Your Board of Directors always appreciates your continuing support.
We would like to report consolidated financial results for the 1st Quarter Ended June 30, 2021 (from April 1, 2021 to June 30, 2021; hereinafter “the period”), and our forecasts for the Fiscal Year 2022 that ends March 31, 2022.
Operating revenues for the fiscal year was ¥174,743 billion (up \22.6 billion quarter-over-quarter), operating loss was ¥2.4 billion (up ¥9.0 billion quarter-over-quarter), and ordinary income was ¥88.4 billion (up ¥89.5 billion quarter-over-quarter). profit attributable to owners of the parent was ¥102.0 billion (up ¥102.9 billion quarter-over-quarter).
Due to significant business performance improvement of OCEAN NETWORK EXPRESS PTE. LTD. (hereinafter referred to as "ONE"), the company recorded 88.809 billion yen of equity in earnings of subsidiaries for the first quarter. Within the recorded equity in earnings of subsidiaries, “ONE” accounted for 87.654 billion yen in consolidated accounting first quarter.
1) Summary of Consolidated Operating Results for 1st Quarter Ended June 30, 2021
（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 stayed generally firm, although there were wide fluctuations, due to the improvement of the vessel supply-demand balance as robust demand from China and other countries for steel continued. In the medium and small vessel sector, market rates rose because of robust Chinese demand for grain imports and an increase in demand for transportation of coal and other goods due to a recovery in industrial activities in various countries.
Under these circumstances, as a result of appropriate management of market exposures and efforts to reduce operation costs and improve vessel operation efficiency, the overall Dry Bulk Segment recorded a year-on-year increase in revenue and returned to profitability.
(ii) Energy Resource Transport Segment
【Tanker Carrier and Electricity 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 Business】
LNG Carrier and Offshore Business 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, market rates remained sluggish in spite of oil price decline recovery.
As a result, the overall Energy Resource Transport Segment recorded a year-on-year increase in revenue, but a profit declined.
(iii) Product Logistics Segment
【Car Carrier Business】
In the global car sales market, the recovery from the impact of COVID-19 in the previous fiscal year continued. As demand for transportation steadily recovered despite concerns about the impact on production due to a semiconductor shortage.
In the domestic logistics and port businesses, because of a continued increase in demand for ocean container transportation, container handling volume expanded. In the towage business, work volume generally increased due to a recovery in demand for transportation. The warehousing business stayed firm. As for the international logistics business, in the forwarding business, air cargo transportation volume recovered because of a modal shift to air transportation due to the tight supply demand balance in the ocean container transportation sector as well as a recovery in demand related to the car industry. The business of transporting finished vehicles by land stayed firm against the backdrop of robust new car sales.
【Short Sea and Coastal Business】
In the short sea business, demand for steel and timber products stayed firm, however due to congestion at the coal loading port, the overall transportation volume decreased year-on-year. In the coastal business, the overall transportation volume recorded a year-on-year increase as the Group captured demand for transportation of foods and construction-related cargoes. In the ferry business, although the movement of people continued to be restricted because of the declaration of a state of emergency and measures to prevent the spread of COVID-19 infection, the numbers of passengers and passenger cars transported recovered year-on-year, while the truck transportation volume remained almost flat.
As for the performance of OCEAN NETWORK EXPRESS PTE. LTD. (hereinafter referred to as "ONE"), robust cargo movements that started in fiscal year 2020 continued, and because of the ensuing supply chain disruptions and continued tightness of the supply-demand balance, market rates stayed high in all trades. As a result, the business performance of "ONE" significantly improved year-on-year.
As a result, the overall Product Logistics Segment recorded a year-on-year increase in both revenue and 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 in revenue and a loss was recorded.
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, as COVID-19 vaccination is making progress around the world, various countries are continuing fiscal support measures and economy-stimulating measures, and against this backdrop, the global economy is steadily recovering. As a result, demand for ocean transportation of bulk cargoes, mainly raw materials, is also expected to stay firm. On the other hand, there are concerns that the worldwide spread of variants of the COVID-19 virus may slow down the economy of various countries, including China, which is the main source of demand for transportation. Therefore, the Group is keeping a close watch on the impact of this and other factors on the dry bulk market and on the volatility of market rates. At the same time, amid the growing needs for environmental measures, 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 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 the demand for ocean container transportation will continue increasing in the domestic logistics segment. In the towage business, work volume is expected to continue growing. As for the international logistics sector, as the shift to air cargoes due to an increase in demand for ocean container transportation continues in the forwarding business, cargo movements are expected to stay firm. The business of transporting finished vehicles by land is expected to maintain strong performance as robust demand for new cars is forecast to continue in the second half and beyond. In the foreign warehousing business, demand is expected to recover in line with the progress of COVID-19 vaccination. In the containership business, as demand for transportation is expected to remain firm in the second quarter, "ONE" will continue to charter additional ships and improve operations in order to avoid supply chain disruptions. In the second half, it is expected that supply chain disruptions will be resolved due to progress of COVID-19 vaccination worldwide and that the supply-demand conditions will gradually return to normal.
Due to the high uncertainty regarding the spread of COVID-19 and when it will end, it is difficult to determine a future forecast. But it is expected that the global economy will remain on the path of recovery as a result of economic support policy measures and economic stimulus measures implemented by various countries and cargo movements especially container ship business remained firm. For the fiscal year ending March 31, 2022, the Group is projecting profit attributable to owners of the parent of ¥265.0 billion.
Our important task is to maximize returns to our shareholders while maintaining necessary internal reserves to fund our capital investment and strengthen our financial position for the sake of forwarding to growth in corporate value.
The dividend policy remains yet to be determined. We will announce in due course, when we have judged that we can forecast dividend payments after comprehensively taking into consideration the forecasts of the full-year results, business foundation and to improve the Company's financial strength.
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.
August 4, 2021
President & CEO
Kawasaki Kisen Kaisha, Ltd