Fiscal 2017 was a good year for Japan’s Kintetsu World Express (KWE), a top 20 global freight forwarder, which saw revenues rise 16.6% to ¥553bn (US$5bn) in the twelve months ended March 31.
Increased profits were the result of a Japanese economy helped by exports and investment but also characterised by weak consumer spending in the past twelve months.
Reported operating income and net income soared 34.2% and 56.1% to ¥17bn and ¥7bn, respectively, from about ¥13bn and ¥4.4bn in fiscal 2016.
Its projected performance is expected to be less dramatic, as it forecasts a 5.7% rise in sales and roughly 10% growth in operating profit. Its latest revised guidance, released on 11 May, is more bullish than implied in its original business plan announced in 2016.
Despite cost inflation, the group managed its operating cost base and operating margins expanded by 40 basis points to 3.2%, contributing to a mild improvement in returns metrics.
“In the global market, demand for air and sea freight continued to increase and showed an upward trend overall,” it said, adding that air freight exports rose 17% and air freight imports 10%, while sea freight exports and imports increased 19.3% and 13.1%, respectively.
In its forwarding unit, growth in core domestic net sales (+15.8%, revenues ¥127bn), including subsidiaries, combined with surging net turnover in the Americas and Asia – where growth rates were steeper – to drive group results.
Meanwhile, its logistics activities also grew, thanks to “expansion mainly in East Asia”: its acquired APL Logistics subsidiary is in full recovery mode, with net revenues up 10.9 % to ¥194bn, thanks to steady growth in the retail and industrial sectors.
Its operating cash flow at group level bucked 2016 trends, rising 3.4% to ¥15bn. Given its investing cash flow, it generated ¥5bn of free cash flow, which contributed to shore up its cash balances, up to almost ¥68bn from ¥65.5bn one year earlier. Some ¥10bn of net cash used for investment was almost evenly split between property, plant and equipment and intangible assets.
Its short-term liabilities were comfortably covered by gross cash, while the value of goodwill dropped to ¥65.5bn from ¥71.9bn in the prior year. The payout ratio fell to 26.7% from 41.7%, and it is forecast to hit 21.5% at the end of the current fiscal year.
KWE said in a separate note that it plans to continue to focus on various measures to increase volumes of air and sea freight to achieve mid- to long-term growth.
In a letter to shareholders, president and chief executive Nobutoshi Torii noted that “there has been notable progress in our collaboration with APLL.
“By making use of APLL’s channels, we were able to win new air freight business from a major retail company. Going forward, we will continue to expand KWE’s network to regions where necessary in order for us to accelerate the further expansion of our cooperative venture with APLL,” he added.
“For this quarter, we expect a steady increase in both air and sea freight volumes, yet we might face freight cost increases, geopolitical risks, and fluctuations in foreign currency exchange. Under such circumstances, the group will work on various measures to increase total handling volumes to be recognized as a global player which is our “Next Phase”,” he concluded.
Source: Transport Intelligence, May 15, 2018
Author: Alessandro Pasetti
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