Ladies and Gentlemen, Thank you very much for joining us today. I will explain our 3rd Quarter (October - December) Fiscal Year 2010 consolidated financial status and our revised estimate for full-year (April 2010-March 2011) financial position for Fiscal 2010.
A. Financial Highlights for 3rd quarter Fiscal 2010
A-1-2. Financial Results
I will start off with Slide page 4, outline of 3rd Quarter financial results, which is described in the middle of the chart; 3rd quarter Operating income 105.0 billion yen and Ordinary income 5.7 billion yen in Containership Business. In Bulk Shipping Business, 3rd quarter Operating income is 112.0 billion yen and Ordinary income is 3.0 billion yen.
9-month Accumulated results (April-December) are as described on the right, which is almost in line with previous estimate.
A-2. Key Points of 3rd Quarter Accumulated Results
Among these valuation factors, the most serious one that will also impact our coming 4th Quarter is Exchange Rate. Because Exchange Rate may give negative impact to all industries, we would like to omit any explanation here. Major impact to us, as a shipping company, is bunker price hike which resulted in 12.0 billion yen negative impact. So, average bunker price raise by $85 per metric ton was very big factor to our profit.
With regard to cargo volume and others, they were almost as expected. As of last October we said that our forecast was on the safe side, especially in Containership business, but unfortunately Container freight rates dropped slightly more than we expected despite our being cautious. This was in North-South trade among others, rather than East-West trade for North America and Europe. There were two factors causing freight rates to drop. One is seasonal factor in slack season same as every year; in addition to that, middle and large ships which were excess capacity from East-West trades pushed into North-South trade and that increased freight competition in North-South trade.
On the other hand, we are trying hard in each trade route to achieve further rationalization of North-Southbound, including ship lay-up even for a short time, for example 6 months, which we experienced in East-Westbound last year.
Although our explanation for 3rd Quarter is brief, we would like to move on to estimate for 2010 Fiscal year which you may be worried about or interested in.
B-1. Estimate for Yearly Fiscal 2010
With regard to Slide B-1, next to 9-month accumulated results on the left is estimate for 4th Quarter.
As you can see on the right edge of the chart, we think it is possible to reach 990.0 billion yen for Estimate of Operating Revenue for Fiscal Year 2010 compared with 985.0 billion yen that we estimated last time.
For Operating Income, the 65.0 billion yen estimate is a bit lower compared with 69.0 billion yen last time. Also Ordinary Income is 53.0 billion yen which is 2.0 billion lower than last time.
However, estimate for Net Income is 33.0 billion yen which is 1.0 billion increase compared with 32.0 billion yen we estimated previously because of several reasons, including tax adjustment, etc.
About exchange rate, our premise for 4th Quarter is 80.50 yen per U.S. Dollar, and we estimate it will average 85.72 yen per U.S. Dollar for Fiscal Year 2010.
B-2. Key Points for Fiscal Year 2010 Estimate
As we mentioned, bunker price may give negative impact of 12.0 billion yen to profit so our premise for 4th Quarter is $515 per metric ton. Although current market price is a bit higher than this, shipping activity is a little slow due to Chinese New Year and it seems that bunker price will slightly fall.
In addition, price will be almost same level by dealing in bunker hedge. We estimate that yearly bunker price will be around $482 on the basis that it can manage to keep $515 through 4th Quarter.
Therefore, we think we do not need to review dividend ratio because estimated figures are almost the same as our previous estimate. As of today we think that business will go as we estimated last time.
In 4th Quarter, although Operating Revenue is almost as expected, amount of Net Profit is almost noncontributory. We think it will be plus minus zero or we may manage to post plus minus zero in 4th Quarter.
The breakdown shows Operating Revenue is almost the same as we announced last time in October, Ordinary Income decreasing a bit, but we estimate that we can secure 33.0 billion yen Net Profit.
B-3-1. Division-wise Trends
- Containership Business -
Moving on to B-3-1 Containership Business in Division-wise Trends, yearly estimate is almost as expected. Although it was possible to manage to secure 5.7 billion yen profit in 3rd Quarter, in 4th Quarter our situation indicates that we have to expect profit to decrease by around 1.0 billion yen.
With regard to freight rates, they kept dropping lower than we expected until middle of December, but around 15th or 16th of December, the decline stopped.
From January, Peak Season Surcharge is being applied taking cargo volume increase until Chinese New Year into account. After Chinese New Year, we are afraid that freight will slightly drop again. Considering those factors and bunker price hike, we think that we must expect profit will decrease around 1.0 billion yen.
In that sense, freight index it is almost as we expected and as to cargo volume, we do not have any special information that can be reported to you as of today.
B-3-2. Division-wise Trends - Dry Bulk Business -
Moving to Slide B-3-2, in Dry Bulk Business, as you know well, from the beginning of this year, flooding in Australia has caused Capesize vessels in particular to stack up at the ports.
Some of them have navigated toward the Atlantic Ocean without loading cargoes, and market rate for Capesize has fallen to catastrophic levels, even below 5,000 U.S. dollars per day.
As we mentioned many times, market exposure of our Cape-size fleet is so small that effect of the market rate might be only around 300 million yen loss at worst, compared to our present projection, which is based on the premise that the market rate will actually be maintained at 5,000 U.S. Dollars per day until the end of March.
However, if market rate for Cape-size stays at 5,000 U.S. Dollars per day in reality, to our regret, ironically, Panamax or Handy-size, which seem comparably affirmative at present, could be falling partly because of psychological effect.
Considering such situation, almost same impact to the Cape-size market may happen to the market for vessels smaller than Panamax, and possible further decline of earnings in Dry Bulk business from present estimation could be about 600-700 million yen. Even if the worst scenario should come true, conversely that is lowest, the effect would not be so serious to our current forecast for this fiscal year which ends on March 31, 2011, provided that damage caused by Australian flooding does not expand further, and that other conditions do not affect us heavily.
B-3-3. Division-wise Trends - Car Carrier Business -
As for Car Carrier Business, and as I have repeatedly said similar things, total cargo volume has fortunately showed signs of recovery with our own marketing efforts, which I expect will continue in the future. However, especially from this January to March, we cannot anticipate significant improvement in either ongoing yen appreciation or exports from Japan to North America, and therefore cannot be significant factors to improve our earnings. We will, therefore, try to maintain our present estimation as best target in the route, and increase cargo volume in trades between counties other than Japan, which means conditions of 'the poor have no leisure' to operate ships toward March.
B-3-4. Division-wise Trends - Energy Transportation and Heavy Lifters-
With regard to Energy Transportation, the market for VLCC's was continuously in a slump, and we still cannot see, or it is rather difficult to see, daylight in earnings for the AFRA-max fleet operated by our consolidated subsidiary in Singapore.
Concerning Heavy Lifters, as to business inquiries that I mentioned last time, fairly concrete business deals have come to be negotiated more and more, so I have a much brighter foresight for the future. Regrettably, however, we cannot include acquisition of any significant businesses contributing to our profit during this January-March term, so our projection for this 2nd Half which was released last October remains unchanged.
Although this is rather brief, we would like to now finish this explanation and general outline.
We will welcome your questions, if you have any.