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"K" LINE's Q3 Financial Status with a Prospect for Full-Year Financial Positions for Fiscal 2002
My name is Yasuhide Sakinaga, President of Kawasaki Kisen Kaisha, Ltd. commonly known as "K" LINE.
It is a pleasure to share with you this report on "K" LINE's Q3 consolidated and non-consolidated financial status and my prospect for full-year financial positions for Fiscal 2002.
In fact, this is the first time for "K" LINE to report its quarterly financial status, which is being started
with this Q3 of Fiscal 2002.
I sincerely and honestly promise you that we will continue to make every effort to advise you of financial information that should always be timely, trustworthy and informative in the interest of all Company stakeholders concerned, as well as shareholders and investors.
First, I will briefly outline the financial results for Q3 Fiscal 2002.
(Kindly see Pages 2 and 3 of the materials at hand.)
The Q3 consolidated operating revenues amounted to 163 billion 556 million Yen. Accumulating them for a 9-month period from Q1 through Q3, you can see that they reach 473 billion 150 million Yen.
As compared with the 610 billion Yen that was announced at the close of interim accounting as of September 30, 2002, an achievement ratio of 77.6%.
I draw your attention to the Q3 operating income which you can see reached 9 billion 98 million Yen. As a result, the same operating income amounts to 20 billion 369 million Yen accumulated for the same 9-month period. The figure is equivalent to a 92.60 % achievement ratio as compared with the already prospected 22 billion Yen on a yearly basis.
In the meantime, income before income taxes and extraordinary items (previously named "Ordinary Income") achieved the level of 7 billion 506 million Yen during the Q3. The accumulated amount totals 15 billion 350 million Yen from Q1 through Q3, and corresponds to a 93.0% achievement ratio against the previously prospected 16.5 billion Yen on a yearly basis.
During Q3, "K" LINE was faced with some difficult situations. That is to say, there was the waterfront lockout on the West Coast of the U.S. as well as the considerable hike in bunker-oil price, etc.
Prevailing over those unfavorable factors, "K" LINE could still realize an even better business performance. This is owed to favorable market trends and the steady efforts carried out by all people concerned inside and outside the Company.
The business landscape is briefed as follows:
Bulker and tanker markets saw upward improvement.
Container cargo moved with steadiness, particularly from China to Europe and the U.S.
Sea-transported cars and trucks units increased for the U.S. and Middle East.
As a result, I am very glad to say that both operating revenues and income improved much better than prospected at the earlier stage.
In looking back, there was a substantial drop in freight rates for container cargo moving in the trunk lines after the autumn months of year 2001 when the September 11 attacks took place in the U.S. This excessive drop caused the Company's financial status to turn downward rapidly. Responding to the steep turndown, management proceeded to map out its 3-year "KV-Plan." This Plan focuses on cost reductions and strengthening of competitiveness aimed at a V-type rapid improvement.
In light of the Company's better overall performance, I can tell you with confidence that "the Company is steadily getting on track toward recovery."
I wish to now brief you on the Q3 achievements by business sector. (Kindly see pages from 4 through 7.)
In our Container Business, a series of 13 new larger containerships entered service from the year 2001 to the middle of 2002. They began operation in full swing with the support of positive tonnage movement centering on China cargo. As a result, we could carry as much cargo as we targeted earlier on the North America, Europe and Asia service lines.
Another good piece of information is that a portion of freight rates in the Europe trade could achieve recovery during Q3.
Overall, business performance managed to end with better results than previously prospected. My viewpoint is that we successfully managed to offset increased costs caused by the U.S. waterfront lockout and the hike in bunker oil price through consistent and positive efforts for cost curtailment throughout "K" LINE and its Group Companies.
In our Bulker/Car Carrier Services, I am happy to mention that the Bulker markets could also get on track toward recovery in the face of positive cargo movement. Ship operation could be improved a great deal centering on carriers of iron-related materials.
When it comes to our Car Carrier Services, the volume of units transported in the trade from Japan to North America, Australia and the Middle East oil-producing countries all showed increases. At the same time, the Company could also perform quite well in other-than-Japan trade.
Bulker/Car Carrier Services were unfavorably influenced by the waterfront lockout on the U. S. West Coast and incurred some losses, but which fortunately could be recovered through our efforts for curtailment in ship costs and expenses.
Overall, I am glad to say that these same Services were able to perform better than previously prospected.
Proceeding to Energy Transportation and Tanker Services, I can report to you that LNG (Liquefied Natural Gas) Carrier Services succeeded in making a stable profit owing to the Qatar and other projects being carried out as scheduled.
Regarding our Thermal Coal Carrier Services, "K" LINE could increase its transported cargo due to market recovery and favorable effects created by newbuildings entering service.
Concerning our Oil Tanker Services, the markets fortunately started to turn upward from the first half of Fiscal 2002.
In the end, these services could achieve better performance than earlier anticipated.
Short Sea/Coastal Shipping Services and Air Freight Forwarding Services could both advance with steadiness.
I am glad to state that Services Incidental to Transportation also achieved better results since the
"K" LINE Group enjoyed an increase in quantity of cargo handled.
In the other services, the Company could see about the same results as had been expected.
And lastly, I would like to briefly touch upon my present prospect for Fiscal 2002 on a full-year basis. (Kindly see pages 8 through 12.)
The points being mentioned as follows are on the preconditions of an exchange rate of 120 Yen against the U.S. Dollar and bunker-oil price of 180 U.S. Dollars per kilo ton; and on a full year basis, an averaged exchange rate of 122 Yen and bunker-oil price at 163 U.S. Dollars).
Despite the fact that there are so many opaque factors in relation to trends in exchange rates and the pending Iraq issue, I forecast that on a consolidated basis, however, that operating revenues will be 630 billion Yen, operating income 29 billion Yen and net income 22 billion Yen. The same results in prospect will be equivalent to what has been targeted at the completion of the 2nd year of the "KV-Plan."
I am proud to reiterate that we are one year ahead of schedule in our accomplishments under this Plan.
On a non-consolidated basis, it is being forecast that operating revenues will amount to 495 billion Yen, operating income 19 billion Yen, income before income taxes and extraordinary Items 15 billion Yen and net income 6.5 billion Yen. The same results except for net income are also expected to stand at a better position than the 2nd year of the "KV-Plan."
A present analysis of Company services for each segment indicates the following:
Container Services are expected to realize somewhat better business achievement than planned, thanks to the possible recovery of freight rates that dropped in early Fiscal 2002, as well as cost curtailment by means of restructuring our service network, despite some unfavorable factors such as a hike in bunker-oil price, etc. that are being expected.
Bulker and Car Carrier Services are also anticipated to attain better business results than previously forecast. This can be attributed to recovering markets and on-going positive cargo movements such as completed vehicles bound for the U.S. and Middle East oil-producing nations.
Energy Resources Transport and Tanker Services also will operate better in response to upward market trends.
To make the Company's balance sheet still healthier and sounder, desperate efforts will be executed to fairly and rigidly deal with latent losses of investment securities under prevailing circumstances in which the stock market is low key. In a real sense, improvement will be accomplished to a significant extent as far as income before income taxes and extraordinary items is concerned.
I must say, however, that relatively speaking our net income will not see that much improvement.
At the forthcoming annual shareholders' meeting in June 2003, "K" LINE's Board of Directors is going to propose an annualized dividend of 5 Yen per share, which adds one Yen to the previously announced dividend, on the precondition that net income will reach 6.5 billion Yen on a non-consolidated basis.
This completes my report to you today.
In all honesty, I can without any doubt or hesitation assure you that with one voice, all directors and employees of "K" LINE and the "K" LINE Group are committed to the earliest accomplishment of the "KV-Plan."
Many thanks for joining me.
