Ladies and Gentlemen, thank you very much for joining us today when you are very busy.
I will first briefly explain our cumulative third Quarter (April-December) Fiscal Year 2013 financial status and our updated estimate for full-year (April 2013-March 2014) financial position for Fiscal 2013, and have as much time as possible for a Q&A session.
A-1 Financial Results for 3rd Quarter Fiscal 2013
First, I will talk about the outline of 3rd Quarter financial results in this Slide A-1.
Accumulated results for 9 months (April-December) for Fiscal 2013 were:
Operating Revenues 918.0 billion yen; Operating Income 24.1 billion yen;
Ordinary Income 29.2 billion yen; and Net Income 15.7 billion yen.
Average exchange rate between U.S.dollar and yen during the term was 98.54 yen per U.S.dollar, and fuel oil price was 626 U.S.dollars per metric ton, with year-on-year comparison as indicated in the next table.
Operating Revenues grew significantly partly because of yen depreciation, and Operating Income was also 'plus' by 13.5 billion yen in comparison with the same term last year, mainly due to business improvement, also owing somewhat, of course, to the effect of weak yen. Ordinary Income increased by 18.6 billion yen as well.In terms of Net Income, although it looks rather pale against Operating and Ordinary Income, there was an improvement of 6.3 billion yen.
Exchange rate was devalued by 18.79 yen per U.S.dollar compared to last year on average, and fuel oil price was down by 52 U.S.dollars per ton. Both of those factors greatly contributed in boosting our profit.
Segment-wise results are as mentioned in the lower table.
Although Containership Business was black for the 1st Half, to our regret in the 3rd Quarter Ordinary Income recorded deficit of 2.6 billion yen. This resulted because freight rates declined considerably, as you have been aware, and as a total for the 9-month period, there was a 1.1 billion yen deficit, which worsened by 4.0 billion yen for year-on-year basis.
However, comparing to results of many pure containership players globally, in terms of loss amount, we could say we did fairly well, relatively speaking, even considering our business size was rather smaller.
Next, for Bulk Shipping Business, Operating Revenues notably increased as well to 428.5 billion yen, and Ordinary Income was 34.3 billion yen, a drastic growth over last year by 24.9 billion yen.
Talking about other businesses indicated, 'Offshore Energy and E&P Support and Heavy Lifter,' somewhat worsened in comparison with last year. As we will explain about this segment later again, heavy lifter business has been in a very hard situation due to downturn in freight rate market. Segment-wise results were as I have now explained.
As our major financial indices are quoted in this slide, Shareholders' Equity at the end of December was 398.7 billion yen, which greatly improved from last year to the point of being just one step away from our near-term target of 400.0 billion yen. As to Cash and Deposits, at the end of December we had 236.8 billion yen on hand, which was also much more than compared to the same term last year.
However, Interest-bearing Debt increased slightly by 24.9 billion yen to 654.8 billion yen, with various coming and going while our policy to reduce the amount of Interest-bearing Debt has never changed.We have to redeem some of it next year so it will be decreasing naturally. Therefore, both Debt Equity Ratio and Net Debt Equity Ratio significantly improved and our Equity Ratio reached 31.1%, returning above the 30% level.
Additionally, talking about Free Cash Flow for guidance, Operating Cash Flow for this 9-month term was 78.6 billion yen, and Investment Cash Flow was 14.9 billion yen which we have kept constricting very strongly; thus Free Cash Flow finally resulted in 63.7 billion yen.Aggregated with estimated amount to be posted in 4th Quarter, Free Cash Flow for this full year will become excessive surplus, which should please be regarded as progress even beyond our management plan.Impact to our profit and loss from variation in exchange rate and fuel oil price is as quoted here.
At the bottom of the column on the right side is quoted 'loss provision related to the Anti-Monopoly Act 5.7 billion yen,' which is, as already announced, an extraordinary loss already recorded as a loss provision related to the Anti-Monopoly Act in preparation for losses that may occur in conjunction with 'advance notice of draft orders' from the Japan Fair Trade Commission.We view this situation with the utmost gravity and taking this opportunity, we express our sincere regret for the concern this matter has caused you.
A-2.Key Points of 3rd Quarter Accumulated Results
The next Slide A-2 shows Key Points of our 3rd quarter results compiled as usual.As I touched on before, the two factors, yen depreciation by 18.79 yen per U.S.dollar as ‘Exchange rate’ and fall in ‘Bunker Oil Price,’ are recorded as 17.8 billion yen in total, which contributed to profit increase.
On the other hand, as to 'Market Volatility,' downside impact from this factor was 27.5 billion yen, mainly from freight rate market in containership business being at lower level than last year.However, we made various streamlining including ‘Effect Tonnage Allocation,’ etc., eventually succeeding to improve by 18.6 billion yen as a total for year-on-year basis.
A-3.Estimate for Full Fiscal Year 2013
I will now talk about full-year estimations for Fiscal Year 2013.For this full year, we continue to take a harsh view of the 4th Quarter and therefore set severer freight rate premises, and furthermore have assumed exchange rate of 103 yen per U.S.dollar since exchange rate has recently become much more volatile.Under these conditions, our 4th Quarter estimates, which look rather poor in a way, are as mentioned in this table: Operating Income plus 3.9 billion yen; Ordinary Income plus 0.8 billion yen; and Net Income plus 0.3 billion yen.I myself feel like there might be some chance of achieviing more than those figures.
So, our full year forecasts are:
Operating Revenues 1,210.0 billion yen;
Operating Income 28.0 billion yen;
Ordinary Income 30.0 billion yen;
and Net Income 16.0 billion yen.
Compared to our previous estimates released with our 2nd Quarter financial results as of the end of October, our Operating Revenues slightly increased, Operating Income stayed unchanged, Ordinary Income up by 3.0 billion yen, and Net Income remained at 16.0 billion yen.
Talking about dividend, as I have touched on before, during 4th Quarter, we still have to count many variable factors such as volatile exchange rate, etc.Therefore, in our present financial plan we temporarily set it as 3.5 yen per share as it has previously been.
A-4.Key Points for Full Fiscal Year 2013
Next Slide shows Key Points of our estimates for Fiscal 2013, about which I have already explained major factors before, and we would like to discuss further in the Q&A sessions later.
A-5.Progress of Cost Saving Plan
Moving to A-5, Progress of Cost Saving Plan, we set original target of 14.5 billion yen at beginning of the year.Thereafter, with further increases added to that figure, a total of 25.9 billion yen cost saving is present target in our full-year plan.
For 9-month term through last December, we already achieved 17.6 billion yen of cost saving, and improved our profit.
Especially in containership business, where freight rates have hardly gone as planned, we have currently accumulated additional cost streamlining, which is proceeding favorably.
Next I will briefly explain division-wise trends and further details will be explained by each person in charge during Q&A.
B-1.Division-wise Trends -Containership Business -
Regarding Containership Business, to our regret it turned to a small deficit due to market decline although revenue itself increased year-on-year as we explained.We have heard that freight restoration in this January succeeded for the most part and cargo volume is increasing in both to North America and to Europe year-on-year, so we think this January has turned out well and next important point is how it will be after Lunar New Year.
B-2.Division-wise Trends -Dry Bulk Business -
Regarding Dry Bulk Business for the 9-month accumulated period, both Revenue and Profit Increased considerably year-on-year.Above all, the Capesize market recovered drastically after last Autumn and market of Panamax or smaller size vessels also recovered because of accelerated cargo movement of major cargo such as coal and grain.At the moment market is slowing down due to Lunar New Year but we think it will start to turn over soon.As there are just 2 months left in this fiscal year and there is not so much spot exposure as we always say, almost 100% of our Capesize fleet is fixed and most of Panamax and Handysize also fixed, we think our profit estimate will not change so much.
B-3.Division-wise Trends -Car Carrier Business -
Next is Car Carrier and so far Revenue and Profit both increased year-on-year but total loading units decreased 3% year-on-year as indicated here.Profitability improved by various efforts, one is the improvement in the previously too low contract freight rates at the time of extension and another is restructuring trade for further efficiency.In terms of “Focus for the future” we think cargo movement for North America and Middle East will remain strong and our small concern is cargo movement for developing countries, but we think we do not need to worry so much as demand for cars will not change drastically due just to economy of the countries compared with that of real estate business.We think the reason for decrease of exports from Japan is that major part of production was allotted to domestic sales because of good demand before rise of sales tax in April.
B-4.Division-wise Trends -LNG Carriers and Oil Tankers -
Next material relates to our LNG Carriers where Revenue increased and Profit returned to black in this department.LNG carriers especially secured very stable profit thanks to mid/long-term contracts, and of course that includes positive effect for weaker yen, and another major factor of profit is that contracts are operated smoothly. Regarding Oil Tankers, VLCC market recovered drastically from end of last year which increased from around World Scale 30 to World Scale 50-60.And the market of middle and small crude tankers and product tankers has improved to some extent, but still remains under break-even point.Our deficit here, however, is very small.From the above, we think we can expect stable profit in sector of LNG Carriers and Oil Tankers in the future.
B-5.Division-wise Trends -Offshore Energy E&P Support & Heavy Lifter Segment -
Finally, we would like to discuss the Offshore Energy E&P Support & Heavy Lifter Segment.Offshore Energy E&P Support includes our Offshore Support Vessel business which we started our company in Norway and now have 7 vessels in our fleet.Considering that oil price remains high and North Sea oil is still developing further to the north, although there was once a prospect that it will soon be depleted, we think it will continue as a very promising sector in the future.Our fleet is now working steadily and operating profit is in the black.
Another is our Drillship business operated offshore Brazil which is running with several partners and this is a stable profit source, so we do not have any concern in Offshore Energy E&P Support. As to Heavy Lifter business, current status is that this sector is somewhat of a burden for our management.Cargo demand has not been so good and there were also many new ship deliveries to this market.Also our competitors are very low-cost East Asian carriers which means they can offer lower price.This makes the current situation extremely difficult so we are considering the point of how we should pursue structural reform of this business.
Thank you very much for your kind attention.