Dear Shareholders:

Your Board of Directors always appreciates your continuing support.

 

We would like to herewith report consolidated financial results for the fiscal year ending March 31, 2020 (from April 1, 2019 to March 31, 2020; hereinafter “Fiscal year 2019”), and our forecasts for the Fiscal Year 2020 that ends March 31, 2021.

 Operating revenues for Fiscal year 2019 was ¥735.284 billion (down ¥101.447 billion year-on-year), operating income was ¥6.84 billion (compared to operating loss of ¥24.736 billion in the same period of the previous fiscal year), and ordinary income was ¥7.407 billion (compared to ordinary loss of ¥48.933 billion in the same period of the previous fiscal year). Profit attributable to owners of the parent was ¥5.269 billion (compared to loss attributable to owners of the parent of ¥111.188 billion in the same period of the previous fiscal year).

1) Summary of Consolidated Operating Results for FY2019

Results for the first nine months of FY2019 Fiscal year 2018
Ended March 31, 2019
Fiscal year 2019
Ended March 31, 2020
Change
Operating revenues 836.7 735.3 (101.4)
Operating income (loss) -24.7 6.8 31.6
Ordinary income(loss) -48.9 7.4 56.3
Profit (loss) attributable to
owners of parent
-111.2 5.3 116.5
Exchange Rate (¥/US$)
(12-month average)
¥110.67 ¥109.13 (\1.54)
Fuel oil price (US$/MT)
(12-month average)
US$450 US$467 (US$17)

(Billion Yen; rounded to the nearest 100 million yen)

 Performance per segment was as follows.

 

  Regarding Dry Bulk Business, in the Cape-size sector, market rates weakened at the beginning of the current fiscal year due to the lingering effects of a dam break accident that occurred in Brazil in the end of previous fiscal year. However, in accordance with a provision recovery of iron ore in Brazil, market rates showed a recovery trend in the first half of the fiscal year.

  In the medium and small size vessel sector, business performance remained steady in the first half of the fiscal year, driven by the positive effect of the recovery in market rates in the Cape-size sector, and thanks to the strong demand for shipment of grains from South America.

  In the second half of the current fiscal year, market rates were sluggish due to the decline in the iron ore volume shipped from Brazil in the Cape-size sector and the slowdown of the cargo movement of grains from South America and steam coal to China in the medium and small size vessel sector, followed by the contraction in transportation demand caused by the spread of COVID-19 around the end of the current fiscal year, affecting all vessel types.

 

  Under these circumstances, the Group strove to reduce operation costs and improve vessel operation efficiency, but partly due to the vessel downtime for the installation of environmentally compatible equipment, the overall Dry Bulk Segment recorded a year-on-year decline both in revenue and profit.

 

 

  Regarding Energy Transportation 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.

  Concerning LNG carriers, and drillship 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.

  Concerning the offshore support vessel business, the vessel supply and demand as well as the market improved.

 

   As a result, the overall Energy Resource Transport Segment recorded a year-on-year decrease in revenue, but a profit increased.

 

 

  Regarding Car Carrier Business, the volume of finished vehicles shipped by the Group decreased year-on-year because of the rationalization including cancellation and realignment for some unprofitable trades including other-than-Japan trades, even though stable cargo movements were maintained in the trades from the Far East.

  As a result, the overall car carrier business recorded a year-on-year decrease in revenue but turned a profit by tackling to improve its profitability including improvement in the vessel operation efficiency, a recovery in freight and optimization of the fleet allocation.

 

  Regarding Logistics Business, although the business in the domestic logistics sector performed steadily mainly in warehousing business despite the towage and sea-land integrated transportation having been affected by the decline in cargo volume caused by the spread of COVID-19 around the end of the current fiscal year. In the meantime, in the international logistics sector, the lifting of air cargo transportation, in intra-Asia as well as to Europe and the United States, was tended to decline year-on-year.

  As a result, the overall logistics business recorded a year-on-year decline both in revenue and profit.

 

  Regarding Short Sea and Coastal Business, in the short sea business, the transportation volume steadily increased mainly in steel materials and biomass fuel, in the meantime, it decreased year-on-year in timber products and coal.

  In the coastal business, the transportation volume increased in liner transportation by the schedule stabilization with improvement of the vessel operation efficiency.

  In the ferry business, it steadily performed due to the increase in use during the long holiday period however, caused by the spread of COVID-19 around the end of the current fiscal year, resulting in the transportation volume remaining almost unchanged from the previous fiscal year.

  As a result, the short sea and coastal business overall recorded a year-on-year decline both in revenue and profit with slight lower transportation volume.

  

  Regarding Containership Business, in the first half of the current fiscal year, OCEAN NETWORK EXPRESS PTE. LTD. (hereinafter referred to as "ONE") achieved recovery in liftings and space utilization, improved the cargo portfolio, and implemented measures to improve its profitability, including reduction of the operational costs through realignment and rationalization of the trades.

  In the second half of the fiscal year, despite the decline in cargo movement starting after the Lunar New Year triggered by the COVID-19 outbreak, ONE carried out tasks to improve its profitability, including flexibly reducing the number of voyages in accordance with demand, and recorded a year-on-year decrease in revenue, but a loss was narrowed.

 

  As a result, the overall Product Logistics Segment recorded a year-on-year decrease in revenue, but a loss decreased.

 

 

  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 decrease in revenue, but a profit increased.

2) Consolidated Forecasts for Fiscal Year 2020

  Unpredicted situation is expected to continue because of difficulties to rationally estimate the spread scale, the effect range, and the period till the settle of COVID-19 in the future, as well as several unclear factors such as world economy and ocean cargo movement.
The Company will make an announcement of the consolidated financial forecasts for the fiscal year ending March 31, 2021 promptly once the forecasts can be rationally estimated, by carefully determining the effect to the financial positions by COVID-19.

    

   Our important task is to maximize returns to our shareholders with stable dividend, while maintaining necessary internal reserves to fund our capital investment and strengthen our financial position for the sake of sustainable growth, which is a priority of our management plan. However, we consider it an urgent management priority to improve the financial position and stabilize the business foundation, being under the circumstances that increased concerns about the slow down risks of world economic such as worldwide COVID-19 and continuous trade disputes between the United States and China, as well as the deterioration risks of the transportation demand, thus, it is with sincere regret that the Company announces it has decided to pay no dividend for the current fiscal year.

  The annual dividend in the fiscal year ending March 31, 2021 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 11, 2020

 

Yukikazu Myochin
President & CEO
Kawasaki Kisen Kaisha, Ltd