MOL faces biggest loss in history, says CEO in gloomy birthday speech

MITSUI OSK Lines is facing its largest loss in history of JPY27 billion (US$0.32 billion) despite stable profits and cost-cutting the company has fallen into the red, said its president Koichi Muto at a 128th anniversary speech.

Factors such as the strong yen, high fuel prices, the impact of the earthquake and tsunami last year, and the economic slowdown in developed countries have weighed heavily on our performance, Mr Muto said, adding that the situation was also worsened by weak rates brought about by a glut of ships in almost every vessel category.

The delivery of new vessels will continue to negatively impact its operating results this year and unless cargo demand increases. It forecasts challenging market conditions into 2012 but a more favourable supply-demand balance for global fleet into 2013.

Despite a cost-cutting operation of JPY20 billion through the introduction of slow steaming the carrier is seeking further cost cuts if those that crept up without a loss to safe and high-quality services.

MOL is currently executing Phase 4 of its action plans for the reinforcement of operational safety, with the aim of becoming the world leader in safe operations to improve key performance indicators such as the accident rate.

MOL is investigating the cause of the collision of a MOL containership on the open seas southeast of Hong Kong on February 22 and stress the safety of seafarers, cargo and ships.

In order to manage the volatile market it has created a mid-term management plan in "GEAR UP! MOL" to create an earnings model unlike its traditional model-one that is resilient to drops in rates. MOL also seeking to expand alliances in containerships and through pooling arrangements for tankers. It will focus on the LNG carrier business and energy-related marine business generated from it such as Floating Storage and Regasification Units (FSRUs).

source: shippingazette.com / picture: google.com

MOL president warns of 'prolonged harsh' business environment

MOL president Koichi Muto says last March's Japanese earthquake has hit his company hard, compounding the effect of a deteriorating business environment, which coupled with a strong yen, high fuel prices and sinking rates due to oversupply, are combining to create an industry-wide downturn.

As a result, the first half of fiscal 2011 saw the biggest loss the group has ever suffered.

"The management environment surrounding MOL remains unpredictable and clouded by imminent oversupply of vessels as more new ships reach completion, and slumping business sentiment. These factors are expected to impact containership operations, especially, where conditions are extremely harsh with the impending completion of a large number of ultra large containerships, and the prolonged slump in the economies of Europe and the US," said Mr Muto.

"Large-scale completion of new vessels is expected to continue this year, so we should prepare ourselves for a prolonged harsh business environment, and approach it with due care," he warned.

"After 2013, however, the number of new vessels completed is expected to level off, providing light at the end of the tunnel. Over the medium to long term, we predict that the excessive production capacity of shipyards in China, two-thirds of which is privately operated, will be brought into balance by the market mechanism, and we expect the oversupply of ships to be relieved," said Mr Muto.

Talking about ensuring the survival of the company he identified four key areas to strengthen, namely to provide safe transportation services at a competitive price while effectively reducing the shipping impact on the environment.

The second key area is its financial performance. To strive to improve the balance sheet and cash flow in the short term through persistent efforts to trim costs and other measures. Thirdly, its performance, in terms of ensuring that cargo is delivered in perfect condition and on time. The fourth area for improvement is sales with the goal being to build stronger relationships with customers.

With regards to slow steaming, last year most MOL ships made more diligent efforts to apply slow steaming. Mr Muto said this practice not only reduces fuel consumption, but is also expected to help mitigate the impact of oversupply in vessels and help the environment.

These sentiments were echoed by in a speech from NYK president Yasumi Kudo: "Since stagnant demand in the west and oversupply of mega-ships are predicted, our ordering of new containerships should be suspended for a while, and a light-asset business model should be adopted whereby vessels and space would be leased as needed, thereby minimising downside risks and sustaining business," he said.

According to the NYK head, strong growth in emerging economies such as in Asia would be important for the carrier, in light of the difficult economic and trading conditions currently in Europe and the US.

"I am confident that we are heading in the right direction to grow further by differentiating ourselves and focusing on emerging markets such as Asia," said Mr Kudo.

"When we focus on the emerging countries we see a different outlook ... rapid economic growth in Asia and the developing countries, which account for more than half the population of the world, is the biggest opportunity, without any doubt.

"We cannot deny the risk of weaker demand in the west having a negative effect on Asia, which largely depends on exports. However, growing demand in Asia will be the key to strong growth in the region and overcoming the slump in the west.

"Now we see a major shift in the trend, Asia is no longer only an exporting region, but creating an enormous consumer market surpassing the US or Europe," he said.

picture: google.com / source: Shippingazette.com

MOL suffers US$214.7 million half-year LOSS as sales FALL 11.9pc

JAPAN's biggest container carrier, Mitsui OSK Lines (MOL), has posted a JPY4.82 billion (US$214.7 million) loss in the six months ending September 30 following a 11.9 per cent decline in revenue to JPY$717.3 trillion against a JPY48.2 billion profit loss suffered the year before.

"While the economies of the developed countries weakened, high growth continued in the emerging economies despite there being a slowing of growth stemming from monetary tightening amid concerns of inflation," said the MOL statement accompanying the results.

"In the US, personal consumption remained stagnant against the backdrop of the ongoing unemployment rate, the housing market remaining a rock bottom and soaring natural resources and energy prices.

"In Europe, the economy was weakened by insecurity of the financial system and austere fiscal policy in each country caused by sovereign risk. Exports also dropped, which resulted in low growth

"In China, although the rate for growth faltered as a result of monetary tightening measures to curb inflation, firm economic expansion continued.

"As for containerships, freight rates fell for the east west trade route because of lower than expected cargo trade and fuel costs increased as a result of rising bunker prices which put enormous pressure on the bottom line," MOL said.

"As a result, business performance over the first six months deteriorated considerably compared with the same period of the previous fiscal year and a loss was recorded.

"Regarding containerships, freight rates dropped as demand weakened amid lower than expected cargo trade in the east west trade route, and fuel costs increase due to rising bunker prices. [MOL suffers US$214.7 million half-year loss as sales fall 11.9pc]

source: Shippingazette.com / picture: google.com

MOL launches ten 5,600-TEU ships to boost Asia-South America CSW service

JAPAN's Mitsui OSK Lines (MOL) has announced it will launch 10 new 5,600-TEU ships to replace existing vessels on the Asia-East Coast South America Service (CSW) with immediate effect to enlarge the loop fleet 13 units.

Along with the fleet expansion, MOL will begin chartering space to a consortium of NYK, "K" Line, Hyundai Merchant Marine and PIL, said the MOL statement.

The new vessels feature new wide-beam and shallow-draft design to enable high loading capacity and can meet the requirements of shallow ports as well as achieve better fuel efficiency.

The new MOL CSW service has a 91-day turnaround and calls at Xingang (Wed/Wed), Dalian (Thu/Fri), Qingdao (Sat/Sat), Busan (Mon/Mon), Shanghai (Fri/Sat), Hong Kong (Mon/Mon), Singapore (Fri/Sat), Santos (Sat/Sun), Buenos Aires (Tue/Wed), Montevideo (Thu/Thu), Paranagua (Sun/Sun), Sao Francisco Do Sul (Mon/Mon), Santos (Tue/Wed), Rio De Janeiro (Thu/Fri), Cape Town (Sat/Sun), Ngqura (Mon/Tue), Singapore (Thu/Fri), Hong Kong (Wed/Wed) and back to Xingang (Wed).

source: shippingazette.com