Your Board of Directors always appreciates your continuing support.
We would like to report consolidated financial results for the fiscal year ending March 31, 2021 (from April 1, 2020 to March 31, 2021; hereinafter “the fiscal year”), and our forecasts for the Fiscal Year 2022 that ends March 31, 2022.
Operating revenues for the fiscal year was ¥625.5 billion (down ¥109.8 billion year-on-year), operating loss was ¥21.3 billion (down ¥28.1 billion year-on-year), and ordinary income was ¥89.5 billion (up ¥82.1 billion year-on-year). profit attributable to owners of the parent was ¥108.7 billion (up ¥103.4 billion year-on-year).
Due to significant business performance improvement of OCEAN NETWORK EXPRESS PTE. LTD. (hereinafter referred to as "ONE"), the company recorded 118.165 billion yen of equity in earnings of subsidiaries for the fiscal year 2020. Within the recorded equity in earnings of subsidiaries, “ONE” accounted for 119.271 billion yen in consolidated cumulative fourth quarter, and 67.325 billion yen in the fourth quarter alone.
1) Summary of Consolidated Operating Results for FY2020
（Billion Yen; rounded to the nearest 100 million yen）
Performance per segment was as follows.
(i) Dry Bulk Segment
【Dry Bulk Business】
In the Cape-size sector, market rates fell steeply early in the current fiscal year as a result of the combined effects of stagnant economic activity due to the spread of COVID-19 and a decrease in shipments due to unfavorable weather conditions in production locations. However, around the middle of the fiscal year, market rates rose at sometimes in line with a recovery in demand for transportation of cargoes to China. In the second half, market rates generally remained firm despite some fluctuations because of a recovery in economic activity in major countries and brisk production of crude steel in China.
In the medium and small vessel sector, cargo movements remained sluggish around the world early in the current fiscal year due to the spread of COVID-19. However, toward the middle of the current fiscal year, cargo movements recovered because of the resumption of economic activity in China and robust demand for transportation of grains from Brazil to China. In the second half, the vessel supply-demand balance tightened for medium and small vessels due to increased demand for coal imports caused by cold waves in China in addition to brisk transportation of grains from the United States to China, and as a result, market rates stayed firm.
Under these circumstances, the Group strove to reduce operation costs, fleet restructure and to hedge against market risks by Forward Freight Agreement but remaining effect of weakened market rates in first half, the overall Dry Bulk Segment recorded a year-on-year decrease in revenue and a loss was recorded.
(ii) Energy Resource Transport Segment
【Tanker and Thermal Coal Carrier Business】
Concerning large crude oil tankers (VLCCs), LPG carriers, and thermal coal carriers, the business stayed firm for mid- and long-term charter contracts and contributed to secure stable profit.
【LNG Carrier and Offshore Energy E&P Business】
Concerning LNG carriers and FPSO (Floating Production, Storage and Offloading system), the business stayed firm for mid- and long-term charter contracts and contributed to secure stable profit.
In the drillship business, losses were recorded considering the forecast of market rates after the expiry in 2022 of existing contracts although the business stayed firm during this period for mid- and long-term charter contracts and contributed to secure stable.
Concerning the offshore support vessel business, market rates fell in the first half owing to stagnant oil resource development because of an oil price drop. Following an oil price recovery in the second half, market rates remained sluggish.
As a result, the overall Energy Resource Transport Segment recorded a year-on-year decline both in revenue and profit.
(iii) Product Logistics Segment
【Car Carrier Business】
Demand for ocean transportation declined steeply because of sluggish global sales and the production shutdown of factories in various countries due to the spread of COVID-19. Although the Group carried out to reduce costs by vessel operation stoppage, temporary trade service revision, and fleet restructure, the car carrier business recorded a year-on-year decrease in revenue and a loss was recorded.
In the domestic logistics sector, container handling volume recovered because of an increase in demand for ocean container transportation around the world. In the towage business, work volume declined due to a continued decline in demand related to steel and paper materials. The warehousing business stayed firm.
In the international logistics sector, cargo movements related to the air forwarding business improved due to a shift from ocean to air cargo transportation caused by congestion in ocean transportation. Cargo movements related to ecommerce remained firm because of "nesting" demand due to the effects of COVID-19.
【Short Sea and Coastal Business】
In the short sea business, regarding steel transportation, shipment volume of steel products declined in the first half as a result of the effects of production cuts by steelmakers, however, the transportation volume in the current fiscal year remained almost flat year-on-year, as demand recovered strongly in the second half. Regarding timber transportation, the transportation volume of imported plywood declined year-on-year owing to sluggish demand, but transportation volume increased significantly for fuels for biomass power generation, for which demand for use as a renewable energy source is growing. As for bulk transportation, transportation volume fell steeply year-on-year because of a drop in domestic demand for Russian coal, the main cargo item.
In the coastal business, the Group strived to capture demand for food cargoes amid a decline in main cargo related to paper and automobiles in the liner transportation sector, but transportation volume fell year-on-year.
In the ferry business, the transportation volume of passengers and passenger cars dropped steeply year-on-year amid the spread of COVID-19. In the tramp service business, the operation rate of both vessels dedicated to the transportation of limestone and coal and general cargo vessels fell year-on-year. As a result, the transportation volume in the short sea and coastal business declined year-on-year.
In the domestic terminal sector, cargo movements in trans-Pacific trade stayed firm. As cargo movements recovered in intra-Asia trade as well in the second half, handling volume increased year-on-year. The international terminal service sector, regarding the Group's container terminal (managed by INTERNATIONAL TRANSPORTATION SERVICE, INC. (ITS)) in North America, cargo movements from Asia to North America increased steeply from summer onward due to "nesting" demand in the United States, so container handling volume remained on a firm trend. Moreover, as business with new users started in September, the Port business turned a profit.
Regarding ITS, the Company completed the transfer of all shares of ITS to MIP V BidCo, LLC, an infrastructure investment fund operated by Macquarie Infrastructure and Real Assets in December, 2020.
As for the performance of “ONE”, in the first half, lifting decreased because global cargo movements declined due to the spread of COVID-19. However, profit increased year-on-year, as the company strove to improve profitability through such measures as flexibly reducing the number of voyages in accordance with demand and reducing operational costs through optimal vessel operation. In the third quarter, mainly Asia North America trade, freight rate market conditions remained firm and utilization rate was maintained firm. Cargo demand for medical related goods and consumer goods recovered over the previous year. Shortage of vessel space and container and shore side and inland congestion cause much turmoil within the entire global supply chain and tight supply-demand balance. In the fourth quarter, supply-demand balance of all trade was tight. “ONE” chartered additional ships to recover schedule integrity and executed extra sailings but profit improved significantly year-on-year, because of a rise in the shortterm freight market.
As a result, the overall Product Logistics Segment recorded a year-on-year decline in revenue but turned a profit.
(iv) Other Segment
Other Segment includes but not limited to the Group’s ship management service, travel agency service, and real estate and administration service. The segment recorded a year-on-year decline both in revenue and profit.
1) Forecast for consolidated financial results for FY2021 (End March 2022)
（Billion Yen; rounded to the nearest 100 million yen）
In the Dry Bulk Segment, the vessel supply-demand balance is expected to tighten because of the limited number of newly built ships and an increase in scrapped ships due to the enforcement of environmental regulations as well as expectations that the global economy will remain on the path of recovery as a result of economic support policy measures and infection prevention measures implemented by various countries. As the dry bulk market is expected to stay firm, the consolidated results for the whole of FY2021 are forecast to improve. On the other hand, there still remains concern over the effects of COVID-19 on economic activity, and therefore, a close watch will be kept on changes in overall transportation demand. In the Dry Bulk Segment, the Group will continue efforts to improve operation efficiency and take profit improvement measures, including cost reduction. At the same time, the Group will strive to secure stable profit by increasing mid- and long-term contracts that take advantage of its strength in high quality transportation.
In the Energy Resource Transport Segment, the Group will strive to secure stable profit under mid- and long-term contracts with respect to large crude oil tankers, LPG carriers, thermal coal carriers, LNG carriers, drillships and FPSO (Floating Production, Storage and Offloading systems). In the offshore support vessel business, the Group will continue efforts to improve profitability through cost reduction measures.
As for the Product Logistics Segment, regarding the car carrier business, global vehicle sales are expected to continue recovering strongly from the impact of COVID-19 in the previous fiscal year. On the other hand, while there are concerns over the effects of a semiconductor shortage on production, the Group expects to secure profits in FY2021 through activities continued since the previous fiscal year, including appropriate fleet development and reorganization of the network of trades. In the logistics business, container handling volume is likely to stay firm amid expectations that robust cargo movements regarding ocean container transportation will continue for a while in the domestic logistics segment. On the other hand, in the towage business, demand is declining at the moment but is expected to recover gradually toward the second half. In the international logistics segment, cargo movements in the automobile industry are expected to remain on the path of recovery. In the air forwarding business, cargo movements are expected to continue recovering due to a shift from ocean to air cargo transportation caused by congestion in ocean transportation.
In the containership business, it is expected that the global economy will remain on the path of recovery, but convergence of COVID-19 is uncertain. There still remain tight supply-demand balance due to strong demand and turmoil within the entire global supply chain. “ONE” initiatively continues to charter additional ships to recover schedule integrity. Container procurement was maximized with new containers phasing in upon delivery.
Our important management task is to maximize returns to our shareholders by implementing stable dividend. However, the Company’s basic dividend policy is to comprehensively take all into consideration such as future business condition, investment for sustainable growth and future financial conditions to tackle on the improvement of mid to long term Shareholders’ interests. Based on this policy, it is with sincere regret that the Company announces it has decided to pay no dividend for the current fiscal year ending March 31, 2021.
The annual dividend in the fiscal year ending March 31, 2022 has yet to be decided and we assign highest priority to improve financial strength and business foundation for the time being.
All of "K" LINE Group members are vigilantly dedicated to the accomplishment of our goals with one voice, and we appreciate your continued support and encouragement.
Thank you very much for your kind attention.
May 10, 2021
President & CEO
Kawasaki Kisen Kaisha, Ltd