Ladies and Gentlemen, thank you very much for joining us today
as we announce our 4th Quarter financial results.
During today's agenda, I will provide an outline of full-year Fiscal 2013 financial results
and our guidance regarding financial position for Fiscal 2014.
【A. Financial Highlights for Fiscal Year 2013】
A-1-1. Financial Results
For full year Fiscal 2013 (April-March), both Operating Revenues and Ordinary Income
improved for year-on-year basis. Operating Revenues were 1,224.1 billion yen;
Operating Income 28.9 billion yen; Ordinary Income 32.5 billion yen;
and Net Income 16.6 billion yen.
Average exchange rate between U.S. dollar and yen during the term was 99.75 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.
Comparing to the previous year, Operating Revenues increased by 89.4 billion yen;
Operating Income also up by 14.0 billion yen; Ordinary Income up by 3.9 billion yen;
and Net Income up by 6.0 billion yen.
So, at every step we successfully achieved revenue increase or profit increase.
For Fiscal 2012, average exchange rate between U.S. dollar and yen during the term
was 82.33 yen per U.S. dollar, and so the yen was devalued by average of 17.42 yen
during Fiscal 2013, and fuel oil price fell by 45 U.S. dollars per metric ton.
Both of these factors significantly pulled up Operating Income and Ordinary Income.
The benefit was plus 14.9 billion yen from exchange rate change and 6.3 billion yen
from fuel oil price movement, with year-on-year comparison as indicated in the column
at the bottom.
As to payment of term-end dividend for the current fiscal year,
because our consolidated Net Income improved from what was planned,
it has been decided to pay term-end dividend of 4.50 yen per share, 1.0 yen increase
from our previous guidance announced together with 3rd Quarter results
as of the end of January 2014, which will be offered at our annual general meeting
of shareholders to be held in June.
A-1-2. Financial Results (Business-wise Operating Revenues/Ordinary Income)
Next, let us go to Slide A-1-2 showing segment-wise financial results.
Ordinary Income for Containership Business, including the sector of Logistics Business,
was a loss of 0.1 billion yen, so we can say almost break-even.
In Bulk Shipping Business, Ordinary Income improved drastically by 17.2 billion yen
for year-on-year basis to 41.3 billion yen as a whole,
but Offshore Energy E&P Support & Heavy Lifter business worsened by 2.1 billion yen
to a loss of 4.5 billion yen.
Summing up all these figures with the Other Businesses and adjustments,
total Ordinary Income was 32.5 billion yen, as I reported before.
Making some supplementary comments: For Containership Business,
the loss in our containership segment, including earnings from ocean freight
and terminal business, etc., was almost balanced with profit from Logistics segment
resulting in minus 0.1 billion yen in total.
Taking containership segment independently, excluding logistics business,
the result was about 3.0 billion yen loss for Fiscal 2013.
Among Bulk Shipping Business, the Dry Bulk segment earned around 15.0 billion yen
during Fiscal 2013. The largest profit growth was recorded for Car Carrier segment
in comparison with the previous fiscal year.
In LNG carrier segment, stable profit continued from the previous fiscal year.
A-2. Key Points
This slide shows key points for our full-year results, which we analyzed as best we could.
Compared with previous fiscal year, indicated in the slide at the bottom,
Operating Revenues increased by 89.4 billion yen and Ordinary Income by 3.9 billion yen overall.
The most significant factor was, as I mentioned at the beginning,
exchange rate and lower fuel oil price. In terms of the other factors, the category of
‘Market Volatility’ was affected negatively. Talking about market level of Containership Business,
it was much lower than Fiscal 2012, but we could somewhat recover the minus factors
through continued cost curtailment efforts.
【B. Estimate for Fiscal Year 2014】
B-1. Estimate for Full Fiscal Year 2014
Next, I will talk about estimates for Fiscal 2014. First, yearly estimation for
Operating Revenues is 1 trillion 230.0 billion yen, slightly up from previous year;
Operating Income is 36.0 billion yen with 7.1 billion yen jump from previous year;
Ordinary Income 34.0 billion yen, up 1.5 billion yen;
and Net Income 18.0 billion yen, up 1.4 billion yen.
Premises for these estimates are exchange rate between U.S. dollar and Japanese yen
of 100 yen per U.S. dollar, and fuel oil price of 621 U.S. dollars per metric ton
throughout the year, which almost remain unchanged from Fiscal 2013 results.
Business-wise Ordinary Income for Containership Business, including Logistics Business sector,
was same as previous year which I talked about before, and is also expected to almost break even
based on business structure being similar to last year.
Bulk Shipping Business is estimated at 38.0 billion yen, slightly down from previous year,
which I will explain later.
Then as to Offshore Energy E&P Support & Heavy Lifter business, it is expected to almost
break even for this fiscal year. Aggregating all businesses, we expect 34.0 billion yen
of Ordinary Income for this full year.
Assuming we achieve our full-year plan, we are considering to pay an annual dividend of 5.00 yen
per share including 2.50 yen per share of interim dividend in Fiscal 2014
(fiscal year ending March 2015).
As quoted in this slide, sensitivity from exchange rate on our yearly Ordinary Income
for this Fiscal 2014 is estimated at 1 yen change in yen-U.S. dollar exchange rate
results in about 1.2 billion yen fluctuation; and change in fuel oil price of 10 U.S. dollars
per one metric ton will result in about 1.2 billion yen effect, which we can say are just as usual.
Now I will explain segment-wise aspects indicated in the table at the right on this slide.
As for Containership Business, yearly Ordinary Income is estimated as breakeven
on the condition that business surroundings remain almost same as previous year.
As to Bulk Shipping Business, we expect some profit increase in dry bulk business
based on the premise that markets are better than in the previous year.
To the contrary, we see profit from Car Carrier Business being down slightly for
year-on-year comparison. LNG carrier segment is expected to remain almost unchanged.
For Offshore Energy E&P Support Business, our offshore support business operation company
expects profit increase from previous year due to present market situation being much steadier.
Heavy Lifter Business, to be perfectly frank, is the most thorny business sector
among all of our businesses, but we plan to shrink its total loss amount
compared to the previous year by tackling various structural reforms,
while the market level continues to turn downward.
This completes the discussion about breakdown of company's total Ordinary Income
of 34.0 billion yen, which I touched on before.
B-2. Key Points
This slide shows Key Points of our estimate for Fiscal 2014.
Ordinary Income for Fiscal 2014 is not severely changed from previous Fiscal 2013.
We will try to achieve profit improvement by continuing our efforts for further cost reductions.
B-3. Progress of Medium-Term Management Plan
Now let me explain comparison with our Medium-Term Management Plan.
Latest Medium-Term Management Plan is for 3 years and Fiscal Year 2014 is last year in the term.
We could manage our business in line with our plan in Fiscal Year 2012,
and Fiscal Year 2013 is almost going along with our plan.
With regard to Fiscal Year 2014, the last year of the management plan,
we made our plan on the basis that supply and demand situation would tighten slightly
and shipping market would improve in every business sector.
Regrettably, business circumstances so far have not yet improved very much
so we are afraid that Ordinary Income, Net Income and EBITDA for Fiscal Year 2014
will decrease compared with original targets in our Medium-Term Management Plan.
However, our estimate of Financial Indices in Fiscal Year 2014, Shareholder's Equity
and Debt Equity Ratio (DER), are better compared with original targets in the plan.
This is because Stock is improving more than our plan by limiting Investment Cash Flow
and by proceeds from Sale of Assets.
On the other hand, improvement of Flow is slower than our plan since business circumstances
will not improve very much as we said previously.
As shown at bottom of chart in Slide B-3, there is "Steady improvement of Financial Standing
and Equity Ratio achieved more than 30% as of end of Fiscal Year 2013"
and we are trying to achieve 40% as soon as possible.
Regarding Cash Flow (CF), we place greatest importance on Cash Flow during our business management
by putting weight on limiting Investment Cash Flow
which means we are not unnecessarily seeking expansion of business scale for a while.
B-4. Progress of Cost Saving Plan
I will now explain about progress of Cost Savings.
In Fiscal Year 2013, we achieved Cost Savings of 11.3 billion yen more than our
original target and we have set our target for Fiscal Year 2014 at 13.1 billion yen
by continuing our Cost Saving efforts. Cost Saving includes various factors and here
we would like to explain a typical one, bunker savings, which represents
one of the major parts of our operating cost. So let us explain using some figures,
Compared with last year, number of our operating fleet increased from 411 vessels
as of March 2013 to 420 as of March 2014; on the other hand, total amount of
our bunker consumption decreased from 3.83 million tons in previous year to 3.66 million tons in 2013.
This is comparison for only Kawasaki Kisen Kaisha itself, not consolidated basis.
“Not consolidated basis” here means it does not include vessels under operation of our overseas affiliated companies.
So amount of bunker consumption decreased although operating fleet increased.
As for actual bunker cost itself in Japanese Yen, total was 207.2 billion yen in 2012
and 221.7 billion yen in 2013. That's because amount in Japanese Yen increased
in the valuation process of exchanging foreign currencies into Japanese yen
due to a weakening Japanese yen,
although there was a factor making our average 2013 bunker unit price in U.S. dollars
per ton slightly lower than in 2012. This means that amount of bunker cost in Japanese yen
increased by 7% year-on-year; on the other hand, our total revenue increased by 14% year-on-year.
The reason for revenue increase is the weaker Japanese yen. Bunker cost in U.S. dollar basis
sharply decreased while revenue increased by 14%. We think this is a very important point,
especially for us as a shipping company, and biggest result of our cost-saving efforts.
【C. Division-wise Trends】
Now I would like to briefly explain trend in each business division.
C-1. Division-wise Trends - Containership Business -
Our estimate of Containership Business this year is revenue increase and
profit at break-even level. We made our business plan for this year on premise
that freight level in 2014 would be almost the same as 2013.
Consequently, further cost reduction or sale of assets is needed in order to
reach break-even point that is same as 2013 results. Current estimate includes those factors.
C-2. Division-wise Trends - Dry Bulk Business -
Regarding Dry Bulk Business, as the ship type-wise market assumption is mentioned
in the table on the right side, our overall estimate of Fiscal 2014 is Revenue with no change
and Profit increase compared with last year.
In Fiscal 2014 our market premise is, as described in material (Financial Highlights) C-2,
Capesize 1st Half $19,000 and Panamax 1st Half $15,000 which are much higher than current market.
However, we do not have any market exposure in 1st Half for Capesize
because our business is based on steady profit with long-term contracts
so market fluctuation has no effect on our Capesize business.
Panamax is the same as market fluctuation has almost no effect because we already fixed
contracts on more than 80% of our Panamax fleet in 1st Half.
During 2nd Half, market exposure of our fleet will slightly increase and
we think Dry Bulk market will turn out better, so we hope profit will improve to some extent.
C-3. Division-wise Trends - Car Carrier Business -
Next is Car Carrier Business and as we previously said, estimate for this year is that both
Revenue and Profit will regrettably decrease compared with last year.
Although transport demand of completed cars worldwide is steady as shown
in material (Financial Highlights) C-3, transport distance will shorten because
direct export volume from Japan is decreasing and trade pattern is changing
so that origin of exports is shifting to Southeast Asia.
We think supply-demand situation and business structure are changing slightly compared with the past.
C-4. Division-wise Trends - LNG Carriers and Oil Tankers -
Next is LNG Carriers where profit will be almost the same this year compared with
last year so stable profit is expected in LNG carrier business.
Regarding Oil Tankers, we have been down-sizing our fleet for some years;
however, there was also small deficit last year so we think this is a crucial period
and we need further structural reform.
C-5. Division-wise Trends - Offshore Energy E&P Support & Heavy Lifter Segment -
Finally, regarding Offshore Energy E&P Support & Heavy Lifter Segment and as we previously said,
market of Offshore Support Vessel business has been strong this year so we expect
there will be good results for the year.
The Heavy Lifter market has continued to face very tough competition and, so far,
we regrettably can hardly expect to make a profit this year.
Consequently, we will focus on reducing amount of deficit by various efforts
through structural reform.
Thank you very much for your kind attention.
