MOL faces biggest loss in history, says CEO in gloomy birthday speech

MITSUI OSK Lines is facing its largest loss in history of JPY27 billion (US$0.32 billion) despite stable profits and cost-cutting the company has fallen into the red, said its president Koichi Muto at a 128th anniversary speech.

Factors such as the strong yen, high fuel prices, the impact of the earthquake and tsunami last year, and the economic slowdown in developed countries have weighed heavily on our performance, Mr Muto said, adding that the situation was also worsened by weak rates brought about by a glut of ships in almost every vessel category.

The delivery of new vessels will continue to negatively impact its operating results this year and unless cargo demand increases. It forecasts challenging market conditions into 2012 but a more favourable supply-demand balance for global fleet into 2013.

Despite a cost-cutting operation of JPY20 billion through the introduction of slow steaming the carrier is seeking further cost cuts if those that crept up without a loss to safe and high-quality services.

MOL is currently executing Phase 4 of its action plans for the reinforcement of operational safety, with the aim of becoming the world leader in safe operations to improve key performance indicators such as the accident rate.

MOL is investigating the cause of the collision of a MOL containership on the open seas southeast of Hong Kong on February 22 and stress the safety of seafarers, cargo and ships.

In order to manage the volatile market it has created a mid-term management plan in "GEAR UP! MOL" to create an earnings model unlike its traditional model-one that is resilient to drops in rates. MOL also seeking to expand alliances in containerships and through pooling arrangements for tankers. It will focus on the LNG carrier business and energy-related marine business generated from it such as Floating Storage and Regasification Units (FSRUs).

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MOL president warns of 'prolonged harsh' business environment

MOL president Koichi Muto says last March's Japanese earthquake has hit his company hard, compounding the effect of a deteriorating business environment, which coupled with a strong yen, high fuel prices and sinking rates due to oversupply, are combining to create an industry-wide downturn.

As a result, the first half of fiscal 2011 saw the biggest loss the group has ever suffered.

"The management environment surrounding MOL remains unpredictable and clouded by imminent oversupply of vessels as more new ships reach completion, and slumping business sentiment. These factors are expected to impact containership operations, especially, where conditions are extremely harsh with the impending completion of a large number of ultra large containerships, and the prolonged slump in the economies of Europe and the US," said Mr Muto.

"Large-scale completion of new vessels is expected to continue this year, so we should prepare ourselves for a prolonged harsh business environment, and approach it with due care," he warned.

"After 2013, however, the number of new vessels completed is expected to level off, providing light at the end of the tunnel. Over the medium to long term, we predict that the excessive production capacity of shipyards in China, two-thirds of which is privately operated, will be brought into balance by the market mechanism, and we expect the oversupply of ships to be relieved," said Mr Muto.

Talking about ensuring the survival of the company he identified four key areas to strengthen, namely to provide safe transportation services at a competitive price while effectively reducing the shipping impact on the environment.

The second key area is its financial performance. To strive to improve the balance sheet and cash flow in the short term through persistent efforts to trim costs and other measures. Thirdly, its performance, in terms of ensuring that cargo is delivered in perfect condition and on time. The fourth area for improvement is sales with the goal being to build stronger relationships with customers.

With regards to slow steaming, last year most MOL ships made more diligent efforts to apply slow steaming. Mr Muto said this practice not only reduces fuel consumption, but is also expected to help mitigate the impact of oversupply in vessels and help the environment.

These sentiments were echoed by in a speech from NYK president Yasumi Kudo: "Since stagnant demand in the west and oversupply of mega-ships are predicted, our ordering of new containerships should be suspended for a while, and a light-asset business model should be adopted whereby vessels and space would be leased as needed, thereby minimising downside risks and sustaining business," he said.

According to the NYK head, strong growth in emerging economies such as in Asia would be important for the carrier, in light of the difficult economic and trading conditions currently in Europe and the US.

"I am confident that we are heading in the right direction to grow further by differentiating ourselves and focusing on emerging markets such as Asia," said Mr Kudo.

"When we focus on the emerging countries we see a different outlook ... rapid economic growth in Asia and the developing countries, which account for more than half the population of the world, is the biggest opportunity, without any doubt.

"We cannot deny the risk of weaker demand in the west having a negative effect on Asia, which largely depends on exports. However, growing demand in Asia will be the key to strong growth in the region and overcoming the slump in the west.

"Now we see a major shift in the trend, Asia is no longer only an exporting region, but creating an enormous consumer market surpassing the US or Europe," he said.

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MOL suffers US$214.7 million half-year LOSS as sales FALL 11.9pc

JAPAN's biggest container carrier, Mitsui OSK Lines (MOL), has posted a JPY4.82 billion (US$214.7 million) loss in the six months ending September 30 following a 11.9 per cent decline in revenue to JPY$717.3 trillion against a JPY48.2 billion profit loss suffered the year before.

"While the economies of the developed countries weakened, high growth continued in the emerging economies despite there being a slowing of growth stemming from monetary tightening amid concerns of inflation," said the MOL statement accompanying the results.

"In the US, personal consumption remained stagnant against the backdrop of the ongoing unemployment rate, the housing market remaining a rock bottom and soaring natural resources and energy prices.

"In Europe, the economy was weakened by insecurity of the financial system and austere fiscal policy in each country caused by sovereign risk. Exports also dropped, which resulted in low growth

"In China, although the rate for growth faltered as a result of monetary tightening measures to curb inflation, firm economic expansion continued.

"As for containerships, freight rates fell for the east west trade route because of lower than expected cargo trade and fuel costs increased as a result of rising bunker prices which put enormous pressure on the bottom line," MOL said.

"As a result, business performance over the first six months deteriorated considerably compared with the same period of the previous fiscal year and a loss was recorded.

"Regarding containerships, freight rates dropped as demand weakened amid lower than expected cargo trade in the east west trade route, and fuel costs increase due to rising bunker prices. [MOL suffers US$214.7 million half-year loss as sales fall 11.9pc]

source: Shippingazette.com / picture: google.com

Big three JAPAN lines in the RED in first quarter

Japan's major shipping lines - MOL, NYK and "K'' Line - posted net losses in their fiscal year first quarter compared with net profits a year earlier, due to higher fuel cost, lower freight rates and yen appreciation.

"Freight market remained sluggish, and the yen appreciated. Because our income is based on the US dollar, yen appreciation means less revenue. Besides, fuel costs rose in the period," said an official at MOL, reported Platts Commodity News.

MOL said its bunker fuel costs for the period April-June period averaged at US$625/mt, up 31.9 percent from a year earlier. Yen averaged at 81.80 versus the US dollar, compared with 91.44 in the same period last year, said the company.

MOL reported a net loss of $103.72 million for April-June compared with a net profit of $263.85 million a year earlier. Its revenue was $4.42 billion in the period, down 12.1 percent year-on-year.

NYK Line reported a net loss of $90.62 million for April-June, compared with a net profit of $291.38 million in the previous year. NYK Line's revenue fell to $5.68 billion, down 11.3 percent year-on-year.

"K'' Line reported a net loss of $47.23 million over April-June, compared with a net profit of $200.25 million a year earlier. "K'' Line's revenue was $3.09 billion in the period, down 3.8 percent from a year earlier.

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Good news from Japan: MOL profit up 358pc, NYK, 'K' Line erase 2009 losses

JAPAN's big three container shipping companies "K" Line, MOL and NYK, posted good results at the end of their shared fiscal year of 2010, ending March 31, all declaring profits, and two erasing losses suffered in the downturn of 2009.

The biggest Japanese carrier, ranked 11th in the world, Mitsui OSK Lines (MOL) posted a year-on-year 358 per cent net profit increase to JPY5.8 billion (US$700 million), drawn on revenues of JPY1.5 trillion, an increase of 14 per cent.

Looking back, MOL said "since FY2009, we have continued effecting various measures such as cutting costs through fuel savings by slow steaming as well as reducing other cargo expenses, improving efficiency through the optimisation of our organisation both in Japan and overseas to enhance cost competitiveness.

"Regarding principal cargo trade lifted by economic recovery, it improved considerably from the previous fiscal year for the east-west trade route and south north trade routes and improved slightly from the previous fiscal years for intra-Asia which was fast to recover from the Lehman shock," said the MOL statement.

"In the Asia-North American routes in addition to extending the Asia North American west coast route to include Laem Chabang port (Thailand) we executed a super slow steam operation. In addition we opened up an Asia North American east coast route via the Suez Canal and an Asia North American north west coast route. In the Asia Europe routes, we reorganised the Japan and south China-Europe route and we became the first Japanese shipping company to add Vietnam as a direct port call on European routes" MOL said.

The No 2 Japanese carrier, ranked 12th in the world, Nippon Yusen Kabushiki (NYK) posted operating profits up 13.7 per cent to $23.78 billion that erased a 2010 operating loss of $200 million in 2009.

NYK recalled that "costs rose during the fiscal year as the price of bunker oil soared, but the segment held the increase down with cost cutting measures including streamlining services and starting the environmentally conscious operation of vessels at reduced speeds. As a result the liner trade segment's results improved dramatically, rebounding to profit following a loss in the previous year.

"In the liner trade cargo traffic is likely to be largely robust overall, but profits may be squeezed by soaring bunker oil prices and an increase in supply of shipping space coupled with a decline in transport volumes in the wake of the Great Eastern Japan Earthquake," said the NYK statement.

NYK container shipping increased 22.2 per cent and services were expanded by deploying more vessels. Cargo volume was robust in the first half of 2010 despite strong demand from emerging market economies, particularly in Asia.

The No 3 carrier, ranked 15th in the world, Kawasaki Kisen Kaisha ("K" Line) posted a full fiscal year profit of JPY30.6 billion (US$368 million) erasing FY2009 loss of JPY68.7 billion, earnings drawn on revenues of JPY985 billion, a 17.5 per cent increase year on year.

Said "K" Line: "The containership business saw a strong recovery in cargo movement, particularly on outward cargo from Asia. Although there were some adverse developments in freight rates because of seasonable factors, the increase in shipping capacity supply slowed because of eco-friendly slow steaming by various shipping companies and there was some recover in rates.

"'K' Line Group continued its concerted efforts to effect a restoration of freight charges in the containership segment and to reduce costs through slow steaming and other initiatives. As a result consolidated operating revenues for the 2010 fiscal year were JPY58.6 billion, an increase of JPY147 billion over the previous year," said the "K" Line statement accompanying the results.

"Cargo movements on European service routes recovered strongly and the number of loaded containers from Asia to Northern Europe and the Mediterranean rose 13 per cent over the previous year. The number of loaded containers shipped from northern Europe and the Mediterranean to Asia was up one per cent while European service routes grew eight per cent overall," said "K" Line.

"As a result the containership business segment reported operating revenues of JPY444.9 billion and an operating income of JPY29.6 billion," said "K" Line.

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