Home » Breaking News, Maritime » ‘K’ Line to cut chartered fleet after huge loss

An anticipated deficit at container shipping alliance Ocean Network Express (ONE) has compelled Japanese carrier Kawasaki Kisen Kaisha (“K” Line) to now expect a loss five times larger than previously announced and to launch a large-scale cost reduction reform.

In an announcement, “K” Line said it will carry out business structural reforms—“mainly for profitability improvement and reduction of fleets”—as it warned of a loss amounting to JPY100 billion (US$898 million) for the year ending March 31, 2019, five times more than the original forecast of JPY20 billion.

“K” Line, Japan’s third biggest liner, said cancellation of “uneconomical” charters for container ships and small and medium-size bulk ships will save it about JPY10 billion in costs.

The carrier, which turns 100 this year, is a member of ONE, a joint venture with fellow Japanese container liners Nippon Yusen Kaisha and Mitsui O.S.K. Lines that was formed in 2017 to combine business and cut costs amid broader consolidation in the shipping industry.

ONE encountered challenges in its initial year of operations last year as it struggled with what it called “teething troubles” with a new information-technology system that led to booking delays and prompted some clients to transfer to other operators.

“ONE already settled the teething problems, which had occurred immediately after the commencement of the services, and hereafter has been steadily under the improvement of liftings and space utilization; however, the forecast of consolidated financial results for fiscal year ending March 2019 is estimated to record loss with regret,” “K” Line said.

It added that under such situation, it considered business structural reforms to “improve our own fundamental profitability through next fiscal year onwards.”

As a result, “K” Line said it determined to provide for losses of about JPY15 billion “related to containerships chartering as well as to carry out cancelling chartering contracts for some of uneconomical containerships and small and medium sized dry bulkers.”

“K” Line further estimates about JPY50 billion as “extraordinary losses with respect to these chartering cancellations.”

On top of this, it expects some of the extraordinary profit, originally scheduled to be recorded in the current period, “to be accounted [for] in next period due to the change of the timing implementation.”

“K” Line said it has revised its financial forecast for the year ending March 2019 “because of provision for losses regarding chartering in operating loss, reflection of impact by dry bulker’s weaken market conditions, extraordinary losses related to cancellation of chartering contracts, as well as the change of the timing implementation for extraordinary profit by assets’ sale such as fleets to subsequent period, which results in expansion of net loss attributable to owners of parent.”

Photo: Basil D Soufi

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