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Management Message

I would like to take this opportunity to thank all NYK Line shareholders and investors for their enduring support. Yasumi Kudo, President

On behalf of the NYK Group, I would like to express my sincerest gratitude to all of the Company's shareholders and investors for their understanding and support. I am pleased to have this opportunity to report on NYK Line's consolidated financial results for the fiscal year ended March 31, 2018.

The Company posted ¥2,183.2 billion in revenues, ¥27.8 billion in operating income, ¥28.0 billion in recurring profit, and ¥20.1 billion in profit attributable to owners of the parent.

Looking back on our operating environment during the fiscal year, the maritime shipping market recovered on the back of growing demand for freight shipments, which reflected the moderate growth of the global economy. Against that backdrop, we worked to make the Group's shipping fleet more economical while efficiently allocating vessels and improving their operational efficiency. Consequently, the Company's financial results improved compared with the previous fiscal year.

We also took steps to reinforce the foundations of the NYK Group's core logistics business, for which Yusen Logistics Co., Ltd., was made into a wholly owned subsidiary in February of last year. Meanwhile, NYK Line, Kawasaki Kisen Kaisha, Ltd., and Mitsui OSK Lines Ltd., integrated their respective container shipping businesses and jointly established Ocean Network Express Pte. Ltd., which officially began offering services from April of this year.

In March, we announced our new medium-term management plan, Staying Ahead 2022 with Digitalization and Green. In order to effectively deal with the unpredictability of current trends, we will aim to boost profitability and improve the Group's ability to withstand changes in the operating environment under this plan by further optimizing the its business portfolio and generating earnings from businesses in which freight rates are stable. At the same time, we will aggressively carry out digitalization and green initiatives in an effort to accelerate growth. Through these initiatives, we will strive to optimize the entire supply chain and create new value for environmental projects by combining Internet of Things (IoT) technology and cutting-edge systems with the Group's global network and operational expertise, which are sources of NYK Line's competitiveness.

For the fiscal year ended March 31, 2018, the Company plans to distribute a year-end dividend of ¥30 per share. As of the disclosure date of this report, the forecast of consolidated financial results for the full fiscal year ending March 31, 2019, is as follows: revenues of ¥1,805.0 billion, operating income of ¥37.0 billion, recurring profit of ¥40.0 billion, and profit attributable to owners of the parent of ¥29.0 billion. Based on that forecast, the Company plans to distribute a full-year dividend of ¥40 per share, comprised of an interim dividend of ¥20 per share and a year-end dividend of ¥20 per share.

In the recent past, the activities of NYK Line's automobile maritime shipping operations were found to be in violation of antitrust laws. On behalf of the Company's management, I would like to take this opportunity to sincerely apologize once again to shareholders and investors for raising concerns and unease regarding this issue.
In response to the violations, we have been making all-out efforts to prevent a recurrence and ensure full legal compliance so that the Group's businesses operate according to fair market principles.

As we undertake these endeavors, we sincerely hope for the ongoing support and understanding of the Company's shareholders and investors going forward.

Financial Results Overview

Please see the below chart and graph for our year to date results ending April 27, 2018.

(Billion yen)
 
FY 2016
FY 2017
Change
Revenues
1,923.8
2,183.2
259.3
Operating Income
-18.0
27.8
45.9
Recurring Profit
1.0
28.0
26.9
Net Income
-265.7
20.1
285.9
Average Exchange Rate
¥108.76/US$
¥111.19/US$
¥2.43/Yen Down
Average Bunker Oil Price
US$253.75/MT
US$341.41/MT
US$87.66 Up

(Note)Figures are rounded down to the nearest 100 million yen.

Revenue

Revenue

Recurring Profit

Recurring Profit

Earnings Forecast for the Fiscal Year 2018

In the fiscal year ending March 31, 2019, market conditions are projected to continue recovering moderately. Shipping traffic is expected to be brisk in the container shipping market, despite the ongoing production of new ultra-large vessels. Against that backdrop, NYK Line's new joint-venture company, ONE, will commence full-scale operations and work to boost profitability. The dry bulk shipping market is forecast to moderately recover, while the tanker market is expected to pick up in the second half of the fiscal year when it enters a period of high demand. NYK Line forecasts a solid performance by its offshore business, and will commence LNG tanker shipments of shale gas from the United States. The Company assumes that the number of vehicles shipped by its automobile transport business will be roughly in line with the fiscal year ended March 31, 2018. In the Logistics segment, the Company intends to substantially increase handling volume while continuing to revamp operations in order to boost earnings. In addition, comparably solid results are forecast for the Air Cargo Transportation segment.
Based on the factors above, the Company's forecast of consolidated financial results for the current fiscal year includes a year-on-year increase in profit, but also a decrease in revenues associated with making ONE, the new joint-venture company in the container shipping business, into an equity-method affiliate.

(Billion yen)
 
FY2016(Result)
FY2017(Forecast)
Change
Fiscal Year
ending
March 31,
2018
Revenues
2,183.2
1,805.0
-378.2
Operating Income
27.8
37.0
9.2
Recurring Profit
28.0
40.0
12.0
Net Income attributable
to owners
of the parent company
20.1
29.0
8.9
Average Exchange Rate
¥111.19/US$
¥105.00/US$
¥-6.19/US$
Average Bunker Oil Price
US$341.41/MT
US$380.00/MT
US$38.59/MT

(Note)Figures are rounded down to the nearest 100 million yen.

Dividends for the Fiscal Year ending March 31, 2018

The management of NYK Line regards the stable return of profits to shareholders as one of its most important priorities. It determines the amount of profits to distribute as dividends after considering a wide range of factors, including forecasts of consolidated financial results, while generally aiming for a consolidated dividend payout ratio of 25%. For the fiscal year ended March 31, 2018, management has decided on a year-end dividend of ¥30 per share, ¥10 per share above the most recent plan. This decision reflects the Company's improved performance during the fiscal year, which resulted from various restructuring measures and the recovery of the maritime shipping market. For the fiscal year ending March 31, 2019, management intends to continue the payment of stable dividends to return profits to shareholders based on the basic policy, above. Accordingly, it plans to pay an interim dividend of ¥20 per share along with a year-end dividend of ¥20 per share, for a total full-year dividend of ¥40 per share.

April 27, 2018
Tadaaki Naito
President
Tadaaki Naito President