Containership
Q1. Please let us know your estimate on the business performance for the second quarter.
A1. Usually summer is the peak season and the profit improves, yet for this year we predict that it takes a bit more time for the stagnant market to fully recover. For that, we estimate the ordinary income of 0.4 billion yen for the second quarter. The major reasons of reduced revenue include the expanding imbalance between inbound and outbound legs caused by the reduced number of inbound containers in Asian trades due to the sluggish market and strong US dollar and an associated increase in the cost for returning empty containers inland.
Q2. Please let us know the current freight rate and your view into the freight rates in the second quarter.
A2. We assume that the freight rate in the second quarter remains almost the same as the first quarter for the outbound Asia-North America trades. The current spot market is stagnant, and our company’s freight index has now been lower than the first quarter index of 97. However, it is assumed that the freight level will be reset by the freight rate restoration that takes place as of August 1, and accordingly we predict that the freight index in the second quarter will be the same as that in the first quarter.
Regarding the Asia-Europe trades, the market has been sluggish since early spring, and the first quarter performance was substantially lower than our initial expectation. The current freight index is slightly below the first quarter index of 49, yet the freight rate restoration planned as of August 1 is expected to improve the index for the second quarter compared to the first quarter. Meanwhile, the markets of North-South trades and Asian trades are forecast to remain tough, which may cancel out the improvement expected for the Asia-Europe trades.
Q3. Regarding the estimate of 4.0 billion yen for the second half year, won’t it require downward revision for the second half year taking into account the current market conditions?
A3. True, if the market remains sluggish, there is a possibility that we have to review our assumption on the freight rate for the second half year, especially for Asia-Europe and North-South trades. However, new 14,000 TEU large containerships have been completed and entering service one after another during the first half year, and the last 5 containerships will enter service in September; we expect to see the effects of operating large containerships in the second half year. Along with the favorable effects of exchange rate and bunker price, we intend to secure 4.0 billion yen as least as estimated at the beginning of the year.
Q4. How much cost saving effect do you expect from operating 14,000 TEU large containerships?
A4. We assume about 10.0 billion yen for a year, and about half of that for the second half year, namely, about 5.0 billion yen.
Q5. What is your prospect into the future supply and market condition?
A5. An unexpectedly large number of orders have been placed for large containerships since the beginning of the year, and those ordered will be completed in 2017 and 2018. As a result, while the supply in 2016 may not be large, it will greatly increase in 2017. For such a future prospect, we believe the market will not improve very much.
Q6. How much have you reduced the supply?
A6. There is no necessity to reduce the supply for Asia-North America trades at the moment since the freight is moving well.
Regarding Asia-Europe trades, many large containerships will enter service this year and the space supply increased by about 10% compared to the last year. On contrary, according to the record until May, the load volume reduced by about 3% compared to the last year. The supply-demand gap therefore is about 13%. For this supply-demand gap, the freight rate fell drastically in May and June, and alliances have been reducing their supply by around 10%. Marine transport companies may have to seriously think shrinking their shipping service further in the second half year, after observing the outcome of freight rate restoration that takes place in August.
Dry Bulk
Q. Please let us know the spot exposure of dry bulk market.
A. At the beginning of the year, we announced that the spot exposure would be 10% for Capesize, 15% for Panamax, about 50% for Small, and an overall average of around 20%. However, the spot exposure has shrunk from the second quarter to 4% for Capesize, 11% for Panamax, about 35% for Small, and an overall average of around 12%.
Car Carrier
Q. Is there any reason why both the operating revenue and the ordinary income increased for the first quarter compared to the same period last year?
A. The main reasons are the increased volume of outbound other than those for Europe and the improved efficiency in the ship allocation and operation.
Tanker
Q. Please let us know the spot exposure of tanker market and its impact on the income.
A. The spot of VLCC is 3.5 vessels in terms of the number of vessels and about 600 days for the second half year. Similarly, the spot of Aframax and product tankers is about 1,400 days. Their impact on the income is, for instance, if the VLCC market improves by 10,000 dollars in the second half year compared to the estimate, the income will improve by 6 million dollars.
General
Q1. Please tell us the reason why downward revision was made on the operating revenue for both the first half year and the full year.
A1. The number of freight loading contracts was decreased and the number of time charter contracts was increased mainly for the Dry Bulk Business, resulting in a reduction in the operating revenue as the income from freight. However, it had no impact on the overall balance.
Q2. The ordinary income of Bulk Shipping Business for the first quarter was 10.4 billion yen, which is better than that in the previous year (6.4 billion yen). Please tell us the rough breakdown.
A2. The performance of Dry Bulk Business was poorer than the last year, but the income from other business including Tanker and LNG Carrier was increased. The latter exceeded the former, and it turned out to be an improvement by 4.0 billion yen in total.
Q3. In the non-operating income, there is a gain of 3.2 billion yen from revaluation of exchange rate counted for the first quarter. Please let us know its contents by business division.
A3. Containership Business and Bulk Shipping Business account for a gain of a little less than 2.0 billion yen, and Offshore Support Vessels a little over 1.0 billion yen.
