Nippon Yusen, Mitsui O.S.K. Predict Lower Profits as Shipping Rates Fall

Nippon Yusen K.K., Mitsui O.S.K. Lines Ltd. and Kawasaki Kisen Kaisha Ltd. (9107), Japan’s largest shipping lines, forecast lower net income this fiscal year after last month’s earthquake cut demand and rates declined.

Nippon Yusen expects profit of 34 billion yen ($417 million) for the year ending March 31, compared with 78.5 billion yen last year, the Tokyo-based company said in a statement today. Mitsui O.S.K. forecast a profit of 30 billion yen, compared with 58.3 billion yen, and said the quake will cut current profit by as much as 10 billion yen.

All three lines fell in Tokyo trading after the companies said they expect lower profit and that the earthquake would damp demand for goods shipments. Dry-bulk and container rates have fallen this year as expansion in the global fleet outpaces rising world trade.

“Japanese shipping lines are really getting hit on two fronts,” said Janet Lewis, a Hong Kong-based analyst at Macquarie Capital Securities Ltd. “We’re continuing to see weakness on the dry-bulk side of things and it’s been quite tough to make money in containers. I think that will continue.”

Nippon Yusen dropped 1 percent to 298 yen at the 3 p.m. close of trade in Tokyo, reversing gains of as much as 2 percent. Mitsui O.S.K. fell 0.4 percent to 450 yen, while Kawasaki Kisen declined 2.5 percent to 270 yen.

Japan’s worst earthquake and tsunami on record last month forced some ports to suspend operations and led to shortages of electrical power and auto parts. The decline in output of cars and other goods has dented demand for shipping, Nippon Yusen and Mitsui O.S.K. said today in press briefings to discuss their earnings.

Nippon Yusen said the quake would knock about 20 billion yen off its annual current profit, or pretax profit from operations. The company forecast current profit at 50 billion yen this fiscal year, compared with 114 billion last year.

Kawasaki Kisen said net income will likely plunge to 2 billion yen this year from 30.6 billion yen.

The Baltic Dry Index, a measure of commodity-shipping prices, has declined 29 percent this year to 1,259 points, as of yesterday in London.

Container lines are due to receive a record amount a new ships this month with yards handing over 32 vessels with a combined capacity of 226,500 boxes, according to Alphaliner. Full-year deliveries will likely have a total capacity of 1.35 million containers, with about a third of handovers taking place in April and May, according to the shipping-data provider.

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

To contact the editor responsible for this story: Neil Denslow at ndenslow@bloomberg.net

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