【Financial Highlights Brief Report for 2nd Quarter FY2025】
A. Financial Highlights for 2nd Quarter FY 2025
A-1. Financial Results for 2nd Quarter FY2025
The results through the second quarter of FY2025 are as follows. Operating revenues totaled 500.5 billion yen, down 37.4 billion yen year on year. Operating income was 42.9 billion yen, a decrease of 18.1 billion yen year on year. Ordinary income was 59.6 billion yen, a decrease of 127.6 billion yen year on year. Interim net income/loss attributable to owners of parent was 68.6 billion yen, a decrease of 114.5 billion yen year on year. The average exchange rate was 146.18 yen, and the average bunker price was 547 dollars.
Segment information is shown on the slide on the next page. Operating income for the second quarter of FY2025 results was lower year on year due to the impact of foreign exchange rates, which appreciated 7.71 yen year on year, higher Car Carrier operating expenses, and a favorable Dry Bulk market, but lower year on year.
In the Containership Business, transport volume remained at the same level as in the same period of the previous fiscal year due to factors such as pre-tariff rush order demand, but short-term freight rates decreased compared to the same period of the previous fiscal year due to the impact of delivery of new vessels etc. As a result, equity-method income of OCEAN NETWORK EXPRESS (ONE), an equity-method affiliate, decreased, and ordinary income/loss and interim net income/loss also declined year-on-year.
Extraordinary income such as gain on sale of owned vessels and gain on sale of a portion of subsidiary shares was recorded.
Key financial indicators are shown in the lower left-hand corner of the slide. Equity capital was 1,683.9 billion yen, interest-bearing liability was 312.2 billion yen, DER was 18.5%, and the equity ratio was 75.6%.
Off-balance sheet assets and liabilities, such as charter hire, amount to approximately 600.0 to 700.0 billion yen, and after taking these into account, the consolidated equity ratio will be 58% to 60%.
A-2. Financial Results for 2nd Quarter FY2025 by Segment
Results by segment through the second quarter. Here are some key points.
In the Dry Bulk segment, the market for both Capesize and Panamax and smaller sizes recovered and remained firm in the second quarter. On the other hand, for the first half of the year as a whole, market conditions were weaker than in the same period last year, and ordinary income/loss was also lower year on year.
Meanwhile, in the Energy Resource Transport segment, LNG carriers, LPG carriers, Thermal Coal Carriers, VLCCs, Drillship, and FPSOs, among others, continued to operate steadily backed by medium- to long-term contracts. The absence of one-time losses recognized in the same period last year also contributed to a profit increase year on year.
In the Product Logistics segment, the Car Carrier Business saw limited impact from U.S. tariffs through the second quarter, and the number of vehicles transported slightly increased year on year, supported by solid demand in countries around the world. However, profit decreased year on year due to exchange rate impacts and increased operating costs, etc.
In the Containership Business, cargo transport volume remained at the same level as the previous fiscal year, including pre-tariff rush order demand, but profit declined as market conditions were sluggish due to increased supply of new vessels, and equity-method investment income from ONE decreased.
B. Forecasts and Initiatives for FY2025
B-1. Forecasts for FY2025 and Key Factors
This is the forecast and key factors for FY2025. First, the forecast assumes that in FY2025, both “K” Line’s own businesses and Containership Business will not transit through the Suez Canal, but via the Cape of Good Hope.
In light of the recent U.S.-China talks, we have not factored in the impact of USTR's port entry fees for Car Carriers. At the U.S.-China talks on October 30, it was agreed to postpone or partially cancel the imposition of additional tariffs for one year, etc. However, the impact on cargo movements, etc. cannot be clearly ascertained, so we will keep an eye on future developments.
The average exchange rate for FY2025 is 145.91 yen and the bunker price is 536 dollars. Please refer to the Appendix on the slide for market conditions and volume forecasts.
Based on these assumptions, our forecasts for FY2025 are: operating revenues of 984.0 billion yen, down 63.9 billion yen year on year; operating income of 86.0 billion yen, down 16.8 billion yen year on year; ordinary income of 100.0 billion yen, down 208.0 billion yen year on year; and net income attributable to owners of parent was 105.0 billion yen, a decrease of 200.3 billion yen year on year.
Operating income decreased year on year due to a decline in profits from Car Carriers and Dry Bulk, as well as yen appreciation. On the other hand, at the ordinary income/loss level, a decline in equity-method income derived from ONE, and other factors, also contributed to the decrease in income.
A one-yen change in the yen-dollar exchange rate is estimated to affect profit by plus or minus 1.0 billion yen, while a ten-dollar change in the bunker price is estimated to impact profit by plus or minus 10 million yen.
The annual dividend forecast for 2025 remains unchanged from the previous announcement in August, and is expected to be 120 yen per share, including a basic dividend of 40 yen per share and an additional dividend of 80 yen per share. In the light of the current business environment, and other factors, we are continuing to review the timing and methods of the flexible additional return of 50.0 billion yen or more announced in May.
B-2. Forecasts for FY2025 by Segment
I would like to explain the forecasts for FY2025 by segment.
For the Dry Bulk segment, profit is expected to decrease year on year mainly due to exchange rate impacts, but also due to the effects of accidents and disputes at loading ports, in addition to the market slump in the first quarter compared to the same period of the previous year.
In the Energy Resource Transport segment, LNG carriers, LPG carriers, Thermal Coal Carriers, and VLCCs, etc., are operating stably backed by medium- to long-term contracts, and we expect an increase in profit, partly due to the absence of one-time factors from the previous year.
In the Car Carrier Business of the Product Logistics segment, the impact of U.S. tariff policy has been factored in as -3.5 billion yen for the full year as before, but we believe the impact on the overall business is negligible. In general, transport volume is expected to increase slightly from the previous fiscal year, supported by solid demand in countries around the world.
On the other hand, profit is expected to decrease year on year due to the impact of the strong yen, increased operating costs, and other factors. The impact of the USTR port charges has not been factored in, as I explained earlier.
In the Containership Business of the Product Logistics segment, we expect freight rates to be sluggish in the second half of FY2025 due to geopolitical risks and the impact of U.S. tariffs, as well as an increase in supply due to the deliveries of new vessels. As a result, due to the decrease in equity-method investment income derived from ONE, we expect ordinary income of 21.5 billion yen, a decrease of 184.5 billion yen year on year and a decrease of 17.5 billion yen from the previous announcement in August.
In the August announcement, in the light of the business environment at that time, ONE's overall profit/loss was estimated to be just under 700 million dollars, but this time, as stated in ONE's public announcement, ONE's overall profit/loss is expected to be approximately 310 million dollars.
B-3. Comparison of Income and Loss for FY2025 (Compared to the August 2025 announcement)
The slide shows a comparison of income and loss for FY2025. The left side of the slide shows the August forecast for ordinary income of 120.0 billion yen, and the right side of the slide shows this latest forecast for ordinary income of 100.0 billion yen.
As for “K” Line’s own businesses, the Dry Bulk segment has seen an increase of 1.5 billion yen since the August announcement.
On the other hand, in the Car Carrier Business, there is no change in the -3.5-billion-yen impact of the U.S. tariffs, which was factored in at the time of the August announcement. However, a further negative impact of 4.0 billion yen from the August announcement is expected due to a decrease in the number of units shipped to Europe as a result of the model changeover and the impact of production issues.
Overall, the forecast for “K” Line’s own businesses is 78.5 billion yen, a decrease of 2.5 billion yen from the 81.0 billion yen announced previously in August. In the Containership Business, we expect a decrease in profit of 17.5 billion yen, mainly due to the effects of the factors I just explained, and we forecast ordinary profit of 21.5 billion yen for the full fiscal year.
C. Status and Progress of the Medium-term Management Plan
C-1.【Capital Policy】：Capital Policy Progress and Corporate Value Improvement
I would like to explain our current capital policy. In the area of enhancing earning power, as I explained earlier, we expect the full-year ordinary income for FY2025 to be down by 20.0 billion yen from the August announcement, to 100.0 billion yen.
On the other hand, the operating cash flow forecast for the current Medium-term Management Plan period through FY2026 remains unchanged from the previous announcement in August at around 1.5 trillion yen. This leaves the starting line for the overall cash allocation unchanged.
As for the investment plan, there is no change from the previously announced 610.0 billion yen in investment cash flow through FY2026. We will continue to examine the optimal capital structure with the aim of achieving both financial soundness and capital efficiency.
With regard to shareholder return policy, we will continue to be aware of the optimal capital structure, ensure the investments necessary to improve corporate value and growth, ensure financial soundness, and actively return to shareholders any portion of capital exceeding the appropriate capital, based on cash flow.
Therefore, based on the latest cash allocation, the planned dividend for FY2025 is 120 yen per share, consisting of a basic dividend of 40 yen per share and an additional dividend of 80 yen per share, and there is no change in the total amount of returns of 800.0 billion yen or more over the Medium-term Management Plan period.
We are also continuing to consider the method and timing of the flexible additional shareholder return of 50.0 billion yen or more, which we have already announced, in the light of the business environment, and we plan to firmly implement it by FY2026, the current Medium-term Management Plan period.
We recognize that the current PBR of less than 1.0 is a major challenge, and we will continue our efforts to be recognized by the market through the realization of an optimal capital structure and business growth.
C-2.【Capital Policy】：Shareholder’s Return Policy
Please refer to the slide that summarizes the overall shareholder returns during the Medium-term Management Plan period through FY2026, as it details what we have explained in the previous slides.
The following slide and beyond summarize the business environment, tariffs, and USTR status, but we will not explain them here, as we hope you will refer to them again. This concludes my explanation.
