IINO KAIUN KAISHA, LTD. (IINO LINES)

Transcription

1 October 31, 2018 Consolidated Financial Results For the Six Months Ended September 30, under Japanese GAAP IINO KAIUN KAISHA, LTD. (IINO LINES) Stock code: 9119 URL: Representative: Hiromi Tosha, President Contact: Kozen Kojima, General Manager of Finance & Accounting Department Telephone: (Rounded to the nearest million yen) 1. Consolidated Financial Results for the Six Months Ended September 30, 2018 (April 1, 2018 to September 30, 2018) (1) Operating Results (Six Months) (The percentage figures represent changes from the previous corresponding period) Profit attributable Q2 (Apr-Sep) Net sales Operating income Ordinary income to owners of parent million yen % million yen % million yen % million yen % FY , ,302 (1.1) 3, , FY ,439 (3.3) 3, , , Note: Comprehensive income Q2 / FY2018 5,850 million yen (up 28.4%) Q2 / FY2017 4,557 million yen (up 739.9%) Net income Net income per share, Q2 (Apr-Sep) per share fully diluted yen yen FY FY (2) Financial Position Total assets Net assets Shareholders equity ratio Net assets per share million yen million yen % yen Q2 (Apr-Sep) / FY ,380 74, FY (Apr-Mar) ,237 69, Note: Treasury stock Q2 / FY2018: 74,405 million yen FY2017: 69,124 million yen 2. Dividends FY2017 FY2018 FY2018 (Forecast) Dividend per share Q1 Q2 Q3 Q4 Full year yen yen yen yen yen Note: Revision of forecast for dividends in this quarter: None 1

2 3. Forecast of Consolidated Earnings for the Year Ending March 31, 2019 (April 1, 2018 to March 31, 2019) (The percentage figures represent changes from the previous corresponding period) FY2018 Net sales Operating income Ordinary income Profit attributable to owners of parent million yen % million yen % million yen % million yen % FY (Apr-Mar) 85, , , , FY2018 Net income per share yen FY (Apr-Mar) Note: Revision of forecast in this quarter: Yes Appropriate Use of Earnings Forecasts and Other Important Information This report contains various forward-looking statements and other forecasts regarding performance and other matters. Such statements are based on information available at the time of preparation as well as certain reasonable assumptions. Actual results may differ materially from those expressed or implied by forward-looking statements due to a range of factors. 2

3 Operating Results and Financial Position 1. Results for the Six Months Ended September 30, 2018 In the six months ended September 30, 2018, the global economy continued to make a gradual recovery, boosted by the solid performance of the economy in developed countries, particularly that of the U.S. At the same time, concerns over trade conflicts stemming from U.S. trade policy worsened even further. In the U.S., despite a continuing of sense of uncertainty regarding the outlook on trade policy, corporate results remained firm and the economy continued to recover at a steady pace. In Europe, the economy expanded gradually despite concerns regarding such issues as trade issues and political instability. In China, production growth recovered somewhat, but export and import growth slowed and the economy entered a downturn. The Japanese economy continued to see a modest recovery overall due to recovery of personal spending and capital investment, but there are concerns that a series of natural disasters will weigh on the economy. In the shipping business of the IINO Group ( the Group ), there were signs of a recovery for dry bulk carriers, but in chemical tankers, the Company s mainstay business, the oversupply of vessels was not resolved and performance remained sluggish.under this environment, the Group worked to efficiently allocate vessels and improve vessel operation profitability by such means as making efforts to renew existing contracts on favorable terms. Also, the Group recorded a gain on sales of non-current assets (extraordinary income) as a result of selling old vessels after closely monitoring trends in the relevant markets. In the Real Estate business, revenue was stable amid steady occupancy rates at the IINO Building and other buildings. In the redevelopment project of the Shinbashi Tamura-cho district, in which the Group is participating, underground demolition was completed and work on the foundation for the new buildings began. Construction work progressed generally in line with plans. As a result, the Group posted consolidated net sales of 41,968 million (up 3.8% year on year), consolidated operating income of 3,302 million (down 1.1% year on year), consolidated ordinary income of 3,270 million (up 6.2% year on year), and consolidated profit attributable to owners of parent of 4,630 million (up 34.4% year on year). The following is an overview of conditions by segment. 1) Oceangoing Shipping Market conditions in the Oceangoing Shipping segment for the six months ended September 30, 2018, were as follows. In oil tankers, the spot market gradually recovered from its low levels due to higher fuel oil prices and the dismantling of aging vessels. Further gains are expected as demand is high in the winter season. In chemical tankers, market conditions remained sluggish due to the ongoing influx of product tankers into the chemical tanker market. In addition, transportation demand fell temporarily due to seasonal factors associated with summer. As a result, overall market conditions remained sluggish. Among large gas tankers, LPG carrier movements between North America and the Far East 3

4 picked up and ton-miles increased due to a growing gap between LPG prices in the east and west caused by higher crude oil prices. As a result, market conditions were solid. In LNG carriers, transportation demand increased due to the start of new projects, and in addition, inquiries picked up ahead of the winter season, which sees heavy demand. Due to these factors, spot market conditions were firm. In dry bulk carriers, demand for grain shipments from South America decreased and the impact of drought in eastern Australia resulted in a temporary softness in market conditions that peaked in spring in the northern hemisphere and lasted through early summer. However, grain and other shipments recovered, and conditions in the Atlantic market rebounded ahead of other markets. As a result, conditions bottomed out in the final stages of the summer even in the Pacific market and began to rise. During the Six months ended September 30, 2018, the Group s average exchange rate was /US$ ( /US$ in the same period of the previous fiscal year), while the average bunker price was US$418/MT (US$313/MT in the same period of the previous fiscal year). The activities of the Oceangoing Shipping segment amid this environment are summarized as follows. In oil tanker operations, the Group secured stable revenue by keeping its vessels deployed on medium- and long-term contracts. In chemical tanker operations, operation profitability deteriorated as a result of the impact of sluggish market conditions. However, the Group maintained stable transportation volumes mainly due to aggressive efforts to secure spot cargo shipments, in addition to freight contracts for its mainstay Middle East to Europe and Asia routes, which includes the Red Sea. At the end of July, a large-scale state-of-the-art chemical tanker with stainless tanks was completed and added to the fleet. A joint venture established by IINO KAIUN KAISHA, LTD. (the Company ) and a U.S. operator maintained operating rates through contracts of affreightment and spot market shipping, primarily on Intra-Atlantic routes. In product tanker operations, in light of poor market conditions, the Group disposed of one ship and focus on improving profits. The Large Gas Tanker Division secured stable revenues through the steady operation of both LPG tankers and LNG tankers deployed on existing medium- and long-term contracts. In dry bulk carrier operations, coal carriers and woodchip carriers maintained steady operations. In Post Panamax vessel operations, the Group worked to secure profits by timing the allocation of vessels to match improvements in market conditions, deploying vessels on contracts of affreightment, and winning a new dedicated vessel contract. In handy vessel operations, as market conditions shifted from flat growth to a decline, the Group strove for efficient vessel allocation and operation with a focus on deploying vessels on freight contracts. As a result, profitability improved. As a result, the Oceangoing Shipping segment posted net sales of 32,138 million (up 4.5% year on year) and operating income of 1,107 million (down 20.1% year on year). 2) Regional Shipping Market conditions in the Regional Shipping segment for the six months ended September 30, 2018, were as follows. Market conditions were poor in domestic gas shipping operations. This was because LPG 4

5 demand continued to decline due to seasonal factors, which is an annual trend, and transport volume fell for petrochemical gas as well due to the impact of regular maintenance at plants. In international short-haul gas shipping operations, ships waits resulted from conditions at the plants on the receiving end for propylene and vinyl chloride monomer, key cargos for the Group, and vessel supply and demand conditions loosened. As a result, market conditions were soft. The activities of the Regional Shipping segment amid this environment are summarized as follows. Domestic gas shipping operations were affected by lower transport volume resulting from a drop in LPG production due to seasonal factors, as well as scheduled maintenance work at the plants, but the Group maintained profitability by securing steady sales based on medium- and long-term contracts and by ensuring efficient vessel allocation. In international short-haul gas shipping operations, freight movement in Southeast Asia was weak, but the Group maintained its stable revenue with medium- and long-term regular ship lease contracts. As a result, the Regional Shipping segment posted net sales of 4,548 million (up 2.3% year on year) and operating income of 469 million (up 84.6% year on year). 3) Real Estate Market conditions in the Real Estate segment for the six months ended September 30, 2018, were as follows. In the central Tokyo office building leasing market, demand for office expansion and integration due to improving corporate earnings, growth in the number of personnel and other factors led to a lack of new tenant space, particularly in large, newly-built or relatively new office buildings. As a result, the overall vacancy rate in the Real Estate segment, including existing buildings, continued to decline, and the rents are increasing. In the hall and conference room business, there are a large number of competing venues, and facilities continued to compete fiercely with one another, including to tie down customers. In the photo studio operations of the real estate-related business, large-scale sports events were held throughout the countries and advertising demand particularly for the internet as well as for movies and television was solid. The activities of the Real Estate segment amid this environment are summarized as follows. In office leasing operations, the Group focused on providing quality tenant services at all buildings it owns and leasing operations proceeded smoothly overall. Additionally, in the redevelopment project of the Shinbashi Tamura-cho district, a construction contract was concluded mainly by the redevelopment union and the project is now fully underway. In its hall and conference room business, IINO Hall & Conference Center, the Group strove to maintain steady utilization by proactively seeking to host seminars, lectures, advanced screenings of movies, and other events. At IINO Mediapro Co., Ltd., which is engaged in studio-related business, the Group strove to maintain steady utilization by actively working to win a major advertising contract with overseas clients on production operations, and to attract users for its mainstay studio 5

6 operations, as well as its photo retouching and location operations. As a result, the Real Estate segment posted net sales of 5,363 million (up 1.5% year on year) and operating income of 1,726 million (up 1.6% year on year). 2. Consolidated Financial Condition 1) Assets, Liabilities, and Net Assets Total assets as of the end of the second quarter (September 30, 2018) were 218,380 million, an increase of 8,143 million from the end of the previous fiscal year (March 31, 2018). This mainly reflected an increase of the number of vessels due to deliveries new vessels and construction in progress along with progress in capital investment. Total liabilities were 143,838 million as of September 30, 2018, an increase of 2,839 million from March 31, 2018, due mainly to an increase in borrowings. Net assets were 74,541 million as of September 30, 2018, an increase of 5,304 million from March 31, This was mainly attributable to increases in retained earnings along with recording profit attributable to owners of parent. 2) Cash Flows Operating activities provided net cash of 6,233 million in the six months ended September 30, 2018 (versus 6,793 million in the six months ended September 30, 2017). This figure mainly reflects profit before income taxes of 5,010 million and depreciation and amortization of 4,519 million. Investing activities used net cash of 8,881 million (versus 1,406 million in the six months ended September 30, 2017), mainly because the 13,327 million spent on purchasing fixed assets and intangible assets, primarily capital investment in vessels and buildings exceeded proceeds of 4,393 million from the sale of fixed assets and intangible assets, primarily aging vessels. Financing activities provided net cash of 1,928 million (in the year-earlier period financing activities used 5,416 million). This was mainly due to the fact that the 3,039 million of a net increase of short-term loans and the 9,875 million in proceeds of long-term loans exceeded the 10,273 million of repayment of long-term loans. As a result, cash and cash equivalents at September 30, 2018, were 10,051 million, compared to 10,658 million at September 30,

7 3. Outlook for the Full Year Ending March 31, 2019 As predicted in the Group s previous release (July 31, 2018), there were signs of a market recovery for dry bulk carriers, but market conditions remain poor for chemical tankers. Accordingly, compared to the previous release, the Group expects lower operating income, but anticipates increases at the level of ordinary income and below due to higher dividends received from investment businesses after the third quarter, and so on. As a result, the Company has revised its the forecast of Consolidated Earnings for the Year Ending March 31, 2019, as follows. Forecast of Consolidated Earnings for the Year Ending March 31, 2019 (April 1, 2018 to March 31, 2019) Previous Forecast (Issued July 31, 2018) Revised Forecast (Issued October 31, 2018) Amount Change/Percent Change millions of yen Net sales 85,000 85,000 ±0/±0% Operating income 6,400 5,700 (700)/(10.9%) Ordinary income 5,300 5, /+9.4% Profit attributable to owners of parent 6,700 6,700 ±0/±0% * Assumptions regarding the foreign exchange rate and the bunker oil price after the third quarter are shown below. Previous Forecast (as of July 31, 2018) Revised Forecast (as of October 31, 2018) Foreign exchange rate 1US$ = US$ = Bunker oil price US$460 / MT US$470 / MT At the Board of Directors Meeting held on October 31, 2018, it was decided that the interim dividend payment would be 5 per share, as previously announced on July 31, This decision was based on the consolidated earnings during the six-month period ended September 30, 2018, and the consolidated full-year earnings forecast. The Company plans to pay a year-end dividend of 5 per share, amounting to a total annual dividend of 10 per share. Both of these amounts are unchanged from the previous forecast. 7

8 Consolidated Financial Statements (1)Consolidated Balance Sheets (Millions of yen) As of March 31, 2018 As of September 30, 2018 Assets Current assets Cash and deposits 10,536 10,054 Notes and accounts receivable - trade 6,744 7,286 Supplies 2,105 2,421 Merchandise Real estate for sale 3 3 Deferred and prepaid expenses 2,022 1,933 Income taxes receivable Other current assets 3,057 2,866 Allowance for doubtful accounts 2 1 Total current assets 24,711 24,668 Non-current assets Property, plant and equipment Vessels, net 70,937 72,325 Buildings and structures, net 43,325 42,315 Land 41,616 41,617 Construction in progress 5,412 11,704 Other tangible fixed assets, net 1,919 2,316 Total property, plant and equipment 163, ,277 Intangible assets Telephone subscription right 9 9 Other intangible assets Total intangible assets Investments and other assets Investment securities 19,287 19,466 Long-term loans receivable Net defined benefit asset Deferred tax assets Other 2,084 3,073 Total investments and other assets 21,723 22,846 Total non-current assets 185, ,712 Total assets 210, ,380 8

9 (Millions of yen) As of March 31, 2018 As of September 30, 2018 Liabilities Current liabilities Accounts payable - trade 5,116 5,069 Short-term loans payable 30,098 40,485 Accrued expenses Income taxes payable Advances received 1,958 2,249 Provision for bonuses Lease obligations 1,727 1,669 Other current liabilities 1,974 1,808 Total current liabilities 41,688 52,143 Non-current liabilities Long-term loans payable 85,014 77,533 Provision for directors' retirement benefits Net defined benefit liability Provision for special repairs 2,903 2,269 Lease and guarantee deposits received 7,605 7,611 Lease obligations Deferred tax liabilities 2,316 2,769 Other noncurrent liabilities Total non-current liabilities 99,311 91,696 Total liabilities 140, ,838 Net assets Shareholders' equity Capital stock 13,092 13,092 Capital surplus 7,613 7,613 Retained earnings 46,576 50,677 Treasury shares 3,244 3,245 Total shareholders' equity 64,036 68,137 Accumulated other comprehensive income Valuation difference on available-for-sale securities 3,976 4,481 Deferred gains or losses on hedges 19 1,060 Foreign currency translation adjustment 1, Total accumulated other comprehensive income 5,088 6,268 Non-controlling interests Total net assets 69,237 74,541 Total liabilities and net assets 210, ,380 9

10 (2)Consolidated Statements of Operations Six months ended September 30, 2017 (Millions of yen) Six months ended September 30, 2018 Net sales 40,439 41,968 Cost of sales 33,755 35,319 Gross profit 6,684 6,649 Selling, general and administrative expenses 3,346 3,347 Operating profit 3,339 3,302 Non-operating income Interest income Dividend income Foreign exchange gains Investment gain on equity method 59 - Other Total non-operating income Non-operating expenses Interest expenses Share of loss of entities accounted for using equity method - 2 Other Total non-operating expenses Ordinary profit 3,079 3,270 Extraordinary income Gain on sales of non-current assets 535 2,148 Gain on sales of investment securities - 4 Total extraordinary income 535 2,151 Extraordinary losses Loss on retirement of non-current assets 9 0 Loss on valuation of investment securities Total extraordinary losses Profit before income taxes 3,605 5,010 Income taxes - current Profit 3,464 4,737 Profit attributable to non-controlling interests Profit attributable to owners of parent 3,445 4,630 10

11 (3) Consolidated Statements of Comprehensive Income (Loss) Six months ended September 30, 2017 (Millions of yen) Six months ended September 30, 2018 Profit 3,464 4,737 Other comprehensive income Valuation difference on available-for-sale securities 1, Deferred gains or losses on hedges 205 1,002 Foreign currency translation adjustment Share of other comprehensive income of associates accounted for using equity method Total other comprehensive income 1,092 1,112 Comprehensive income 4,557 5,850 Comprehensive income attributable to Owners of parent 4,549 5,810 Comprehensive income attributable to non-controlling interests

12 (4)Consolidated Statement of Cash Flows Six months ended September 30, 2017 (Millions of yen) Six months ended September 30, 2018 Cash flows from operating activities Profit before income taxes 3,605 5,010 Depreciation 4,194 4,519 Share of loss (profit) of entities accounted for using equity method 59 2 Decrease (increase) in net defined benefit asset Increase (decrease) in net defined benefit liability 0 35 Interest and dividend income Interest expenses Loss (gain) on sales of property, plant and equipment and intangible assets 535 2,148 Decrease (increase) in notes and accounts receivable - trade Decrease (increase) in inventories Increase (decrease) in notes and accounts payable - trade 1, Loss (gain) on valuation of investment securities Other, net Subtotal 7,339 6,786 Interest and dividend income received Interest expenses paid Income taxes (paid) refund Net cash provided by (used in) operating activities 6,793 6,233 Cash flows from investing activities Purchase of property, plant and equipment and intangible assets 2,228 13,327 Proceeds from sales of property, plant and equipment and intangible assets 761 4,393 Purchase of investment securities 1 1 Proceeds from sales of investment securities 5 20 Other, net Net cash provided by (used in) investing activities 1,406 8,881 Cash flows from financing activities Net increase (decrease) in short-term loans payable 330 3,039 Proceeds from long-term loans payable 2,722 9,875 Repayments of long-term loans payable 7,766 10,273 Purchase of treasury shares 0 0 Cash dividends paid Dividends paid to non-controlling interests Repayments of lease obligations

13 Net cash provided by (used in) financing activities 5,416 1,928 Effect of exchange rate change on cash and cash equivalents Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of period 10,719 10,536 Cash and cash equivalents at end of period 10,658 10,051 13

14 (5)Business Segment Information Six Months Ended September 30, 2017 (April 1, 2017 to September 30, 2017) I. Revenues Oceangoing Shipping Regional Shipping (In million yen) Real estate Total Adjustment Consolidated (1) External sales 31,002 4,186 5,252 40,439-40,439 (2) Inter-segment sales (254) (39) - Total 30,747 4,446 5,285 40,479 (39) 40,439 Segment profit (loss) 1, ,699 3,339-3,339 Six Months Ended September 30, 2018 (April 1, 2018 to September 30, 2018) I. Revenues Oceangoing Shipping Regional Shipping (In million yen) Real estate Total Adjustment Consolidated (1) External sales 32,333 4,332 5,303 41,968-41,968 (2) Inter-segment sales (195) (81) - Total 32,138 4,548 5,363 42,049 (81) 41,968 Segment profit (loss) 1, ,726 3,302-3,302 14