Japan’s Big Three Downgrade Full-Year Forecast amid ONE Issues

Business results of the Japanese shipping majors K Line, NYK Line and MOL for the second quarter and the first half of the fiscal year 2018 sustained a significant blow from deteriorating problems stemming from the launching of the Ocean Network Express (ONE).

MOL reported the strongest results of the three with an ordinary profit for the second quarter of the year, covering April-September, standing at JPY 10.2 billion (USD 90 million). The profit is lower from last year’s equivalent of JPY 17.3 billion. Revenue was also down year-on-year standing at JPY 619 billion (USD 5.4 billion) compared to JPY 819 billion a year ago.

For the full year, MOL downgraded the forecast for ordinary profit and net income due to a deterioration in ONE’s profit for the first half, due mainly to lower-than-anticipated liftings and utilization, which are still on the way to recovery even in the second half of the year.

As a result, the company expects its ordinary profit for the year to be 45 pct lower reaching JPY 22 bn.

NYK Line reported a loss of JPY 9.8 billion for the six months ended September 30, much lower from previously forecast JPY 3 billion profit.

For the full year, NYK Line’s forecasts revenues of JPY 1.81 trillion, up from previous JPY 1.765 trillion, a recurring loss of JPY 13 billion, down from JPY 10 billion profit and a loss attributable to owners of the parent of JPY 6 billion, down from the anticipated JPY 12 billion profit.

Finally, K Line booked a half-year loss of JPY 24.5 billion ( USD 216.4 million), reversing from last year’s profit worth JPY 13.1 billion.

The company expects full year losses to reach JPY 20 billion, down from previous JPY 5 billion profit, which was forecast in July 2018.

ONE

ONE booked a USD 311 million loss in the first half of the year ending September 30.

“We are recovering from the initial negative impact of reduced liftings and a drop in the loading factor in Q1 due to teething problems during the start-up period. However, liftings were lower than our target level. In addition, we experience higher costs for returning empty containers to Asia as the result of a larger impact due to a slower recovery on the non-dominant leg,” the joint venture said.

As explained, the annual integration synergy of USD 1.05 billion is steadily emerging.  The containership business estimates that as of FY 2018, it will reach 75% against originally budgeted 60%, which is 5% less than the forecast of 80%.

ONE added that customer service issues were fully resolved in Q1, and that it was in the process of making a full recovery of lifting volume.

Nevertheless, cost-saving effect in bunker and others did not reach the original targets.

“As a result, we expect a –USD 600 million net loss, –USD 710 million from previous forecast of USD 110 million profit,” ONE said.

HMM Targets USD 10 Bn in Annual Revenue by 2022

South Korean shipping company Hyundai Merchant Marine has set a target of building up its capacity to 1 million TEUs and posting USD 10 billion in annual revenue by 2022.

Presenting the company’s Blueprint for 2022 in Seoul on October 26, HMM’s CEO C.K. Yoo said that the company also plans to finalize the acquisition of stakes in Hyundai Pusan New Port (HPNT) by the end of this year. HMM sold the terminal as part of its restructuring in 2016.

“HMM will do its utmost to improve productivity by connecting Block Chain and IoT technology to our services in order to increase customer satisfaction. We need to transform HMM to an IT friendly company to fulfill our vision of smart shipping,” Yoo added.

In late September, HMM ordered twelve 23,000 TEU and eight 15,000 TEU eco-friendly mega vessels in preparation for the IMO’s sulfur regulations starting from 2022.

The newly ordered mega vessels are expected to deliver from 2020 in sequential order.

Earlier this month, the South Korean shipping major cashed in USD 883.8 million from the issuance of bonds.

COSCO Shipping Ports’ Profit, Revenue Jump in 3Q

Hong Kong’s port operator COSCO Shipping Ports (CSP) delivered a rise in profit attributable to equity holders, as revenue surged in the third quarter of 2018.

For the quarter, the company’s revenue jumped by 62.6 percent to USD 253 million from USD 155.6 million, as profit attributable to equity holders increased by 11.8 percent to USD 75.1 million from USD 67.2 million.

Due to a slowdown in throughput growth of the group’s non-controlling terminal companies, COSCO Shipping Ports handled a total of 30.8 million TEU, representing an increase of 11.1 percent compared to 27.7 million TEU reported in the third quarter of 2017.

Throughput from the group’s subsidiaries increased by 33 percent to 5.79 million TEU from 4.35 million TEU reported in the third quarter of 2017, accounting for 18.8 percent of the group’s throughput. Volumes from the group’s non-controlling terminals rose by 7 percent to 25 million TEU, up from 23.3 million TEU seen a year earlier, accounting for 81.2% of the total throughput.

For the period of first nine months ended September 30, 2018, the company’s revenue surged by 73.5 percent to USD 748.4 million from USD 431.3 million, however, profit attributable to equity holders plunged by 46 percent to USD 244.1 million from USD 451.9 million reported in the nine-month period of 2017.

During the first nine months of the year, the company’s total throughput increased by 20.6 percent to 87.5 million TEU, compared to 72.5 million TEU handled a year earlier.

Source: World Maritime News