[Containership]
Q1. What are your prospects for transport volume in each major trading sector for Fiscal 2015?
A1. We are expecting an increase of approximately 12% for Asia-North America trades and a decrease of about 3% for Asia-Europe trades in loading volume compared to previous year.
Q2. Please let me know your company’s plan for fleet capacity in Fiscal 2015.
A2. While five 14,000TEU large ships will enter service in the first half year, a selected number of medium to small ships will be removed from the fleet. As a result, the total TEU level of our company will remain almost the same.
The 14,000TEU ships will be allocated for Asia-Europe trade, and the 8,000TEU ships currently in service for the Asia-Europe trade will be shifted to Asia-North America trade. We will focus on tonnage management in order to manage the transport volume described in A1 above, and the weekly transport capacity for Asia-North America trade will be enhanced (by approximately 16% compared to Fiscal 2014) while that for Asia-Europe trade will be decreased by about 5% compared to Fiscal 2014.
Q3. You will reduce the number of vessels in accordance with the delivery of large containerships. Will that result in a reduction in the quality of services provided by your company?
A3. The movement to pursue rationalization through employment of larger vessels is observed by all alliances in the industry, and the entire CKYHE Alliance will also go through conversion to larger ships. Although the number of loops and the ports of call will be reviewed during promotion of rationalization measures, this will not result in a significant reduction in frequency or affecting service quality compared to other alliances.
Q4. Please let me know the freight rate you consider as the premise for Fiscal 2015.
A4. Market deterioration by around 10 points in Asia-North America trade and 5 points in Asia-Europe trade compared to the results of Fiscal 2014, is the current premise.
The premise of market deterioration arises from our assumption on an oversupply situation due to deliveries of new large containerships.
We expect the quarterly trend to be a gradual reduction for Asia-North America trade throughout the year, peaking during summertime in the second quarter and declining in the third and fourth for Asia-Europe trades.
Q5. What is the current freight rate like for Asia-Europe trade? Also, please let me know the situation of freight rate increase in May.
A5. The current freight rate level for Asia-Europe trades, speaking in terms of index, has fallen to a range of 50-55 (Fiscal 2008 1Q = 100). This is an unprecedentedly low level.
Regarding the rate increase in May, our company is hopeful to increase by around $900 per TEU effective May 1.
Other companies are also planning to increase rate by a similar level in early May, but it seems some shipping companies are considering postponing the rate increase from May 1 to May 10, so that it will be after the long May holidays in Japan; the situation is unpredictable and requires careful attention. Unfortunately, major profit may not be gained at this level of freight rate.
Q6. Ordinary income from the Containership Business in Fiscal 2015 is estimated to be 8 billion yen for the first half and 4 billion yen for the second half. Why is there such a difference (4 billion yen)?
A6. That difference comes from seasonal factors. Generally the Containership Business is busy with a large freight volume during the first half, while the loading volume drops in the second half due to the slack season in winter and the freight rate decreases accordingly. The estimate takes into account these seasonal factors.
Q7. What is your estimate on the ratio of long-term contracts (one-year freight contracts) in total volume for Fiscal 2015?
A7. We assume it to be 20-25% for Asia-Europe trade and 40-45% for Asia-North America trade. These figures will turn out to be about 5-10% higher than the ratio in Fiscal 2014.
[Dry Bulk]
Q1. Please let me know the spot exposure of dry bulk market at the beginning of the fiscal year.
A1. The rate of spot exposure is about 7% for Capesize, about 15% for Panamax, and about 50% for Small. The budget is formulated under these rates.
Q2. Please let me know your plans on structural reform.
A2. We are planning to reduce the exposure through redelivery of about 5 vessels in Fiscal 2015 centering on Small ships, following the redelivery of 6 vessels carried out in Fiscal 2014.
Q3. What is the effect of structural reform of dry bulk fleet carried out in Fiscal 2014 that is included in the budget estimate for Fiscal 2015?
Q3. We are assuming an improvement effect of a little over 2 billion yen.
[General]
Q1. On Page 10 of the Financial Highlights Brief Report, there is 45 billion yen of market volatility counted as one of the Variation Factors for yearly Fiscal 2015 estimate. Please let me know the breakdowns by segment.
A1. We are assuming approximately 70% for Containership Business, about 20% for Dry Bulk Business and 10% for others.
Q2. On Page 10 of the Financial Highlights Brief Report, there is a relatively large loss of 19.7 billion yen counted for others in the Variation Factors. Please let me know the breakdowns.
A2. We assume that the profit of 4.2 billion yen from revaluation of exchange rate in Fiscal 2014 and the profit of about 3.0 billion yen from sales of chassis in North America (which was a temporary cost reduction factor) will be lost in Fiscal 2015.
The remaining 12.5 billion yen is roughly divided into several major factors. For instance, we assume a loss of about 2.0 billion yen arising from the delay in payment during the fiscal year (those that arose in Fiscal 2014) related to ILWU (International Longshore and Warehouse Union). There will be a loss of about 6.0 billion yen due to an increase in the cost for bringing empty containers back in return voyages, which originate from the imbalance between the volume of Asia to North America freight that will be increased and the volume of North America to Asia freight that will see an upper limit in the growth of trades, as well as from the increase in the unit cost for inland transport (railway, trucks).
Q3. Please let me know your view about the operating CF and investment CF in Fiscal 2015. Is there a possibility of reducing your investment plan along with the market deterioration?
A3. Our policy is to keep the operating CF 67.0 billion yen and the investment CF within 50.0 billion yen.
Estimate for Fiscal 2015 assumes market deterioration for the major segments, and is consistent with the direction of the new Medium-Term Management Plan released earlier this year.
