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Business Climate
Economic growth in developed countries during the nine months period remained low, while risks from monetary and financial aspects, such as the downgrading of U.S. Treasury bonds and Europe’s debt crisis, continued to threaten any recovery. On the other hand, emerging countries showed relatively high economic growth backed by robust domestic demand.
However, signs of a slowdown in the European economy began to affect emerging countries toward the second half of 2011.
Speaking of the ocean shipping industry, improvement of both dry bulker and tanker markets was limited because of a supply-demand imbalance caused by newbuilding vessels and other factors. In the containership segment, a slowdown in cargo volume mainly on the East-West route, rising bunker prices, and other factors weighed heavily on profits.
In the face of such a severe business climate, we have continually focused on efficiency of vessel allocation and group-wide cost reduction. However, the impact of a prolonged appreciation of the yen, steep rise in bunker prices, and other factors forced us to post losses.
Financial Results by Segment
(Nine Months)
In the dry bulker segment, the Capesize market remained on a weak note as more newbuilding vessels came into service and cargo volume dropped since the beginning of 2011. However, the market recovered to the US$30,000 level in mid-October and mostly held steady through the end of the year, reflecting progress in scrapping aged ships, enhancement of slow steaming
efforts and so on. As to the tramp markets for Panamax and smaller drybukers, their cargo movements held steady, but, supply pressure from newbuilding vessels created an underlying weakness. Accordingly, the entire segment showed significantly lower profits year on year despite securing stable income from long-term contracts.
In the tanker segment, both crude oil tanker (VLCC) and product tanker markets remained stagnant due to factors including abundance of newbuilding vessels, and upward movement was limited even the market level recovered in response to growing winter demand in the Northern Hemisphere. While we made a great effort to reduce fuel expenditures and other costs by expanding the adoption of slow steaming, we posted a loss.
In the LNG carrier segment, we earned stable profits from long-term transport contracts. However, profits declined year on year in the wake of the yen’s appreciation and other factors.
The car carrier segment showed a large decrease in profits year on year as exports of cars from Japan declined sharply following the Great East Japan Earthquake in March. It is in a recovery process as Japanese automobile production rebounds, though there are concerns such as the prolonged appreciation of the yen.
Looking at the containership segment, freight rates dropped as a result of weakened supply and demand due to lower-than-expected cargo movement, especially in the East-West trade route, and fuel costs increased due to rising bunker prices, all of which put enormous pressure on the bottom line. Although we strove to improve our bottom line by adjusting ocean capacity by revising services and promoting cost cutting measures such as further enhancing slow steaming to curb fuel costs, a considerable loss was recorded for the first nine months of FY2011.
Forecasts for FY2011 and Dividends
For the fourth quarter of FY2011, on a brighter note, we can expect a sustained recovery trend in seaborne trade of completed cars, which showed a sharp decline after the Great East Japan Earthquake, and improvement in the tanker market during the high-demand season. Nevertheless, concerns remain about Europe’s debt crisis, slowing growth in emerging countries, growing tension in the Middle East, and so on, in addition to declining transport demand due to seasonal factors in the containership segment and the near-term downturn in the dry bulker market caused by adverse weather in Western Australia and Brazil.
Accordingly, we anticipate the following consolidated financial results for FY2011—revenue of ¥1,430 billion, operating loss of ¥25 billion, ordinary loss of ¥27 billion, and net loss of ¥29 billion. Including an increase in loss on valuation of investment securities because of further declines in the stock market, we made a considerable downward revision of the outlook from the previously announced figures.
Our company faces extreme difficulties, but we will continually strive to further improve the quality of transportation service, boost the efficiency of vessel allocation, and thoroughly enhance slow steaming, through the launch of a new crude oil tanker(VLCC) pool and establishment of a new containership alliance on the Europe route, etc. And we devote every group-wide effort to break out of the current stagnant business performance as early as possible.
On the assumption of the profit forecast for FY2011 above, we plan to pay an annual dividend of
¥5 per share (including an interim dividend of ¥2.5 per share already paid).
Midterm Management Plan GEAR UP! MOL
Aiming to make the MOL Group an "excellent and resilient organization that leads the worldwide ocean shipping industry," we are positive that every member of our group is fully behind this effort. We thank you, all our shareholders, for your support and look forward to your continued cooperation.
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