A-1. First Quarter Financial Results
Financial results for first quarter of fiscal 2015 show operating revenue of 335.5 billion yen, operating income 11.2 billion yen, ordinary income 14.6 billion yen and quarterly net income of 10.2 billion yen, resulting in an increase for both revenue and income compared to the same period last year. However, these figures include the positive effects of exchange rate and bunker price, which were 3.9 billion yen and 11.3 billion yen, respectively, totaling about 15 billion yen. Overall, the business environment became more severe, specifically represented by the stagnant markets for both Containership and Bulk carrier Business.
The average exchange rate was 120.97 yen per US dollar, and bunker price was $366 US dollars per metric ton.
A-2. Estimate for First Half Fiscal 2015
For the first half of Fiscal 2015, we estimate operating revenues of 680 billion yen, operating income 17.0 billion yen, ordinary income 20.0 billion yen and net income of 14.5 billion yen. These figures are not that much different from the estimate made at the beginning of the year, and the interim dividend is planned to be 2.5 yen per share as announced at the beginning of the year.
For Containership Business, we estimate that performance during the second quarter will be about 4 billion yen less than first quarter. The reasons include an increase in cost for transporting empty containers inland due to the expanding imbalance between the inbound and outbound legs for the Asia-North America trades, in addition to the prospect of Container market taking a bit more time to fully recover. On top of that, 3.2 billion yen of revaluation gain of exchange rate was generated in the first quarter but without similar expectation in the second quarter; also the first quarter improved by 1.0 billion yen or so because some revenues were taken into account in the first quarter rather than second quarter in the Car Carrier Business. Taking these factors into account, we are estimating ordinary income of 5.4 billion yen for the second quarter, 9.2 billion yen lower than in first quarter.
As you can see, operating revenues are estimated to be 55.0 billion yen lower than the figure released at the beginning of the year. This results from reduced revenues in Containership Business, plus correcting the estimation on ratio of “trip charters” that count both ocean freight revenue and all operating costs (ship cost, bunker, cargo charge, etc.) on PL, while “time charter contracts” only count charterage (ship rental income) in the Bulk Shipping Business segment. Our initial estimation turned out having too much trip charter case which is now being corrected. This correction will impact revenue income on PL but has no effect on the profit estimation. Also, net income is shown as being 3.0 billion yen higher than the publicly announced figure, which is the result of bringing forward special revenues arising from the sales of overseas assets that were originally planned to be sold in the second half of the year.
A-3. Estimate for Full Year Fiscal 2015
The full year estimates for Fiscal 2015 are operating revenues of 1,350.0 billion yen, operating income 39.0 billion yen, ordinary income 40.0 billion yen and net income of 23.0 billion yen.
Premises for these estimates in the second half of the year are an exchange rate of 118 yen per US dollar and bunker price of 350 US dollars per metric ton. Sensitivity of the exchange rate and bunker price against the half-year ordinary income is estimated to be approximately 0.4 billion yen for each 1 yen per US dollar and approximately 0.9 billion yen for each 10 dollars per metric ton, respectively. The annual dividend is planned to be 5.0 yen per share as planned at the beginning of the year.
The key points include a decrease in the operating revenues by 55.0 billion yen for the second half as well, for the same reason as the first half of the year. As of now, ordinary income for the second half remains at 20.0 billion yen, which is the same as the figure announced at the beginning of the year.
While the results for both Containership and Bulk markets are feared to be less than initial expectations, a major improvement is expected for the oil tanker market. Along with the current exchange rate of 123 yen instead of the assumed 118 yen per US dollar, also bunker price of 300 dollars instead of the assumed 350 dollars per metric ton, overall performance is expected to improve provided that the current business environment holds.
Regarding the factors that cause reduced revenues for the second half of the year, while some deterioration is expected to occur in Containership Business, depending on the future freight market, Bulk Shipping Business segment may remain at almost the same level since losses in the Dry Bulk Business can be recovered by the Oil Tanker Business. All in all, results may depend on the freight trend for Containership Business. Assuming net income of 23.0 billion yen, the ROE will be 5.1%.
A-4. Key Points for First Half Fiscal 2015 Performance Fluctuation
While there are some factors showing improvement of approximately 30.0 billion yen compared to the same period last year, falling freights in Containership business as well as deteriorating Dry Bulk market cancel them out.
A-5. Progress of Cost Saving Plan
We are expecting cost savings of about 13.0 billion yen in total as planned.
I would like to move onto trends in each business division. Please see page 10.
B-1. Containership Business
For the first quarter, both operating revenue and ordinary income increased compared to the same period last year. Future key points include change in freight trend caused by the delivery of many new containerships that will negatively impact the imbalance in supply and demand. Of major concern, of course, will be the markets in Asia-Europe trades and North-South trades that are most susceptive to the cascading effect resulting from fleet realignment..
B-2. Dry Bulk Business
For the first quarter, both operating revenue and ordinary income decreased compared to the same period last year, due to a stagnant market. Future key points include how long the market will remain stagnant for mid- and small-type bulkers, the Cape-size market having recovered to current level of approximately 15,000 dollars.
Meanwhile, scrapping of old large bulkers has been progressing with trend toward improvement being observed for the supply side. We believe that is a major factor in the recent recovery in the market.
Regarding the overall balance for our entire Bulk Shipping Business segment, we believe that losses in Dry Bulk Business can be covered by the market recovery in Oil Tanker Business and others.
B-3. Car Carrier Business
Although total transport quantity was slightly reduced, there was an increase in both operating revenue and ordinary income in the first quarter as some voyages that were planned to complete in the second quarter moved ahead of schedule. We use voyage completion dates for calculating the income.
Looking at each region, while trades to Europe and within Europe are both slightly deteriorating, the rest reflect a bullish tone. Overall, the Car Carrier Business is expected to remain strong.
B-4. LNG Carrier and Oil Tanker Business
For the first quarter, both operating revenue and ordinary income increased compared to the same period last year. LNG Carrier Business is in steady operation, and the Oil Tanker market was quite buoyant. There may be some issues in the future such as a change in the number of ships used for storage as well as matters in Iran, but we forecast that the market will remain strong for this year.
B-5. Offshore Energy E&P Support & Heavy Lifter Segment
In the first quarter, the Offshore Energy E&P Support Segment recorded decreased operating revenue, yet the ordinary income turned into black. Drillship is in steady operation and for Offshore Support Vessels, key points include how the softening market will recover in the future since stagnancy is expected for drilling projects due to the falling crude oil price.
For our Heavy Lifter Segment, operating revenue remained almost the same although the deficit in ordinary income was reduced. However, there are some concerns over this business segment, including the reduction in the volume of project cargo to be transported associated with falling crude oil prices. Also, the market for cargo moving in semi-liner service below 500 metric tons is no longer as strong as it was until last year.