Message from the President

I would like to express my sincere gratitude to all of our company's shareholders and investors for your understanding and support of the NYK Group's activities. I am pleased to have this opportunity to report as follows on NYK Line's third quarter results in the fiscal year ending March 31, 2021.
Supported by a solid performance from Global Logistic Services (Liner Trade, Air Cargo Transportation and Logistics), the consolidated results through the first nine months of FY2020 were revenue of ¥1,145.9 billion, operating profit of ¥47.9 billion, recurring profit of ¥122.0 billion and profit attributable to owners of parent of ¥52.3 billion, a significant improvement from the ¥18.7 billion net profit recorded through the same period last year.
In the Liner Trade, OCEAN NETWORK EXPRESS PTE. LTD. experienced higher than expected transportation demand mainly for medical supplies and consumer goods for stay-at-home demand, and the bottom line significantly improved compared to the same period last year. In the Air Cargo Transportation segment, while international passenger flights continued to be suspended and reduced due to the COVID-19 pandemic, cargo volumes recovered from the middle of the third quarter, and utilization on the aircraft operated by Nippon Cargo Airlines Co., Ltd. and the unit freight rates remained at high levels, resulting in significantly increased profits on higher revenue year on year. In the Logistics segment, the air freight forwarding business maintained strong handling volumes as some of the ocean freight was shifted to air freight due to containership congestion, in addition to the demand for charter flights caused by space shortage. In the ocean freight forwarding business, handling volumes recovered due to strong market on the North America route and in Asia, and in the logistics business, E-commerce related shipping volumes increased as a result of stay-at-home demand. Overall, the Logistics segment achieved increased profit on higher revenue compared to the same period last year.
In the Bulk Shipping segment, the impact of the COVID-19 pandemic led to a drop in transportation volumes in the car transportation division, but efforts were made to cut costs and rationalize the business. In the dry bulk division, although the market improved from June, the levels remained below the same period last year. Also, following the second quarter, an extraordinary loss for structural reforms and other expenses was again recorded in the third quarter. In the energy division, the stable freight rate businesses centered on LNG carriers and the offshore business were firm. The VLCC (Very Large Crude Carrier) market remained weak due to decline in shipping volumes, but the LPG carrier market trended at higher than expected levels as a result of longer ton-miles following active vessel allocation to shipments from North America, longer waiting days at the discharging ports and congestion at the Panama Canal, while wintertime demand increase. Overall, the Bulk Shipping segment recorded lower profit on decreased revenue compared to the same period last year.
The impact of the COVID-19 pandemic on the NYK Group going forward continues to be uncertain, but the current forecast for the full-year consolidated results are revenue of ¥1,540.0 billion, operating profit of ¥57.0 billion, recurring profit of ¥160.0 billion and profit attributable to owners of parent of ¥90.0 billion. An annual dividend is planned to be ¥130 per share, as an interim dividend is ¥20 per share and a year-end dividend is forecast to be ¥110 per share.
Today, we announced the NYK Group ESG Story. This story presents our thinking about ESG management and the specific initiatives that will be implemented directed at achieving "integration of ESG principles to the corporate strategy" set forth in the Medium-Term Management Plan "Staying ahead 2022 with Digitalization and Green" announced in March 2018. In order to respond to the requirements of society and the current era, we will strive to use "ESG" as a second set of criteria in addition to "economic factors" currently used as the criteria for employee actions. In this way, we will transform the awareness of the entire NYK Group and work to deliver value to all stakeholders as a Sustainable Solution Provider directed at realizing a sustainable environment and society in the future.
Going forward, I ask all of the shareholders and investors for your continued understanding and support for the NYK Group.

Financial Results Overview

Please see the below chart and graph for our year to date financial results.

(Billion yen)

FY2019
Q1-3 Result
FY2020
Q1-3 Result
Change
Revenues 1,253.2 1,145.9 -107.3
Operating Profit 32.4 47.9 15.4
Reccuring Profit 38.4 122.0 83.6
Profit attributable to owners of parent 18.7 52.3 33.6
Average Exchange Rate ¥109.05/US$ ¥106.14/US$ Strong Yen
¥2.91/US$
Average Bunker Oil Price US$433.29/MT US$362.57/MT Price Down
US$70.73/MT
  • *Figures are rounded down to the nearest 100 million yen.

Revenue

Recurring Profit

Earnings Forecast for the Fiscal Year 2020

NYK Line's forecast of the full-year consolidated financial results is as follows: revenues of ¥1,540.0 billion, operating profit of ¥57.0 billion, recurring profit of ¥160.0 billion and profit attributable to owners of parent of ¥90.0 billion.
It is still unclear when the COVID-19 pandemic will come to an end, but based on the performance through the third quarter and after taking into account the measures to prevent infections and economic policy trends in each country, as well as the other current characteristics of each business segment, the following forecast was formulated.
In the Liner Trade, although there is the potential for weaker cargo volumes at ONE due to the increased COVID-19 infections and seasonal factors such as Chinese New Year, cargo volumes are expected to remain firm. At the terminals in Japan and overseas, handling volumes are expected to recover mainly in North America. In the Air Cargo Transportation segment, international passenger flights are expected to remain suspended and reduced for the time being, and after a period of weakness caused by Chinese New Year, cargo volumes are forecast to recover again in March. In the Logistics segment, although handling volumes will remain below the levels last year in both the ocean and air freight forwarding businesses, procurement costs are expected to remain high in the ocean freight forwarding business and the market is forecast to remain strong for a while in the air freight forwarding business. In the logistics business, handling volumes are expected to be strong mainly in Europe and North America.
In the car transportation division, handling volumes to North America are expected to recover, and by closely watching the impact of the third wave of COVID-19 infections, efforts will be made to implement agile and rational vessel deployment. In the dry bulk division, although the Capesize market started the year off strong, each segment is expected to enter the seasonally slow period. In the energy division, although the market situation differs according to each vessel type, the VLCC (Very Large Crude Carrier) market is expected to remain at the current weak levels, LPG carrier market should continue to be strong, and LNG carriers are forecast to remain firm based on support from the long-term stable contracts. Similarly, the offshore segment, which is primarily operated based on long-term stable contracts, is also forecast to be firm. However, the bottom line is expected to deteriorate following the renewal of the drill ship contracts.
In the real estate business, the COVID-19 pandemic will have a limited impact. In the cruise business, in addition to the Asuka II dry docking in January, all cruises were cancelled until February 20 following the declaration of a state of emergency. Moreover, in relation to the transfer of trust beneficial right of fixed assets (real estate) of the subsidiary company, record of an extraordinary income is expected.

(Billion yen)

FY2020
Previous Forecast
FY2020
Revised Forecast
Change
Revenues 1,460.0 1,540.0 80.0
Operating Profit 30.0 57.0 27.0
Reccuring Profit 70.0 160.0 90.0
Profit attributable to owners of parent 35.0 90.0 55.0
Average Exchange Rate ¥104.91/US$ ¥105.35/US$ Weak Yen
¥0.44/US$
Average Bunker Oil Price US$367.59/MT US$371.35/MT $3.76 Up
  • *Figures are rounded down to the nearest 100 million yen.

Dividends

NYK Line has designated the stable return of profits to shareholders as one of the most important management priorities, and generally targeting a consolidated dividend payout ratio of 25%, the distribution of profits is decided after comprehensively taking the business forecast and other factors into account. At the same time, based on an ongoing minimum dividend that is not affected by the business results, an annual dividend of ¥20 per share has been set as the minimum dividend.
In accordance with this policy, it is forecast to issue a year-end dividend of ¥110 per share for an annual dividend of ¥130 when including the interim dividend of ¥20.

February 3, 2021
President
Hitoshi Nagasawa