To each
member of "K" Line and all our Group Companies, Happy New Year! It is a great
pleasure to send a message to you at the beginning of the year 2000, the last year of the
20th century with all its great changes and also the start of a New Millennium.
During the first half of fiscal 1999 we could post sales revenues of 181,200 million yen,
operational profit of 9,800 million yen, ordinary profit of 6,600 million yen. On a yearly
basis, we prospect that we can post sales revenues of 360,000 million yen, operational
profit of 16,000 million yen, ordinary profit of 11,000 million yen and net profit of
4,000 million yen. Provided there is no change in economic circumstances, we will be able
to attain a level of business achievement enabling us to pay a dividend of 4 yen per
share, 1 yen higher than last year. On a yearly-consolidated basis it is anticipated that
sales revenues will total 490,000 million yen with operational profit of 28,000 million
yen, ordinary profit of 14,000 million yen and net profit of 6,000 million yen.
The operational profit for the current first half is the 2nd record high in the
Company’s history following that for the corresponding period in fiscal 1974. If and
when we attain ordinary profit of 11,000 million yen on a yearly-basis, we will reach the
past record high. In particular, the Container Business Sector had been in the red for a
long time due to exposure to the harshest of competition from the Asian shipping lines.
The bottom line of the Sector, however, improved into the black during the current first
half as a result of restoration in freight rates and cost-reduction efforts and is
expecting to be back above the surface of the water on a yearly basis. Such favorable
results are encouraging and lead us to be more positive in considering future business
development. Here I would like to express my sincere gratitude to all "K" Line
customers for their warm-hearted support and cooperation in each and every business
transaction in all sectors. For such a remarkable improvement I would simultaneously like
to say how much we owe to the directors, employees and all colleagues throughout the
"K" LINE Group in Japan and abroad who have been patiently making such diligent
efforts. Frankly, I want to share my good feelings with all of you but with the
understanding that we are still on the way to the final goal ahead.
As you are well aware, the new consolidated accounting system is to be introduced in Japan
as from fiscal 1999 in which businesses must publicly open their activities mainly on a
consolidated basis. It means that businesses are being assessed on that basis.
"K" Line, on non-consolidated basis, stands as a big core from the viewpoint of
its business scale, but it should be regarded as only a part of the whole
consolidated-business composition. For example, other companies in our Consolidated Group,
i.e. Kawasaki Kinkai Kisen Kaisha, Ltd., Daito Corporation and "K" Line Air
Service, Ltd., each post sales revenues of 25,000 to 30,000 million yen on an annual
basis. In comparison with our Tanker and Energy Transportation Services Sector earning
36,000 million yen in annualized sales revenues, you can understand that the Group
companies composed of the lines of consolidated business are playing so important a role.
In New "K" LINE Spirit for 21(New K-21) showing the four concrete directions, we
are committed to giving importance to consolidated management as one of them. Back in July
1999, along this direction, Consolidated Management Division was started in an attempt to
cope with this new era of consolidated management. At a meeting with the presidents of
twenty-four group companies that took place in September 1999, the Company’s
principles and directions of consolidated management were cleared and confirmed:
Maximization of corporate value as the "K" Line Group reflecting on the stock
price of "K" Line must be the top-priority management goal through
maximization of consolidated management achievements and realization of healthier
financial status in making improvements in profitability and efficient asset management at
the level of the Group. We mutually share the basic understanding that seeking for
optimization for the Group as a whole may not always be the same as seeking for
optimization of individual group companies. On this basic understanding, the principles
and goals of consolidated management are to reconstruct the whole lines of business by
Company’s subsidiaries into the most optimum composition and to attain to realization
of the goals to which the Group is committed.
At the same time, we further gave our fundamental explanations to the attendants about our
basic policies comprising Personnel Policy, Business Composition Policy, Capital Policy,
Profitability & Management Efficiency Improvement Policy & Finance Policy. We
sincerely asked for their better understanding and cooperation. We are planning to
steadily execute the above policies through discussions at the committee of New K-21 and
by officially authorized organizations within the Company.
Implementation of these policies is exemplified by a share exchange agreement concluded on
November 26, 1999 for retransformation of Taiyo Kaiun Kabushiki Kaisha into a 100%
subsidiary. I firmly believe that this action is being taken to be ready for the new era
of consolidated management reviewing the old system of the Japanese shipping industry set
up in 1964. This action is being followed by the Company proceeding to carry out a drastic
review with regard to organizational reforms, upon the ship management companies assuming
a part in shipping business as the Company’s core business, and upon the
harbor/stevedoring/transport and logistics companies, the core business of the Group.
Summarizing up the domestic and overseas economic circumstances surrounding the Company, I
would like to mention that overseas, the U.S. economy, despite showing a tendency towards
a mild slowdown, seems to continue its comparatively stable growth with the support of its
skillful financial policy aimed at sustainable growth. The European developed nations are
expected to attain a mild improvement in their economies by token of recovery in
exportation. In Asia the nations seem to have tided over the economic crises resulting
from the currency crises and to already be on the road to recovery. With respect to Japan,
it is judged that the economy has bottomed out and started towards a recovery supported by
the financial measures repeatedly taken by the Japanese Government and an increase in
exports due to general recovery of the Asian economy.
However, the major domestic industries are exerting every effort to restructure
themselves. They are addressing the Japanese structural upheavals ranging from the aging
population with less number of children to the rapid information-technology-driven changes
observed in every sector, and also tackling the structurally-changing economic systems
resulting from Japan entering into the new era of low economic growth versus previous long
period of high economic growth. Some publicly-announced consolidations and reorganizations
in the financial sector here are beyond the traditional entrepreneurial system based on
the divided groups of financial capital. In fact, they truly deserve general attention
since they give a new impact to the business management circumstances.
In the wake of the two mergers in Japan’s shipping world namely NYK/Showa and
MOL/Navix, “What "K" LINE would do?” was taken up as a concern by some
mass media. In reply, I would to like to mention with firmness that there is no change in
the least to the Company’s fundamental management policy of standing independent on
our own under our own responsibility. In comparison with the world’s major shipping
lines, I would like to assert with sureness and confidence that scale-wise the Company has
already sufficiently developed to be large enough to satisfy customer needs and
continuously provide price-competitive services to them. For the bottom line, the most
necessary theme for the Company is to maintain a necessary and optimum corporate scale to
practice the above two missions. Last year the Company promoted its newbuildings plan
focusing on bulkers in an effort to develop the non-liner business sector, which is one of
the assignments we are committed to in New K-21. In the meantime, the Company has been
restraining any investment in newbuildings in the Container Business Sector since the
Bosporus Bridge was put into service in July 1993. It can be judged now, however, that
that Sector is posting a satisfactory level of profit and is now ready to make a practical
step for future fleet additions. From such judgment, towards the end of last year the
Company resolved to place an order for eight 5500-TEU-type containerships. The resolution
is aimed at replacing old ships with the best and latest updated ones, increasing
container carrying capacities to catch up with the growing world container cargo movements
and assuring greatest price competitiveness through the larger-sized containerships. We
consider that these new containerships, among the most competitive in the world, can be
expected to play a key role in the major service routes in the 21st century.
On the occasion of this being the beginning of a New Year, I would like to heartily pray
that all employees--on sea and land, their families, those celebrating the new year inside
or outside Japan, everyone from all our Group companies within and outside Japan, may be
blessed with good health, abundant happiness and increased prosperity in this New Year
2000. |