【Financial Highlights Brief Report for 1st Quarter FY2025】
A. Financial Highlights for 1st Quarter FY 2025
A-1. Financial Results for 1st Quarter FY2025
For the fiscal 2025 first quarter results, operating revenues were 244.9 billion yen, operating income was 19.8 billion yen, ordinary income was 21.6 billion yen, and net income attributable to owners of parent was 29.9 billion yen, representing a year-on-year decrease in both revenue and profit. The dollar-yen exchange rate for the first quarter was 145.32 yen, which is approximately 10 yen stronger than the roughly 155 yen rate in the same period of the previous year. The bunker price was 550 dollars, a slight decrease compared to the same period last year.
Details by business segment are provided on the next page, but the decline in operating income compared to the same period last year was primarily due to the impact of exchange rates and a sluggish Dry Bulk market in the first quarter.
In terms of ordinary income, in addition to the decrease in operating income, the equity-method income and loss from OCEAN NETWORK EXPRESS (ONE), which operates our Containership Business, was also reflected. Particularly in the first quarter, the decline in average freight rates compared to the same period last year led to a reduction in ONE’s earnings, contributing to the decline in our ordinary income. Net income for the quarter came to 29.9 billion yen, as we recorded extraordinary income from the sale of owned vessels and a portion of subsidiary shares. As there have been no significant changes in our financial indicators since the end of March, I will not cover them this time.
A-2. Financial Results for 1st Quarter FY2025 by Segment
Now, I would like to discuss the results by segment. Starting this fiscal year, we have changed the method for allocating foreign exchange gains and losses to each segment. Previously, foreign exchange gains and losses on foreign currency-denominated assets and liabilities not linked to a specific segment were allocated to each segment based on a certain formula. However, starting this fiscal year, we have changed the method so that these are now recognized at the corporate level. The figures for the same period of the previous fiscal year given for comparison have been restated using the new method adopted this fiscal year. In other words, the figures shown enable comparison using the same basis.
Regarding the Dry Bulk segment, compared to the same period last year, the Capesize market saw a temporary improvement in June. However, due to accidents and disputes at loading ports, the market was weak overall. For Panamax and smaller sizes as well, cargo movements of coal and grain were sluggish, and the market did not gain momentum. As a result, the Dry Bulk segment as a whole was impacted by the stronger yen, market conditions, and business disruptions due to accidents and disputes at loading ports. Consequently, an ordinary loss of 0.5 billion yen was recorded.
The Energy Resource Transport segment has a relatively high proportion of long-term contracts, so earnings fluctuations tend to be limited. However, in the first quarter of the previous fiscal year, there were one-time losses. As those factors were absent this year, results improved year on year.
Starting this period, performance will now be reported separately for Car Carrier Business, which is part of the Product Logistics segment.
In Car Carrier Business, although additional tariffs were imposed on automobile exports to the United States, vehicle demand remained relatively strong not only in the United States but also worldwide, resulting in overall strong transport demand. As a result, profitability remained at a high level. However, due to the appreciation of the yen, both revenue and profit declined compared to the same period last year.
As for Containership Business, ONE’s transport volume saw a slight increase compared to the same period last year, including pre-tariff rush order demand. However, due to a decline in freight rates, profit decreased, resulting in a large year-on-year drop in earnings.
B. Forecasts and Initiatives for FY2025
B-1. Forecasts for FY2025 and Key Factors
I will now explain the updated performance forecast for the current fiscal year. With regard to U.S. tariff policy, while China continues to negotiate a trade deal with the U.S., other major trade partners have largely reached agreements on their specific tariff rates, including Japan, the EU, South Korea, Taiwan, etc. However, it remains difficult to predict how these developments will affect the real economy going forward-particularly cargo movements relevant to our business-and the outlook continues to be unclear. Although it is difficult to foresee the extent and timing of the impacts, we have updated our figures based on our current forecasts.
First, let me explain a few of the assumptions behind these figures. As noted on the slide, we do not anticipate the resumption of transit through the Suez Canal before the end of this fiscal year, and therefore our forecast assumes no use of the Suez Canal. Details of the tariff impact will be explained on the next slide, but the effects are mainly related to Containership Business and Car Carrier Business. We have incorporated a certain level of impact into our estimates based on our internal calculations. The port entry fees being imposed by the Office of the United States Trade Representative (USTR) as part of U.S. trade measures against China are scheduled to begin in October, but we have not factored them into our forecast.
We have set the dollar-yen exchange rate at 141.73 yen, with forecasts from this month onward based on 140 yen. The bunker price is set at 566 dollars.
Assumptions regarding market conditions, including for Dry Bulk, are outlined in the Appendix. There have been few changes to these assumptions since the beginning of the fiscal year.
Based on these assumptions, for our updated full-year forecast for fiscal 2025, operating revenues are 968.0 billion yen, operating income is 90.0 billion yen, and ordinary income is 120.0 billion yen, while net income attributable to owners of parent is 115.0 billion yen. These figures represent an upward revision compared to the forecast announced in May. Specifically, operating income has increased by 10.0 billion yen, and both ordinary income and net income attributable to owners of parent have increased by 15.0 billion yen each.
A one-yen change in the yen-dollar exchange rate is estimated to affect profit by plus or minus 1.6 billion yen, while a ten-dollar change in the bunker price is estimated to impact profit by plus or minus 20 million yen.
Although shareholder return and related information will be explained later, there are no changes from what was announced in May.
B-2. Comparison of Income and Loss for FY2025 (Compared to the May 2025 announcement)
This slide shows a comparison of the changes in our performance forecast since the beginning of the fiscal year, with a focus on tariff impacts. As shown on the far left of the slide, at the beginning of the fiscal year, our performance outlook before considering tariff impacts pointed to ordinary income of 135.0 billion yen. Based on our estimate that tariffs could have a 30.0-billion-yen total impact-13.5 billion yen on “K” Lineʼs own businesses (mainly Car Carrier Business) and 16.5 billion yen on Containership Business-we disclosed an initial ordinary income forecast of 105.0 billion yen.
As I will explain in more detail later, Car Carrier Business has so far seen limited actual impact, so we have now decided to revise the tariff impact upward by 10.0 billion yen. Based on forecasts from ONE, we have revised our assumptions for Containership Business using a full-year net income forecast of 700 million dollars, resulting in a 2.0-billion-yen improvement. In addition, mainly due to exchange rates factors, we expect a further 3.0-billion-yen improvement in ordinary income from “K” Lineʼs own businesses. As a result, we now forecast full-year ordinary income of 120.0 billion yen-an upward revision of 15.0 billion yen from the initial forecast at the beginning of the fiscal year.
B-3. Forecasts for FY2025 by Segment
Turning now to the full-year performance forecast by segment, our market assumptions for Dry Bulk and tankers for the second quarter onward remain unchanged from May.
For the Dry Bulk segment, major factors include the significant impact of exchange rates compared to the previous fiscal year, as well as market conditions affecting the first quarter. Additionally, accidents and disputes at loading ports in the first quarter—particularly disruptions in vessel deployment around Guinea—also had an impact. As a result, we now expect a decrease in profit compared to the initial forecast.
As for the Energy Resource Transport segment, due to the large share of medium- to long-term contracts, earnings remain stable. While there were one-time losses in the previous fiscal year, those factors are now gone, and we therefore expect profit to increase this year.
Next, I would like to discuss the Car Carrier Business, which is part of the Product Logistics segment. While U.S. tariffs were initially set at 25%, they have ultimately settled at 15%, and we revised the projected tariff impacts accordingly. At the beginning of the fiscal year, we had anticipated a decline of about 30% in cargo volume to the U.S., but as of now, the actual impact has been minimal. For the first half, we expect only a very slight impact; for the second half, we have revised our previous 30% decline estimate to a 15% drop. As a result, we have revised our initial forecast for Car Carrier Business upward by 12.0 billion yen.
For Containership Business, please refer to the later slides concerning ONE. We have revised our estimate of equity-method income from ONE. At the beginning of the fiscal year, ONE had projected net profit of approximately 1,100 million dollars, without considering tariff impacts. However, “K” Line later forecasted just under 700 million dollars, taking into account cargo volume reductions and a deterioration in freight market conditions. ONE has now updated its full-year forecast to 700 million dollars, and we have also revised our anticipated share of equity-method income accordingly.
As for the other businesses within Product Logistics, there have been no significant changes from the announcement we made in May.
C. Status and Progress of the Medium-term Management Plan
C-1.【Capital Policy】：Capital Policy Progress and Corporate Value Improvement
I will now go over the current status and progress for our Medium-term Management Plan. There have been no major changes since the briefing at the beginning of the fiscal year. However, with respect to “K” Line’s “earning power,” our full-year ordinary income forecast has increased by 15.0 billion yen from the initial outlook, reaching 120.0 billion yen.
Regarding operating and investment cash flows, as explained at the beginning of the fiscal year, we are projecting operating cash flow of 1.5 trillion yen and investment cash flow of 610.0 billion yen. These figures remain unchanged.
As for shareholder return, our goal in this policy is still to always remain aware of our optimal capital structure, ensure the investments necessary to improve corporate value, and maintain financial soundness. Using any capital in excess of the appropriate level, our policy is to consider distributing shareholder returns in a proactive manner based on the cash flow situation. We will continue to follow this approach going forward. As of May, we indicated a total shareholder return of 800.0 billion yen or more during the Medium-term Management Plan period. For this fiscal year, we have announced a dividend of 120 yen per share, and for the next fiscal year, it will be 100 yen per share. This outlook remains unchanged. In May, we also mentioned the flexible additional shareholder return totaling 50.0 billion yen or more, on top of the previously announced figure. We are continuing to consider this in light of the current business environment. Please note that the method and timing of such returns are still under review.
One key challenge in enhancing corporate value is our current PBR, which remains around 0.8. We recognize that improving our PBR is the most important issue in terms of our capital policy. We are currently reviewing measures to clearly demonstrate a growth trajectory that leverages “K” Line’s strengths.
C-2.【Capital Policy】：Shareholder’s Return Policy
For our shareholder return policy, we plan to pay an annual dividend of 120 yen per share for the current fiscal year and 100 yen per share for the next fiscal year. These figures remain unchanged. Regarding the flexible additional shareholder return of 50.0 billion yen or more, we are reviewing this measure and aim to provide an update as soon as possible.
C-3. Changes in the business environment
Regarding changes in the business environment, we recognize that, particularly within geopolitics and the global economy, events affecting our business are occurring at the same time. Specifically, U.S. trade and tariff policies, economic concerns regarding China, and tensions in the Middle East are all factors that, overall, are exerting downward pressure on “K” Line’s business performance. Moreover, the outlook for these issues remains highly uncertain and unclear, and we believe it is essential to closely monitor the situation and make timely and appropriate responses. As for energy and environmental policies, we believe that the broad trend toward decarbonization remains unchanged. However, as some signs of pushback or temporary reversals are also emerging, we recognize the need to move forward while taking a realistic approach that aligns with the practical aspects of our business.
C-4. Shipping Industry Environment
This slide summarizes the environment surrounding the shipping industry from three perspectives: U.S. tariff policy, USTR measures, and the security situation near the Suez Canal and Strait of Hormuz.
With respect to its tariff policy, the U.S. is still negotiating with China. Given this, we believe it is important to closely monitor the extent and nature of any impacts on trade patterns and the real economy. We will continue to assess how U.S. tariffs and USTR measures may affect our business.
As for the USTR measures, port entry fees are scheduled to take effect on October 14 this year, and we are currently in the process of clearly explaining to our customers what we know. Although the potential financial impact of these measures has not been factored into the figures presented today, we are committed to taking all the necessary actions that we can.
Regarding a return to the Suez Canal, due partly to recent reports of shipping attacks by the Houthis, we have determined that use of the canal is not yet feasible. Accordingly, our earnings forecast for this fiscal year assumes that we will continue to avoid the Suez Canal. While this situation is having a certain impact on supply and demand, we intend to continue developing our business while taking these circumstances into account.
