be achieved in mid-2010's.
With respect to the interim dividend for the current financial period, the Board of Directors today resolved that no interim dividend be paid as was similarly announced previously.
As for annual dividend payment for the current fiscal year, we will sustain our plan to pay \3.5 per share as was previously announced despite today’s revision of our forecast of financial results to increase net income in consideration of persistent uncertainties in shipping market trends.
Meanwhile, we have issued on 10 September 2013 Euro-yen Convertible Bonds (50.0 billion yen ) that will mature in 2018, which aims for further promotion of growth strategy in association with secure finance and more stabilization of our financial ground, in our effort to achieve ‘Build a stable earning structure’ and ‘Reinforce financial standing,’ the main themes of our mid-term management plan. As announced, we will allocate such raised funds for investment in car carrier and LNG carrier businesses, looking towards their growth in the future.
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.
October 31, 2013
President & CEO
Kawasaki Kisen Kaisha, Ltd
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