Japan’s Big Three Downgrade Forecasts as They Post Losses

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Japanese three shipping giants have all downgraded their expectations for the full-year consolidated results as they report losses in the third quarter of the fiscal year ending March 31, 2016.

Nippon Yusen Kabushiki Kaisha (NYK Line) posted an extraordinary loss resulting from an impairment of fixed assets in its consolidated financial results for the third quarter.

Namely, seeing that the prolonged sluggish market situation in dry bulk shipping was here to stay, NYK Line reduced the book value of bulkers to their respected recoverable amounts, resulting in an extraordinary loss of approximately JPY 33.5 billion (USD 277.5 million). Of this total, approximately JPY 20.9 billion was accounted for by a single consolidated subsidiary.

As a result of this reduction, NYK Line expects to incur a loss of JPY 29.7 billion under extraordinary losses in its non-consolidated financial results for the fiscal year ending March 31, 2016.

The company’s net profit for the first nine months amounted to JPY 22.82 bn, down 19.8 % from the previous year. NYK’s full year profit forecast was downgraded to JPY 25bn from JPY 47bn.

Dry bulk and container shipping woes pushed down Mitsui OSK Lines (MOL) to recorded net profit of JPY 13.2 bn (USD 110 million), plunging from last year’s JPY 24.8 bn.

The company anticipates to record an extraordinary loss of up to JPY 180 billion in the fourth quarter of this fiscal year, due to costs for the business structural reforms including disposal of vessels in the dry bulker and containership businesses.

For the full year, the company predicts its loss to deepen to JPY 175bn (USD 1.45bn), considerably higher from the previously announced JPY 17bn.

Kawasaki Kisen Kaisha, Ltd. (K Line) also followed in the footsteps of its compatriots posting a considerably lower profit for the three quarters of JPY 9.27bn (USD 76.9m) against last year’s JPY 33bn.

K Line stressed that a large number of new buildings’ delivery, while cargo movements’ growth remained low, expanded the imbalance between supply and demand in shipping capacity in containership business, and in addition, a decrease of demand following Chinese economic deceleration in dry bulk business brought sluggish market.

“Despite the efforts to improve profitability by conducting efficient fleet assignments and cutting operating costs, based on the prospect of the continuous sluggish market mainly in containership business and dry bulk business, we revised downward financial results for the full year as aforementioned,” the company said.

As a result, K Line’s revised expectations for the full year profit were pushed down to JPY 7bn, from previously forecast JPY 12bn.