| 3. Business Performance (1st quarter of FY2006)
<Overall>
While the world economy during the first quarter of fiscal year (FY) 2007, the three months from April 1 through June 30, 2007, saw continued modest growth in Europe, Japan, and the United States, China showed ongoing high growth backed by active investment. Looking at ocean shipping, the dry bulker market increased sharply due to tight fleet demand, while the very large crude oil tanker (VLCC) market remained same as the same period of the previous year result. In the containership segment, the company generally benefited from an initial freight rate recovery mainly on European routes.
Overall, crude oil and bunker prices remained at high levels, as during the same period of the previous year. While the bunker price was assumed at US$330/MT at the beginning of FY2007, the average was US331/MT. The average of the exchange rate was ¥119.32/US$, compared to an assumption of ¥115/US$ at the beginning of FY2007.
Consolidated financial results for the first quarter, and comparisons with the same period of the previous term are as follows: |
| <By segment>
a) Bulkship Business
-- Dry bulkers, car carriers --
In dry bulk businesses, stable earnings from long-term contracts for iron ore carriers, coal carriers, and wood chip carriers contributed to satisfactory performance, and the spot market increased due to active demand for transport. As a result, the Baltic Dry Index (BDI) marked an all-time record high, absorbing high bunker prices and leading to a significant increase in earnings for the first quarter of FY2007 compared to the same period of the previous year.
Both revenue and earnings in the car carrier business increased compared to the same period of the previous year, thanks to brisk cargo traffic from the Japan/Far East and efficient operation in cross-trades.
--Tankers and LNG Carriers--
Tanker and LNG carrier businesses showed stable earnings through long-term contracts for crude-oil tankers, methanol carriers, and LNG carriers. Spot markets for crude oil tankers remained at the same level as the same period of previous year, while petroleum product tankers operations showed favorable result. Thus in general, these businesses remained strong. As a result, this segment during the first quarter of FY2007 showed a slight increase in earnings from the same period of pervious year.
b) Containerships
As a result of freight rate negotiations held during the first quarter of FY2007, the company moved toward a recovery in freight rates although there were some variations depending on the route. Particularly, freight rates on the Asia-Europe routes (westbound) recovered to where it was before the steep decline in 2005. Rates on north-south routes and Asian routes also rose. And trade volume increased on almost all routes. These increases contributed to major growth in revenue during the first quarter of FY2007, compared to the same period of the previous year. Associated business such as container terminal operation and shipping agency businesses remained favorable thanks to active trade on most routes. Looking at costs, in addition to bunker prices increase, costs for inland transport in the United States and Europe moved higher, and canal tolls both in Suez and Panama increased. These factors compressed earnings. However, increased revenue from cargo increase on all routes and especially the reduction of container repositioning costs in the U.S.A. offset these increased costs, resulting in increase in earnings during the first quarter of FY2007 compared to the same period of last year, and turning ordinary income to black ink.
c) Logistics
In the air cargo forwarding business, the company kept working hard to enhance group-wide sales strength and cost reduction, and maintained earnings at the same level of the first quarter of the previous term, although export cargo from Japan saw sluggish growth.
d) Ferry and Domestic Transport
Number of Ferry passengers showed a declining trend, and skyrocketing bunker prices compressed earnings. However, movement of the long-distance trucks showed continued strength, and the company executed rationalization such as withdrawal of unprofitable routes. As a result, earnings for the first quarter improved compared to the same period of the previous year. Domestic shipping business remained firm, resulting in an increase from the same period of the previous year.
MOL Ferry Co., Ltd. and Kyushu Kyuko Ferry Co, Ltd. merged effective June 1, 2007, and The Diamond Ferry Co., Ltd. and Blue Highway Line Nishinihon Corporation merged effective July 1, 2007. These companies have now started operations as the new MOL Ferry and the new Diamond Ferry, respectively.
e) Associated Businesses
Daibiru Corp., which is the core company in our real estate business, showed generally strong performance, maintaining first quarter earnings at the same level as the same period of previous year. In this segment, Daibiru made real estate management company Mitsui O.S.K. Kosan a subsidiary. This move was a part of an effort to enhance group-wide business.
In the cruise ship business, our cruise business such as the "Paradise in the South Seas Cruise" showed favorable sales, resulting in higher earnings. And sales of fuel and machinery for vessels in our trading business continued to post steady performance.
Overall, associated businesses showed increased profits compared to the same period of the previous year.
f) Others
Other businesses, which are mainly cost centers, include ship operation, ship management, ship chartering, financing, and shipbuilding. Overall profits of this segment increased compared to the same period of the previous year. |
