Ladies and Gentlemen, thank you very much for joining us today when you are very busy.
I will first briefly explain our cumulative 1st and 2nd Quarter (April-September) Fiscal Year 2013 financial status and our updated estimate for full-year (April 2012-March 2013) financial position for Fiscal 2013.
A-1. Financial Results for 2nd Quarter Fiscal Year 2013
Let me indicate our 2nd Quarter Fiscal Year 2013 (June – September 2013) financial data in this Slide A-1 you have in your hands.
As mentioned, Operating Revenues were 310.9 billion yen, Operating Income was 12.5 billion yen, Ordinary Income 9.1 billion yen, and Net Income 7.7 billion yen.
Average exchange rate and fuel oil during the term were as quoted in the table.
Together with 1st Quarter, for entire 1st Half, Operating Revenues were 606.6 billion yen, Operating Income 19.8 billion yen, Ordinary Income 20.0 billion yen, and Net Income 14.7 billion yen.
Average exchange rate for 1st Half was 98.03 yen per U.S. dollar and average fuel oil price was 628 U.S. dollars per metric ton.
Finally for 1st Half, while our Operating Revenues declined slightly, Operating Income was up by 6.8 billion yen, Ordinary Income was also up by 5.0 billion yen, and Net Income up by 7.2 billion yen from our previous estimation publicized in July 2013.
Exchange rate and fuel oil price remained almost unchanged from the last assumptions as of July 2013.
Talking about outline of segment-wise results as mentioned in the lower table, during 2nd Quarter, Containership Business, which is now composed of both Containership Division and Logistics Division, earned 1.5 billion yen Ordinary Income for 2nd Quarter, and for accumulated 1st Half, Operating Revenue 294.3 billion yen and Ordinary Income 1.5 billion yen.
In Bulk Shipping Business, during 2nd Quarter, we posted 141.5 billion yen of Operating Revenues and 9.7 billion yen Ordinary Income, and total for 1st Half Ordinary Income was 21.9 billion yen.
While the other business segments do not account for major part of our business performance, Offshore Energy E&P Support & Heavy Lifter Business was still in uphill battle for 2nd Quarter, and did not become profitable, ending up with deficit of 0.7 billion yen for the term, and 1.9 billion yen for 1st Half.
Including 'Other' Business segment and 'Adjustments', 1st Half results in total were what I indicated in the beginning.
As a result of these, profit and loss, or anyhow our major financial indices, turned to what we mentioned at the bottom of right side of the slide, which shows comparison of those as of the end of September and the end of March.
Shareholders'Equity at the end of September was 383.2 billion yen, expanded by 42.6 billion yen from the end of March.
As to Cash and Deposits, our liquidity in hand was 231.1 billion yen, including cash from convertible bonds of 50.0 billion yen issued within the 2nd Quarter.
Thereby Interest-bearing Debt also increased to 650.9 billion yen, which is a record maximum amount itself, while our Cash and Deposits also reached maximum in our history.
Debt Equity Ratio declined slightly, and especially looking at Net Debt Equity Ratio, it decreased to 110%, for which we understand our financial standing has become much healthier than before. Our Equity Ratio has gone beyond 30%.
As to extra-ordinary profit and loss, which is not indicated in these slides, for this 1st Half, our extra-ordinary profit was 5.0 billion yen mainly from sale of assets and investment securities.
And extra-ordinary loss was 5.3 billion yen including loss from sale of assets and revaluation loss on investment securities, etc., and accumulated extra-ordinary profit and loss is 0.3 billion yen net loss.
A-2. Key Points of 1st Half Fiscal Year 2013
Slide A-2 shows Key Points for our 1st Half results of Fiscal 2013, and factor-wise points were as shown.
Just for guidance, making a comment especially to some of these factors, as the third one, 'Market Volatility', freight rate market for containership business fell compared with our last estimation announced three months ago.
Due to this factor our profit was lowered by 3.0 billion yen, but on the other hand, as indicated in another item below, 'Cost Increase and Decrease', which means cost saving in one word, we succeeded in our efforts for cost saving.
Eventually we were able to post some profit in our Containership business for this 1st Half.
A-3. Estimate for Full Fiscal Year 2013
Next, I will talk about full-year forecasts for Fiscal Year 2013, which I understand is what you are most interested in.
To conclude, our full-year forecasts almost remain unchanged from what we set in July.
Operating Income and Ordinary Income are kept at just the same figures, and Net Income is somewhat increased to 16.0 billion yen.
Pre-conditions for exchange rate and fuel oil price are just as mentioned in this table.
I will point out a few of the reasons why we set same figures.
One is that coming to the 2nd Half, after this autumn, I feel that concerns about deceleration in global economy might be spread widely.
According to one article, world GDP growth expectation for 2013 is widely revised downward.
It is like teaching your grandmother to suck eggs, an expression that comes from an old Japanese proverb, “To teach Buddhism Sutras to Buddha,"
considering such situations like federal debt ceiling problem in US, politics and economics in China becoming substantially unsteady, or lasting economic deceleration in India, Brazil and other emerging economies, so we wonder how far we can achieve freight restoration in containership business scheduled in November, or our cost-cutting measures along with the rate restoration.
This is one of the reasons we made full-year estimations same as previous ones.
Another reason is that dry bulk market for this year started to recover earlier than our expectations, which is of course very nice for our business, but it started to decline again earlier than our expectations, which means the market is awfully unstable.
So I feel it is difficult to accurately foresee the future market at present time and so I decided to leave full-year plan unchanged.
However, we did revise Net Income slightly to 16.0 billion yen, which means that when Ordinary Income possibly increases somewhat, Net Income could be favorably changed.
Then, segment-wise plan for this full year is as indicated in the table at the bottom of this slide.
For Containership Business, 2nd Half Ordinary Income is now expected to show loss of 6.0 billion yen, due to the factors I mentioned before.
Bulk Shipping Business is 15.6 billion yen, and the others are just as quoted in this slide.
In total, 7.0 billion yen Ordinary Income is expected for this 2nd Half, and you might feel like the gap between 1st Half is too big.
But again, with such opaque factors that I mentioned before, we left them unchanged in this way.
Talking about insignificant matters, in sensitivity from exchange rate for this 2nd Half, it is estimated that
1 yen change in yen-U.S. dollar exchange rate will result in about 0.4 billion yen fluctuation in Ordinary Income, and 10 U.S. dollars per one metric ton change in fuel oil price for this 2nd Half will result in about 0.6 billion yen effect on Ordinary Income.
Regarding extra-ordinary profit and loss for 2nd Half, although we have not counted on anything significant, depending on circumstances, we may make some structural reforms and could expect certain amount of extra-ordinary losses.
It totally depends on actual situation.
A-4. Key Points for Full Fiscal Year 2013
Next is Key Points of our estimate for Fiscal 2013.
As we previously said, Containership freight has already dropped drastically since about September which is indicated in 3rd column of Market Volatility in the table.
Most important point is how much we can restore this Containership freight after November and how far our winter program, such as skipping voyages or laying up ships, will be carried out.
On the other hand, we increased target of our cost saving plan by an additional 10.0 billion yen and will try to achieve this target in 2nd half.
So please understand this cost saving is one of the Key Points in our 2013 estimate.
A-5. Progress of Cost Saving Plan
Finally about Progress of Cost Saving Plan, although original target we set at the beginning of the year was 14.5 billion yen, it was increased by roughly 10.0 billion yen additionally as we explained.
Therefore, new total Cost Saving target for this year is 24.2 billion yen.
Talking about just 1st half, actual result was 9.2 billion yen of cost saving which means 64% of original target has already been achieved.
We now have to try further Cost Saving since we enlarged the denominator.
I have now concluded my explanation of results for this 1st half Fiscal 2013.
Let me report to you about cash flow.
At the top of the data, you can find 'Cash flows from operating activities.'
As reported in our financial highlights, another document you have in your hands, on page 14, Net cash provided by operating activities is 61,743 million yen during 1st Half which is very substantial.
This includes 23,612 million yen of "change in derivative assets and liabilities, net" which was generated by cancellation of derivative contracts in 1st quarter. We will explain further if there are questions later.
In addition there is Cash flows from investing activities.
This was improved by means of sales of securities and ships, etc.
We limited Cash flows from investing activities to 16,170 million yen as total.
Therefore free cash flow by the end of this 1st half was 45.5 billion yen.
It may be an historically high amount of free cash flow as per half year terms in the past although have not looked back in details.
Cash flows from financial activities is also plus in this 1st half, because we issued Convertible Bonds in 1st half.
Amount of cash and cash equivalents at the end of 2nd quarter is at an historically high level which was never reached in the past.
B-1. Division-wise Trends - Containership Business -
Containership Business material is shown in Slide B-1 that you have in your hands.
We could make a profit in 1st half by cost saving and sale of assets such as sale of Container boxes, although freight level itself was at a very hard level as we explained.
Next important point is how we can restore freight rates after November.
B-2. Division-wise Trends - Dry Bulk Business -
Regarding Dry Bulk Business in 1st half, we could achieve relatively good results as Revenue Increased and Profit Increased year-on-year, one of the reasons being rapid market recovery after August in first half plus additional various factors such as more efficient tonnage allocation.
About Dry Bulker market, that part of the table on the right is for 2013 with 1Q and 2Q actual results.
On average, Capesize market was $12,650 in 1st half and Panamax was $8,330, this level not being highly profitable at all.
Estimates for 3rd quarter, other than Capesize, are almost same as current spot level, but current Handy market may be better than this estimate.
And 4th quarter after the New Year, we prudently set premise of each vessel.
This reflects our present thinking.
B-3. Division-wise Trends - Car Carrier Business -
Next is Car Carrier and during 1st half you can see results for Revenue and Profit both increased year-on-year but loading units actually decreased slightly from last year as is indicated here.
This is the result of various efforts.
One is the improvement in contract freight rate terms at the time of extension, and another is restructuring trade itself.
In addition we accomplished bunker saving by slow steaming of course.
From all various efforts we could increase revenue and increase profit.
We can say volume in Far East-Middle East and Far East-Latin America is strong regionally, but main factor is improvement of trade management as previously mentioned.
B-4. Division-wise Trends - LNG Carriers and Oil Tankers –
Next material in B-4 is about LNG Carriers and Oil Tankers.
Revenue Decreased but Profit returned to black for 1H.
The reason for revenue itself decreasing is that quite a long time ago we started further down-sizing scale of our fleet for oil tankers and product tankers because an historically low level market for these segments had been continuing.
However, loss from tanker business decreased, and LNG carrier business is making stable profit, so we show “Revenue Decreased but Profit returned to black"in total.
Although there is “Steady performance with long/mid-term contracts"as focus for the future in LNG, long-term contracts are already fixed for the next few years and will not change, so this is a stable profit source.
We think the most important point is how successfully we can make good additional contracts in the future.
As for oil tankers and product tankers we think their markets will not improve any time soon, looking at current supply and demand.
Consequently our policy is to wait for next chance of market recovery with loss minimization by more efficient tonnage allocation, etc., although we will not further down-size fleet as it has already shrunk to some extent.
B-5. Division-wise Trends - Offshore Energy E&P Support & Heavy Lifter Segment -
Finally we would like to explain Offshore Energy E&P Support & Heavy Lifter Segment.
Although we are afraid that the title “Offshore Energy E&P Support"is an overly dramatic name, what is actually involved is just 2 types of business.
One is Offshore Support Vessels for which we operate a company in Norway as you may know.
And another is Drillship which is used for offshore drilling in Brazil.
The Drillship operation is working steadily and earning stable profit as we can enjoy certain level of dividend.
With regard to Offshore Support Vessels, business is already making profit, because demand for these vessels is very strong as there is increasing oil development activities in the North Sea due to high oil price these days, although it was very hard at the beginning of this business.
However, the company is in Norway and accounting currency is Norwegian Krone.
Exchange rate of Norwegian Krone against Yen, Dollar and Euro has considerable impact in accounting scheme, as there is evaluation gain or loss of debt in Japanese Yen as well as freight revenue being in Dollars or Euros.
At any rate, situation in that business is producing cash surplus in first half.
We think market situation will be relatively good in the future, so we want to expand this Offshore support vessel business slightly more at some point if possible.
Thank you very much for your kind attention.