Kawasaki Kisen Kaisha Ltd., Japan’s third-largest shipping line by sales, may cut as much as 3 billion yen ($30 million) in additional costs and reduce European container routes as rates plunge.
“The container business is extremely challenging,” President Hiroyuki Maekawa said in an interview in Tokyo yesterday. “We have to try and reduce the supply of ships.”
K-Line, as Kawasaki Kisen is also known, has almost completed plans to cut costs and boost revenue by 30 billion yen this year, said Maekawa. Kawasaki Kisen, which gets almost half its revenue from container shipping, and larger rival Nippon Yusen K.K., are laying up ships and reducing route frequencies as a global recession saps demand for furniture, building materials and consumer electronics.
“Considering a bold plan while the damage is still manageable is the right stance,” Yoku Ihara, head of equity research at Retela Crea Securities Co, said.
Transportation of containers from Asia to North America tumbled a record 34.3 percent in February, the most since the Japan Maritime Center started collecting figures in 1995. They dropped 20.9 percent overall in the first quarter, the center said last week.
“We might be able to cut another 2 billion yen to 3 billion yen in costs,” Takashi Saeki, a senior managing executive officer at K-Line said in the same interview. The Tokyo-based shipping line has laid up 11 of its 98 container ships, he said.
K-Line rose 6.4 percent to 449 yen at the 3 p.m. close of Tokyo Stock Exchange trading. It has fallen 60 percent in the past year.
Pressure on Profits
The world’s shipping lines may double the number of idled container carriers to 20 percent of the global fleet amid a surge in new vessels and falling demand, First Ship Lease Trust Chief Executive Officer Philip Clausius said last month.
Container shipping, which accounted for 45 percent of K- Line’s revenue last fiscal year, will drag down profit in the fiscal year ending March 31, as the unit may have a pretax loss of 22 billion yen, the shipping line said in April. Container shipping rates have fallen about 20 percent from a year ago on Asia-North America routes, Maekawa said.
K-Line predicts overall net income will plunge 80 percent to 6.5 billion yen in the period.
Nippon Yusen predicts a pretax loss of 25.9 billion yen at its container business this fiscal year and Mitsui O.S.K. Lines Ltd., Japan’s second-largest shipping company by sales, expects a pretax loss at its container division of 20 billion yen.
“There’s a chance rates will be lower than expected and demand may not increase, which will pressure profits,” Maekawa said. “We hope the April-June period turns out to be the bottom. We still have a chance for an increase in demand.”
“The container business is extremely challenging,” President Hiroyuki Maekawa said in an interview in Tokyo yesterday. “We have to try and reduce the supply of ships.”
K-Line, as Kawasaki Kisen is also known, has almost completed plans to cut costs and boost revenue by 30 billion yen this year, said Maekawa. Kawasaki Kisen, which gets almost half its revenue from container shipping, and larger rival Nippon Yusen K.K., are laying up ships and reducing route frequencies as a global recession saps demand for furniture, building materials and consumer electronics.
“Considering a bold plan while the damage is still manageable is the right stance,” Yoku Ihara, head of equity research at Retela Crea Securities Co, said.
Transportation of containers from Asia to North America tumbled a record 34.3 percent in February, the most since the Japan Maritime Center started collecting figures in 1995. They dropped 20.9 percent overall in the first quarter, the center said last week.
“We might be able to cut another 2 billion yen to 3 billion yen in costs,” Takashi Saeki, a senior managing executive officer at K-Line said in the same interview. The Tokyo-based shipping line has laid up 11 of its 98 container ships, he said.
K-Line rose 6.4 percent to 449 yen at the 3 p.m. close of Tokyo Stock Exchange trading. It has fallen 60 percent in the past year.
Pressure on Profits
The world’s shipping lines may double the number of idled container carriers to 20 percent of the global fleet amid a surge in new vessels and falling demand, First Ship Lease Trust Chief Executive Officer Philip Clausius said last month.
Container shipping, which accounted for 45 percent of K- Line’s revenue last fiscal year, will drag down profit in the fiscal year ending March 31, as the unit may have a pretax loss of 22 billion yen, the shipping line said in April. Container shipping rates have fallen about 20 percent from a year ago on Asia-North America routes, Maekawa said.
K-Line predicts overall net income will plunge 80 percent to 6.5 billion yen in the period.
Nippon Yusen predicts a pretax loss of 25.9 billion yen at its container business this fiscal year and Mitsui O.S.K. Lines Ltd., Japan’s second-largest shipping company by sales, expects a pretax loss at its container division of 20 billion yen.
“There’s a chance rates will be lower than expected and demand may not increase, which will pressure profits,” Maekawa said. “We hope the April-June period turns out to be the bottom. We still have a chance for an increase in demand.”