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Q_A at Presentation Meeting of 2Q FY2011 _PDF

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Q_A at Presentation Meeting of 2Q FY2011 _PDF Powered By Docstoc
					                                                                                           NYK Line
                                                                                     November 2011


                 Summary of Q&A Session at Briefing on Financial Results
                 for the 2nd Quarter of the Fiscal Year ending March 31, 2012




Liner Trade
Q1 Your forecast for the freight rate index on European routes in the second half is the same as
    the second quarter result of 74, but could you provide a break down of your forecasts for the
    third and fourth quarters?
A1 We expect 73 in the third quarter and 76 in the fourth.


Q2 Your European cargo space is up 3% over your previous forecast. Do you have any plans to
    reduce tonnage capacity? Also, what is your opinion about laying up vessels?
A2 We are running a bit behind in the start of our winter program for tonnage supply but plan to
    start it soon. Although current freight rates remain very low, they are higher than the “lay-up
    point”. Other companies most likely are in the same position as ourselves, and we do not
    think this situation can continue much longer. We are now proposing rate hikes to our
    customers.


Q3 Please give us your thoughts on the progress of reforms, such as the acceleration of the
    move to a light-asset business model, and on longer-term prospects for improving profitability.
A3 If market conditions remain as they are now, some companies specializing in container
    vessels may have to pull out of the business. Even in a worst-case scenario, the combined
    profits of our Liner Trade, Terminal and Harbor Transport, and Logistics segments should stay
    in the black, with a reduction in the size of our container fleet helping to reduce red ink in the
    Liner Trade. Since the start of the post-financial Crisis economic slump, we have reduced
    fleet size, but contract periods on some chartered vessels have yet to expire. The return of
    these chartered vessels should help us realize the benefits of our transition to a light-asset
    model from 2014. As for accelerating the implementation of our plan, we will base any such
    decisions on conditions in our operating environment going forward. While reducing profit
    fluctuations in our Liner Trade, we are also aiming at early realization of our fiscal 2013 target
    of one million TEU in handling volume at our forwarding business.


Bulk Shipping
Q1 You have lowered your projections for the number of automobiles to be shipped in the second
    half owing to the impact of the floods in Thailand, but could you please provide a breakdown
    of the expected volumes to be shipped from Thailand versus volumes from other locations?
A1 We chartered vessels based on our previously bullish outlook for car export volumes from


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    Japan, but we have lowered our second-half shipping projection from 1.77 million cars to
    1.63mn in light of the Thai floods and automakers’ own downward revisions to exports from
    Japan owing to yen appreciation. The reductions in assumed shipments from Japan and
    Thailand are about even.


Cruises
Q1 You have said that you expect profitability in the cruise business to improve next year, but can
    you give us more specifics?
A1 For our Crystal Cruise business in North America and Europe, we have implemented the
    “Revival Plan,” which includes breaking from the past rigid pricing system to more flexible
    pricing of our cruises. As a result, bookings for 2012 cruises are shaping up nicely. Meanwhile,
    the profitability of our Asuka II cruises for the Japanese market has deteriorated amid a wave
    of cancellations owing to the Great East Japan Earthquake and piracy incidents off the coast
    of Somalia. We plan to turn this business around by reviewing schedules and marketing
    methods.


Corporate / Others
Q1 How have you reflected the impact of Thai flooding in the downward revision to your earnings
    forecasts?
A1 In our Liner Trade segment, we assume that the decrease in shipping volumes from Thailand
    will be offset by increases from other locations. In our Logistics and Air Cargo Transportation
    segments we think the overall impact will be negligible, because we expect shipments of
    goods used in recovery efforts to offset the current decline in cargo shipments to and from
    Thailand. We are concerned about the impact on marine and land transport shipping volumes
    in our Car Carrier Division, but at this stage we are not able to accurately ascertain the
    specific impact on division profits.


Q2. Could you let us know the factors you expect to have a negative impact on this year’s
    earnings only, and any factors you currently foresee as earnings drivers next year?
A2 The Great East Japan Earthquake of course has affected all of our businesses. We expect to
    post extraordinary losses or profit declines of several tens of billions of yen, with the impact
    most severely felt by our Liner Trade segment, Car Carrier Division, and Cruise segment.
    The impact of flooding in Thailand is a concern for the second-half performance of our Car
    Carrier Division, but we also expect the division’s performance to rebound sharply in fiscal
    2012 as conditions in Thailand improve. The Dry Bulk Carrier Division and the Tanker
    Division are both proceeding with the disposal of unprofitable vessels, and we expect both
    divisions to show profit improvements in fiscal 2012. We have similar expectations for the
    Cruise segment, which currently is revising its marketing practices and propping up its
    operations. In addition, we are expanding our forwarding business as we work toward our
    goal of one million TEU in handling volume in fiscal 2013. We believe expansion of this


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    business will enable us to maintain solid profits in our Logistics segment even when container
    market conditions deteriorate.


Q3 Have you made any revisions to your cost-cutting targets for this fiscal year? If so, could you
    please provide a breakdown of figures for the Liner Trade segment and other segments?
A3 Planned cost reductions for the full year amount to about ¥24 billion. We made good progress
    toward this goal in the first half, reducing costs by ¥12.9 billion, of which ¥5.7 billion came in
    the Liner Trade segment. Half of the cost cuts in the Liner Trade segment were achieved by
    reducing fixed costs, such as expenditures on fuel and ships, the other half came from cuts to
    variable costs. The bulk of cost cuts in other segments stem from reducing consumption of
    fuel oils.


Q4 Would you please explain the factors behind the ¥30 billion reduction in your original forecast
    for investment cash outflows in fiscal 2011? The medium-term plan targeted investments of
    ¥200 billion. Do you plan to make further cuts to planned investments over the next two
    years?
A4 We expect a reduction of ¥18 billion from investment cuts and ¥12 billion from asset sales.
    We do not plan any major structural reforms and plan to reduce overall investment levels by
    being more selective.




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