Ladies and Gentlemen, thank you very much for joining us today.
During today's agenda, I will provide an outline of full-year Fiscal 2014 financial results and our guidance regarding financial position for Fiscal 2015.
A-1-1. Full-Year 2014 Results
For full-year Fiscal 2014 (April-March), both Operating Revenues and Ordinary Income improved for year-on-year basis. Operating Revenues were 1,352.4 billion yen; Operating Income 48.0 billion yen; Ordinary Income 49.0 billion yen; and Net Income 26.8 billion yen.
Average exchange rate between U.S. dollar and yen during the term was 109.19 yen per U.S. dollar, and fuel oil price was 541 U.S. dollars per metric ton.
Amount of profit improvement from exchange rate was 8.3 billion yen and from fuel oil price was 11.1 billion yen.
About cash flow, the free cash flow was 90.6 billion yen by subtracting the investment cash flow of 11.2 billion yen from the operating cash flow of 101.9 billion yen.
We are planning to pay a year-end dividend of 6.0 yen per share, which is 3.5 yen higher than the estimate. Combined with the interim dividend, the annual dividend will be 8.5 yen per share. This is 4 yen higher than 2013, and the payout ratio is 30%.
The background factor of net profit for the 4th quarter being negative 6.1 billion yen is that structural reform was executed centering on the Dry Bulk Business and the incurred cost of over 15 billion yen was accounted for as an extraordinary loss.
A-1-2. Full-Year 2014 Results (Business-wise Operating Revenues/Ordinary Income)
Ordinary Income for Containership Business was 20.6 billion yen and Bulk Shipping Business was 36.5 billion yen.
As a special remark, there was a revaluation loss of 5.7 billion yen from exchange rate for the offshore support vessel business whose accounting currency is Norwegian krone in the Offshore Energy E&P Support Segment, and as a result, the Offshore Energy E&P Support Segment recorded a deficit for an amount that is nearly the same as the revaluation loss.
A-2. Key Points
The key points of the annual income increase by 16.5 billion yen compared to the previous year are as follows.
For exchange rate and bunker oil price, the exchange rate was depreciated by 9.44 yen compared to fiscal 2013 and bunker oil price became lower by 85 dollars per metric ton, resulting in an account improvement of 8.3 billion yen and 11.1 billion yen, respectively.
Meanwhile, the market suffered from a major decline mainly in the bulk shipping business, which cancelled out the steady market and improved cargo volume in Containership Business; as a result, Market Volatility scored a decrease of 5.3 billion yen compared to fiscal 2013.
While cost saving mainly in the Containership Business produced an improving effect on the account by 15.5 billion yen, subtracting the loss of 13.1 billion yen from others as bunker swap settlements, revaluation of exchange rate and others, in total the income in fiscal 2014 was increased by 16.5 billion yen compared to fiscal 2013.
A-3. Review of previous Mid-Term Management Plan
This slide summarizes the main financial indices during the period from fiscal 2012 to 2014, which was under the previous Mid-Term Management Plan, “Bridge to the Future.”
The equity ratio was 36.1% in fiscal 2014, and DER was 122%. These figures were better than the original plan, indicating successful realization of steady improvement of financial standing.
The investment cash flow in each year was much lower than the original target of 50 billion yen per year, associated with the partial sale of shares of the terminal subsidiary company on the US west coast, ITS. The free cash flow for 3 accumulated years was 206.3 billion yen, which also contributed to improvement of financial standing.
B-1. Estimate for Yearly 2015
Next, I will talk about estimates for Fiscal 2015. First, yearly estimation for
Operating Revenues is 1 trillion 460.0 billion yen; Operating Income 43.0 billion yen with 5.0 billion yen decrease year-on-year; Ordinary Income 40.0 billion yen with 9.0 billion yen decrease year-on-year.
Premises for these estimates are exchange rate between U.S. dollar and Japanese yen of 118 yen per U.S. dollar, and fuel oil price of 350 U.S. dollars per metric ton throughout the year.
Business-wise Ordinary Income for Containership Business is expected to be 12.0 billion yen which is 8.6 billion yen down from previous year, and Bulk Shipping Business is estimated at 32.0 billion yen, 4.5 billion yen down from previous year.
Then as to Offshore Energy E&P Support & Heavy Lifter business, it is expected to almost break even for this fiscal year which is an improvement of 5.7 billion yen as no revaluation loss from exchange rate is expected this year.
In total, we expect 9.0 billion yen decline of Ordinary Income for this full year.
Regarding the dividend, by applying the stable dividend policy stipulated in our new Mid-Term Management Plan, we are planning to pay total 5.0 yen per share for the annual dividend, 2.5 yen for the interim dividend and 2.5 yen for year-end. The net income of 23 billion yen for the term is equivalent to 5.1% on an ROE basis.
B-2. Key Points
A financial improvement is estimated in Fiscal Year 2015 for exchange rate and bunker oil price by 7.5 billion yen and 34.5 billion yen, respectively, 42 billion yen in total. However, that is expected to be outmatched by a downturn of 45 billion yen arising from market decline and volume decrease mainly in Drybulk and Containership.
While we will continue making cost saving efforts, including business rationalization through delivery of 14000TEU vessels in the Containership Business, due to other factors such as reduction of sales of assets, increase in wages for dock workers on the West Coast of North America and an increase in railroad rates, we are expecting an overall income decrease of 9.0 billion yen in the end.
B-3. Cost Saving Plan
The effect of cost savings carried out in fiscal 2014 reached the original target of 13.1 billion yen. The actual achievement was 15.5 billion yen, which was 2.4 billion yen better than the target.
In fiscal 2015, we are expecting cost reduction and profit improvement of 11.4 billion yen for the Containership Business, including cost reduction from vessel rationalization through delivery of new large 14000TEU vessels and profit improvement from increased cargo volume of reefer cargos.
By adding a cost reduction of 2.3 billion yen estimated for the Non-Containership Business and Others, we are expecting overall cost savings of 13.7 billion yen for fiscal 2015.
C-1. Division-wise Trends - Containership Business -
In Containership Business, an oversupply situation is expected to fall on the market for fiscal 2015, especially for the Europe routes, because of large number of deliveries of new large containerships of various carriers. Additionally, associated with the general cost increase including the increase in the wages for dock workers on the West Coast of North America and increase in the cost for inland railroad and truck transport in North America, we estimate ordinary income of 12.0 billion yen, which is 8.6 billion yen less than the previous year.
C-2. Division-wise Trends - Dry Bulk Business -
For Dry Bulk Business, the market appears stagnant with excessive oversupply of all ship types. While a certain level of market improvement is expected due to increased scrapping and retirement of vessels that do not comply with new rules for ballast water, we predict that the current market stagnancy will persists for the next 2 years or so, and the market will finally start to recover from 2017 when the large number of new vessel deliveries calms down.
We plan to sail across this difficult time by making continuous efforts in strengthening our earning structure, including reduction of market exposure and cost savings.
C-3. Division-wise Trends - Car Carrier Business -
Regarding Car Carrier Business, while there are some uncertainties in the situation of resource-rich countries and emerging economies, we expect that the overall ocean transport demand of completed cars will remain strong.
Looking into individual regions, the situation is that trades from Europe or North America to Far East, trans-Atlantic trades, and export from Thailand are going strong, while export from Japan is in a downturn trend.
By providing flexible services along with the change in trade patterns, we will continue making efforts for improving our daily tonnage deployment efficiency. Additionally, we plan to build a strong and stable business foundation by pursuing greater diversity in cargo types we handle, which is to be realized by utilizing 7,500-unit energy-saving large car carriers in increasing the volume of High & Heavy cargos and non-self-propelled cargos. The first 7,500-unit car carrier will be delivered in July.
C-4. Division-wise Trends - LNG Carrier and Oil Tanker Business -
In our new Mid-Term Management Plan, LNG Carrier Business is positioned as a subject of strategic investment for accumulating stable profit through long and mid-term contracts.
For the Oil Tanker Business, the market has turned positive since the latter half of previous fiscal year.
We are expecting steady earnings for our VLCC and LPG carriers through long and mid-term contracts concluded mainly with Japanese shippers.
We forecast that the market for medium-sized Aframax vessels will remain stable, since the pressure from new ship deliveries has been receding.
C-5. Division-wise Trends - Offshore Energy E&P Support and Heavy Lifter Segment -
For both the Offshore Energy E&P Support Business and Heavy Lifter Business, there is concern over some issues including delay in the projects due to the current trend of low crude oil prices.
Regarding the Heavy Lifter Business, we aim at securing high profit project cargo.
For the Offshore Energy E&P Support Business, the challenge is securing long and mid-term contracts amid the very severe market environment.
Steady income from drillships is expected, albeit small in amount.
This ends my comments for today and I thank you again for your kind attention.