Nippon Yusen May Beat Annual Profit Forecast on Container-Shipping Demand

Nippon Yusen K.K., Japan’s largest shipping line by sales, said it may beat the annual profit forecast at its container-carrying unit as rebounding demand allows the introduction of peak-season surcharges.

The company plans to add an extra $200 per 20-foot container on Asia-North America routes beginning as early as this month through September, Mikitoshi Kai, its head of investor relations, said in an interview in Tokyo yesterday. The company hadn’t included the levy in its profit forecast, he said.

Nippon Yusen, expecting the first profit in three years at its container division, has also returned all of its laid up box ships to service as an economic rebound spurs U.S. demand for car parts, electronics and buildings materials. Mitsui O.S.K. Lines Ltd. and Kawasaki Kisen Kaisha Ltd., the second and third- largest Japanese shipping lines by sales, are also predicting a return to profit this fiscal year for container operations.

“All three operators are probably going to produce better than expected profit,” said Janet Lewis, an analyst at Macquarie Capital Securities (Japan) Ltd. “The key is whether they take container ships off after the peak season to maintain prices.”

Nippon Yusen had predicted a 500 million yen ($5.6 million) pretax profit from container shipping in the year ending March 31, compared with a loss of 55.4 billion yen last fiscal year. Mitsui O.S.K. and Kawasaki Kisen have also both forecast a 500 million yen profit for container operations this fiscal year.

‘Space is Tight’

“We’re optimistic that they will accept the surcharge,” Kai said about customers. “Space is tight. We should be able to meet our 500 million yen forecast easily and I reckon we will make more.” He didn’t give an exact estimate for the unit and declined to comment on companywide profit.

The peak-season surcharge comes after Tokyo-based Nippon Yusen negotiated rate increases of as much as $400 per container in annual contracts beginning from last month, Kai said.

“We got an almost 100 percent agreement on the rate increase,” he said. “We were satisfied.”

Nippon Yusen fell 1.5 percent to 341 yen on the Tokyo Stock Exchange today. Mitsui O.S.K. and Kawasaki Kisen both slid about 2 percent. Nippon Yusen has risen 20 percent this year, compared with a 29 percent gain at Mitsui O.S.K. and a 46 percent increase at Kawasaki Kisen.

Nippon Yusen has said it will cut 20 billion yen in costs companywide this fiscal year, including 15 billion yen at the container unit. The company may be able to save a “few billion yen” more at the container arm, Kai said.

The shipping line in April forecast net income of 35 billion yen this fiscal year, compared with a loss of 17 billion yen last year.

Industrywide container shipments rose for a fourth month from Asia to North America in March, following a more than two- year decline, according to the Japan Maritime Center.

To contact the reporter on this story: Chris Cooper in Tokyo at ccooper1@bloomberg.net; Kiyotaka Matsuda in Tokyo at kmatsuda@bloomberg.net

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