【Financial Highlights Brief Report for Fiscal Year 2024】
A. Financial Highlights for Fiscal Year 2024
A-1. Financial Results for FY2024
For the fiscal 2024 full-year results, operating revenues were 1,047.9 billion yen, operating income was 102.8 billion yen, and ordinary income was 308.0 billion yen, while net income attributable to owners of parent was 305.3 billion yen. Operating revenues through net income attributable to owners of parent increased year on year. The actual exchange rate was 152.73 yen, and the average bunker price was 610 dollars per metric ton. From the beginning of the first quarter of fiscal 2024, we have changed the conversion rate to convert income and expenses of foreign affiliate companies from spot rate on the financial closing date to average rate during the term. The previous fiscal year’s figures have been restated here using the newly changed conversion method. Operating income increased, mainly due to robust transport demand for “K” Lineʼs own businesses, such as Dry Bulk and Car Carrier Businesses, compared to the same period last year. In addition, due to the rise in short-term freight rates in Containership Business, OCEAN NETWORK EXPRESS (ONE) performed well, which led to a significant increase in equity-method earnings, an increase in ordinary income, and ultimately an increase in net income attributable to owners of parent for the fiscal year.
At the end of the fiscal year, equity capital was 1,648.4 billion yen, interest-bearing liability was 344.8 billion yen, DER was 21%, and equity ratio was 75%. The consolidated equity ratio, taking into account off-balance-sheet assets and liabilities such as charter hire amounting to approximately 600.0 to 700.0 billion yen, is estimated to be 57%-59%. Lastly, with regard to shareholder returns for fiscal 2024, the year-end dividend is expected to be 50 yen per share, in line with the forecast announced in February 2025. Combined with the interim dividend of 50 yen, the full year dividend will amount to 100 yen per share.
A-2. Financial Results for FY2024 by Segment
Turning to full-year results by segment, in Dry Bulk segment, the Capesize market progressed smoothly throughout the fiscal year, supported by steady transport demand. The market for Panamax and smaller sizes remained steady in the first half of the year. As a result, the full-year results improved compared to the previous fiscal year. For the Dry Bulk segment as a whole, both revenue and profit increased year on year, partly due to the absence of temporary factors that had affected results in the previous fiscal year.
In the Energy Resource Transport segment, LNG Carrier, Thermal Coal Carrier, VLCC, and LPG Carrier Businesses continued to operate smoothly under medium- to long-term charter contracts, accumulating stable earnings. However, temporary factors caused a decrease in revenue and profit compared to the previous fiscal year.
In the Product Logistics segment, overall revenue and profit increased. For Car Carrier Business, the global automobile sales market continued to recover as the supply shortages of semiconductors and automotive parts were largely resolved. In addition, we have continued our efforts for freight rate restorations and improved vessel operation efficiency, ensuring a high level of profits. In Containership Business, cargo transport demand remained strong despite an increase in the supply of new vessels. In addition, due to the situation in the Red Sea, vessels continued to avoid the Suez Canal, resulting in an approximately 10% absorption of vessel supply. This tightened the overall supply-demand balance, supporting a firm market. Since the Lunar New Year, short-term freight rates have been trending downward due to a slowdown in cargo movements and increased vessel supply. However, for the fiscal year as a whole, market conditions improved significantly compared to the previous fiscal year.
B. Forecasts and Initiatives for Fiscal Year 2025
B-1. Forecasts for FY2025 and Key Factors
In light of the current business environment, uncertainties such as the trade policy of the U.S. administration persist, making it difficult to predict both the extent and duration of potential impacts in fiscal 2025. Nevertheless, we would like to present our outlook based on our current assessment.
First, I will explain the key points of the forecast assumptions. For fiscal 2025, we assume that vessels in both “K” Line’s own businesses and Containership Business will continue to bypass the Suez Canal and operate via the Cape of Good Hope throughout the year. In addition, we have incorporated our assumptions regarding the impact of tariff implementation on cargo movements and market conditions, primarily in Containership and Car Carrier Businesses. Furthermore, our forecast figures are based on these assumed impacts continuing through the end of the fiscal year. The port entry fees to be implemented by the Office of the United States Trade Representative (USTR) are expected to target mainly car carriers, but this impact has not been factored into our figures at this time. The dollar-yen exchange rate for the full year is expected to be 140.79 yen, and the bunker price is expected to be 574 dollars. Please refer to the Appendix for market condition assumptions for each vessel type.
Based on these assumptions, for our full-year forecast for fiscal 2025, operating revenues are 950.0 billion yen, operating income is 80.0 billion yen, and ordinary income is 105.0 billion yen, while net income attributable to owners of parent is 100.0 billion yen. The imbalance between the first and second halves regarding the fiscal year's net income attributable to owners of parent is due to the timing difference in recognizing extraordinary income, including from asset sales. A one-yen change in the exchange rate has an impact of plus or minus 1.6 billion yen, while a ten-dollar change in the bunker price has an impact of plus or minus 30 million yen.
The annual dividend forecast for fiscal 2025 is 120 yen per share, consisting of a basic dividend of 40 yen per share and an additional dividend of 80 yen. This is an increase of 20 yen per share from the previous announcement in February.
B-2. Comparison of Income and Loss for FY2025 (Year-on-Year Comparison, Impact of Tariffs)
This slide provides a comparison of ordinary income between the actual results for fiscal 2024 and the forecast for fiscal 2025. The left side shows the actual results for fiscal 2024, the center shows the forecast for fiscal 2025 before considering the impacts of U.S. tariffs, and the right side shows the forecast for fiscal 2025 after considering the expected impacts of the tariffs.
The change from the actual results for fiscal 2024 to the fiscal 2025 forecast before considering the impacts of U.S. tariffs reflects a 23.2 billion yen decrease in ordinary income from “K” Line’s own businesses due to an approximately 12-yen appreciation of the yen. However, other factors contributed to an improvement of 3.0 billion yen. In Containership Business, long-term freight rates are expected to increase slightly from the last fiscal year. However, we anticipate a deterioration of 147.0 billion yen due to a continued increase in the delivery of new vessels and a decline in short-term freight rates.
The change from the fiscal 2025 forecast before considering the impacts of U.S. tariffs to the forecast after considering the tariff impacts reflects a 13.5 billion yen deterioration in ordinary income from “K” Line’s own businesses, mainly in Car Carrier Business, due to an expected decline in cargo volume and the impact on freight market conditions caused by the tariffs. As a result, the fiscal 2025 forecast for “K” Lineʼs own businesses in terms of ordinary income after considering tariff impacts is 68.0 billion yen, a decrease of 33.7 billion yen from the fiscal 2024 result of 101.7 billion yen.
In Containership Business, the impacts of tariffs are expected to lead to a reduction in cargo volume and a decline in freight rates, mainly on U.S. routes, resulting in a negative impact of 16.5 billion yen on “K” Line’s equity in this business. Accordingly, after considering tariff impacts, our ordinary income forecast for fiscal 2025 is 37.0 billion yen, a decrease of 169.3 billion yen from the 206.3 billion yen result for fiscal 2024.
Even at this stage, it is difficult to predict what impact tariff policy will have throughout the fiscal year, including its continuity. However, for both “K” Lineʼs own businesses and Containership Business, we forecast that the current potential impacts will continue throughout the year.
B-3. Forecasts for FY2025 by Segment
Turning to the fiscal 2025 forecast by segment, we expect a 4.6 billion yen decrease in profit for Dry Bulk compared to the previous fiscal year. This takes into account the risk of fluctuations in cargo markets due to the impacts of the U.S. tariff policy. Going forward, we plan to work on improving vessel operation efficiency and reducing costs in line with the situation.
Regarding Energy Resource Transport, we believe that the impacts of the U.S. tariff policy will not be significant, and LNG Carrier, Thermal Coal Carrier, VLCC, and LPG Carrier Businesses will keep contributing steadily to profit under medium- to long-term contracts. Profit is expected to increase, partly due to the absence of one-time/ temporary factors from the last fiscal year.
As for the Product Logistics segment excluding Containership Business, we initially expected continued solid performance in Car Carrier Business due to factors such as solid cargo movements and medium- to long-term transport contracts. However, we have now made our performance forecast based on the assumption that marine transport volume to the United States will decrease by about 30% throughout the year due to the impacts of the tariff policy.
As can be seen in the Appendix, the forecasted number of transport units remains largely unchanged from the last fiscal year. While an increase was initially expected in fiscal 2025 due to new contracts and other factors, this has been offset by a decline in the number of units transported to the U.S., resulting in a total volume similar to the last fiscal year. To offset tariff impacts, Car Carrier Business will work to optimize fleet size and improve operation and vessel deployment efficiency as necessary. Car Carrier Business results will be disclosed as part of the Product Logistics segment, just as for Containership Business, from the first quarter of this fiscal year. In addition, we assume that the impacts of tariff policies will not be significant for the time being on our Logistics Business and Short Sea and Coastal Business.
Next, regarding Containership Business in the Product Logistics segment, we expect ordinary income to reach 37.0 billion yen in fiscal 2025. ONE has set two scenarios for its earnings guidance for fiscal 2025: a full-year after-tax profit of 1,100 million dollars in the case of a relatively stable business environment, and a full-year after-tax profit of 250 million dollars, after factoring in the potential impacts of tariffs. This includes a decrease in cargo volume on certain routes and a decline in global freight rates. The key issue is the extent to which the potential impacts of tariffs should be factored in. Taking into account the business environment from fiscal 2024 through the present, the forecast reflects the effects of reduced cargo volume and declining freight rates, and projects a full-year after-tax profit of just under 700 million dollars. ONE will continue to work on flexible vessel deployment and efficient operation according to the situation, and will continue to keep a close eye on changes in the business environment.
C. Status and Progress of the Medium-term Management Plan
C-1. Key Points of the Medium-term Management Plan
To reiterate key points of our current Medium-term Management Plan, “K” Line is using emissions reduction and decarbonization as opportunities to advance investment in businesses with the role of driving growth and in environmental initiatives. To that end, we have set forth three key initiatives: capital policy, business strategy, and functional strategy.
In terms of capital policy, we plan to achieve an optimal capital structure and further enhancement of business management, and then optimize cash allocation for growth investments and shareholder return.
Under our business and functional strategies, we position investments in businesses with the role of driving growth and in environmental initiatives as key pillars of our growth. At the same time, we will enhance our cross-functional strengths — namely, safety ship quality management, environmental technology, and digital transformation — and work with customers and partners to realize growth in areas where these strengths can be fully leveraged.
As I will explain later, we plan to hold a business briefing in the near future, focusing on our business strategy.
C-2. 【Capital Policy】: Capital Policy Progress and Corporate Value Improvement
Regarding the enhancement of earning power, although the current business environment remains uncertain, we have maintained our operating cash flow target of 1.5 trillion yen for the current Medium-term Management Plan period through fiscal 2026. This is unchanged from the announcement in February.
As for investment plans, investment cash flow up to fiscal 2026 was expected to be 740.0 billion yen when last announced in February, but is now expected to be 610.0 billion yen. New investments are progressing largely as planned. However, some replacement investments have been postponed due to delays in customer plans and trends in ship prices. These delays are expected to extend beyond fiscal 2026 and into the early part of the next Medium-term Management Plan period. In addition, there has been an increase in cash inflows from the sale of businesses and assets, and these factors have led to the revision of investment cash flow to 610.0 billion yen. As explained earlier, some investment postponements will occur after the current Medium-term Management Plan period, in fiscal 2027 or later.
We will continue to investigate our optimal capital structure, aiming to achieve both financial soundness and capital efficiency with an awareness of business risks.
As before, our goal in our shareholder return policy is to remain aware of our optimal capital structure, ensure the investments necessary to improve corporate value and drive growth, and maintain financial soundness. Using any capital in excess of the appropriate level, we will distribute shareholder returns in a proactive manner based on the cash flow situation.
After reviewing the business environment, financial outlook, cash allocation based on operating and investment cash flow forecasts as explained thus far, we have decided to raise the total shareholder return under the Medium-term Management Plan to 800.0 billion yen or more. This includes an additional flexible return of 50.0 billion yen or more on top of the previously announced target of 750.0 billion yen or more. We will provide details on how and when shareholder returns will be implemented once finalized.
In addition, the dividend forecast for fiscal 2025 has been increased by 20 yen per share to a total of 120 yen. This comprises a basic dividend of 40 yen and an additional dividend of 80 yen. This increase will be carried out using surplus funds remaining after the completion of share buy-backs and other returns under the previously announced total shareholder return of 750.0 billion yen or more, and is separate from the additional flexible return of 50.0 billion yen.
Lastly, with regard to corporate value improvement, we find it deeply regrettable that our current PBR remains below 1.0. To improve corporate value and achieve growth, we will further strengthen our efforts by reinforcing our functional strategy that leverages our strengths, while promoting collaboration with customers and partners.
In addition, we transitioned to a Company with Nominating Committee, etc. on March 28, 2025, and will accelerate our initiatives through strengthened governance and enhanced management.
C-3. 【Capital Policy】: Cash Allocation
As for cash allocation, we plan to allocate 610.0 billion yen for investment cash flow and 800.0 billion yen or more for shareholder returns, based on 1.5 trillion yen in operating cash flow. The remaining portion of the cash flow will be treated as part of the management allocation. After considering future changes in the business environment, it could be directed towards M&A, postponed investments, or shareholder returns.
C-4. 【Capital Policy】: Business Investment Plan
While investment cash flow was estimated at 740.0 billion yen in the previous announcement in February, our latest figure is 610.0 billion yen.
In terms of investment progress, the number of LNG carriers is expected to increase from the current 46 to 65 by fiscal 2026, and we are continuing to pursue further initiatives.
In Car Carrier Business, we have decided to deploy a total of 17 LNG-fueled vessels, including chartered vessels.
We are also expanding our fleet of carriers for coal and iron ore, including new fuel vessels, to meet customer demand.
Furthermore, we are advancing investments focused on our businesses with the role of driving growth and on environmental initiatives, such as the launch of a liquefied CO2 transport business in Europe and a geological survey vessel business to support offshore wind turbines. However, investment cash flow decreased by 130.0 billion yen due to delays in customer plans, the partial postponement of replacement investments stemming from trends in ship prices, and increased cash inflows from the sale of businesses and assets.
By further leveraging our strengths, we will continue to work toward business growth, including collaboration with customers and partners.
C-5. 【Capital Policy】: Shareholder’s Return Policy
We plan to provide total shareholder returns of 800.0 billion yen or more during the Medium-term Management Plan period, including an additional 50.0 billion yen as a flexible return. The method and timing will be announced once determined.
Meanwhile, for fiscal 2025, we will increase the additional dividend to 80 yen, bringing the total dividend to 120 yen per share. This is based on the surplus of 750.0 billion yen previously announced as total shareholder returns for the Medium-term Management Plan period.
C-12. Shipping Industry Environment
I would like to now discuss three important points regarding the current environment surrounding the shipping industry.
The first is the U.S. tariff policy. We need to continue monitoring developments in U.S. tariff policy, but we believe the two major impacts will likely be a decrease in trade volume to and from the United States and the potential for changes in trade patterns, including developments in domestic production in the United States.
The burden of the tariffs will likely fall on the American people, and questions remain as to whether this policy will be maintained until a full-scale economic slowdown occurs. Therefore, we believe it is important to closely monitor developments in order to anticipate the duration of its impact.
Our financial forecast for fiscal 2025 has been calculated based on the assumption that the impacts we foresee at this time will extend throughout the year. The “K” Line businesses most likely to be affected are Containership and Car Carrier in the Product Logistics segment. Accordingly, we are currently preparing to consider short- to medium-term fleet adjustment and changes to service patterns, with a focus on these two businesses.
However, given the unpredictability of U.S. tariff policies and their potential impacts, we will continue to closely monitor the situation and future developments.
The second is the issue of the USTR-imposed countermeasures targeting China-related vessels, which are scheduled to take effect in October this year. The key targets of this measure are mainly Chinese shipping companies, Chinese-built ships, and non-U.S.-built car carriers, while in LNG transportation, the focus is on promoting the use of American-built vessels. While “K” Line operates some relevant vessels, such as Chinese-built ships, we believe that the business impact on our Dry Bulk and Energy Resource Transport segments will be limited in the short term. In Containership Business, we expect to be able to limit the impact by avoiding the use of targeted vessels on U.S. routes. In Car Carrier Business, however, all services on U.S. routes are expected to be affected, which is a major concern for us. We believe that it is necessary to discuss with customers and related industries to find a solution. Please note that “K” Line’s financial forecast for fiscal 2025 does not factor in potential impacts of the USTR measures.
Thirdly, regarding the use of the Suez Canal, unfortunately, there has been no change in tension levels in the Middle East, due to factors such as continued U.S. military attacks on the Houthis. While there are various reports today, our top priority is to make decisions based on the safety of our vessels, crews, and cargoes. Although we will continue to closely monitor the situation, for our financial forecast for this fiscal year, we have assumed that there will be no transits through the Suez Canal during the year, and that vessels will continue taking the Cape of Good Hope route instead.
