Ladies and Gentlemen, thank you very much for joining us today when you are very busy.
A-1. Financial Results for 1st Quarter Fiscal Year 2011
I will first explain our 1st Quarter Fiscal Year 2011 (April 2011 - June 2011) consolidated financial status along with these slides. As mentioned in this Slide A-1, Operating Revenues were 244.2 billion yen. Ordinary Income was deficit of 8.8 billion yen, and Net Income was deficit of 3.7 billion yen. Average exchange rate for 1st Quarter was 82.04 yen per U.S. dollar, and fuel oil price was 644 U.S. dollars per ton. Last year's 1st Quarter results are quoted in the column just to the right side of this 1st Quarter results. As you see, the results were drastically different from last year. This is especially evident when looking at year-on-year comparison. First, exchange rate for 1st Quarter Fiscal Year 2010 was 92.81 per dollar, which appreciated by 10.77 yen for this 1st Quarter, negatively affecting our profit by minus 3.0 billion yen. In a similar way, average bunker oil price during this 1st Quarter was 644 dollars per ton while it had been 475 dollars per ton in the previous 1st Quarter, so the difference of 169 dollars per ton resulted in our Ordinary Income dropping by 5.1 billion yen. In order to be quoted in this chart, business-wise results are indicated in the right side table. You can see Containership Business with 104.7 billion yen Operating Revenues and Ordinary Income was minus 7.8 billion yen; Bulk Shipping Business with 110.1 billion yen Operating Revenues and Ordinary Income minus 2.0 billion yen as well. Other Business earned some profit, and all aggregated, Ordinary Income totally resulted in minus 8.8 billion yen, as I touched on before.
A-2. Estimate for 1st Half Fiscal Year 2011
Next, in this A-2 slide, I will talk about our 1st Half forecasts, which are a total of 1st Quarter results that I have now explained and 2nd Quarter estimation. When we made the previous financial announcement in April, I said that in this 1st Quarter our forecasts regrettably went into the red, but from 2nd Quarter it would turn black. On that point, actual deficit in this 1st Quarter was in line with the estimation announced as of April, but in revised estimation for 2nd Quarter, while Operating Revenues will grow somewhat to about 255.0 billion yen, Ordinary Income is continuously expected to show a loss of 5.2 billion yen.
But, considering Net Income for this 2nd Quarter, we expect profit of 1.7 billion yen. Exchange rate premise for this 2nd Quarter is 80.24 yen per U.S. dollar, which we understand reflects recent rate. Fuel oil price is set as 656 dollars per ton. Regarding the Net Income that I mentioned, let me give you a little additional information. We expect some extraordinary profit from share exchange within this 2nd Quarter. The story is that one of our overseas subsidiaries, Kawasaki Australia, has made investments for terminal, stevedoring or property-related businesses together with a partner, an Australian listed company. Recently the partner company wanted to buy all shares of such joint businesses, and we decided to exchange all of our shares with the partner company's listed shares.
Due to this exchange, we will incur 6.8 billion yen profit before tax, and 4.8 billion yen after tax.
Including this profit, our Net Income for 2nd Quarter is therefore estimated as 1.7 billion yen. With these comments, we hereby publicize our estimation for 1st Half, a total of 1st Quarter results and 2nd Quarter estimations, as mentioned in this table: Operating Revenues of 500.0 billion yen, Ordinary Income minus 14.0 billion yen, and Net Income minus 2.0 billion yen.
A-3. Estimate for Full Fiscal Year 2011
Moving to Slide A-3, I will talk about full-year forecasts for the Full Fiscal Year 2011.
Actually, our 2nd Half predictions remained unchanged from what we announced in April, that Operating Revenues are 560.0 billion yen, Ordinary Income 8.0 billion yen and Net Income 4.0 billion yen with assumptions for exchange rate 85 yen per U.S. dollar and fuel oil price 650 dollars per metric ton. Every year we revise the budget for 2nd Half during August, and at this moment there are so many ambiguous factors such as exchange rate, freight rate markets for containerships or dry bulk carriers in the future, so we have held just the same forecasts for this 2nd Half as what was publicized in April. In this regard, today we will release our full year forecasts that Operating Revenues are 1 trillion 60.0 billion yen, Ordinary Income minus 6.0 billion yen and Net Income plus 2.0 billion yen.
A-4. Key Points
Next, here we have briefly summed up Key Points: as I mentioned at the start of this speech, fluctuation of exchange rate considerably affected 1st Quarter Ordinary Income for the year-on-year basis. Impact of various fluctuating factors in Exchange Rate is minus 3.0 billion yen, and Bunker Oil Price hike is minus 5.1 billion yen. These are two major specific factors. Further, with there being negative effects quoted from market volatility, market freight rates were lower than our preconditions as of April. Especially considering the situation whereby restoration or raising Containership freight rates has not proceeded in line with our original schedule, downturn trend of freight rate might be the biggest factor to depress our profit. Regrettably, this is the case nowadays. Now, I will briefly overview business-wise trends and will later answer your questions for more details.
B-1. Division-wise Trends -Containership Business-
As indicated in the right side column, Ordinary Income for this 1st Quarter was loss of 7.8 billion yen. As to freight rates for this 1st Quarter, using our 'freight index' that set freight rate as of 1st Quarter of Fiscal 2008 as 100, out-bound leg for Asia-North America routes was 94, and that for Asia-Europe was 71.
Lifting volume was, as quoted in this table, 163,000 TEUs toward North America, and 130,000 toward Europe, both out-bound trades from Asia.
Utilization rate was 93% for Asia-North America, and 97% for Asia-Europe, ratios which we understand are not so poor. However, partly because we had squeezed our space substantially, we had made our original plan as of April based on slightly higher utilization ratio than it was, so I suppose less loading volume than the original to some extent reflected in our profit being down.
B-2. Division-wise Trends -Dry Bulk Business-
Next, B-2, Dry Bulk Business among 'Bulk Shipping Business.' I will shortly explain about this section. During this 1st Quarter, average market rate for Cape-size was 8,600 U.S. dollars per day, Panamax 13,800 dollars, and Handy-max 14,600 dollars. Especially Cape-size market slump will negatively affect our profit. Also as quoted in this table, since we have made simulations of our businesses for this 2nd Quarter based on assumptions of Cape-size being 15,000 U.S. dollars per day; Panamax 14,000 dollars; and Handy-max 12,000 dollars, premises which we feel for Panamax or Handymax market are actually what they now are like. However, Cape-size rate, once returned to nearly 15,000 dollars per day, again slid downward around 10,000 dollars, so please recognize this could be a somewhat unstable element against our forecasts for 2nd Quarter onward.
B-3. Division-wise Trends -Car Carrier Business-
Then, talking about B-3, Car Carrier Business, as I said at the previous analyst meeting in April, loading volume would drastically decrease in the 1st Quarter due to effect of the Great East Japan Earthquake; the actual number of cars we carried throughout the 1st Quarter was 162,000 in outbound service from North East Asia, as hereby mentioned. Referring to the far end of the left side of this table, that for 1st Quarter Fiscal 2010 was 240,000. This nearly 80,000 cargo drop damaged our profit significantly. For 2nd Quarter, we expect loading volume will show fair recovery. However, as you may know, our income and costs for this business are booked on basis of the 'voyage completing method', so, unfortunately, many vessels loading cargoes during 2nd Quarter will be completing their voyages within 2nd Half. In this regard, however, profit of our Car Carrier Business will solidly turn into the black after October.
B-4. Division-wise Trends -Energy Transportation and Heavy Lifters-
At the end as to B-4, Energy Transportation Business, etc., to our great regret, we cannot say oil-tanker-related markets are fantastic. The slack has continued for a long time, and average VLCC market level for this 1st Quarter was World Scale 54, which is an exceptionally low level. Markets of AFRA-max and Clean have also been at far below break-even levels, which is the present situation as well. Most of our VLCC business is based on long-term contracts on which we still have earned some profit. However, AFRA-max and Clean tankers have incurred losses so I feel we must think about how we can manage these businesses in the future. Then, regarding offshore support vessels, due to slowing down of various projects after the severe economic recession, the market for this business also fell drastically, and we felt quite doubtful about its profitability in the future. However, energy situation has subsequently turned to phase of shortage, and many oil drilling projects have resumed, so present market for offshore support vessels is in upward trend.
So, fortunately, as our offshore business fully started only from this year, we were able to post some profit.
Here I will conclude my explanations.
