Declining 2018 growth rates at Kintetsu World Express were expected

Annual revenues grew 7% to ¥* 592bn ($5.4bn) at Japan’s Kintetsu World Express (KWE) in fiscal 2018, with steeper growth for profits confirming headline trends in previous years.

However, growth rates were significantly lower than in 2017, although broadly in line with guidance for the year.

Operating income rose 15% to ¥19.9bn ($183m), leading to a net earnings surge of 40.8% (to ¥9.8bn), as total assets, net assets and liabilities remained virtually unchanged, which testified to a strong focus on organic growth. Meanwhile, underlying margins grew some 20 basis points, on a comparable annual basis.

Growth rates are again expected to be markedly lower this year, with 2019 guidance pointing to a 4.7% rise in net sales, and operating income and net earnings both up about 6% by 31 March 2020.

One of the largest 3PLs globally, KWE noted that business conditions were challenging, given a slew of external factors – the usual suspects such as trade wars between the US and China, Brexit risk and the slowdown in mainland China were all mentioned.

On top of these risks, sluggish demand for semiconductors and electronic components would likely continue to weigh on performance, and KWE referred to a “lull in transportation demand” in these segments.

However, the US expanded and Japan gradually recovered while demand for air and sea freight in fiscal 2018 continued to grow “steadily”, although growth rates were hardly impressive.

In this context, group air freight exports rose 3.6% to 600,000 tonnes (Japan up 4.6% to 160,000), while imports were flattish at 1.34m tonnes (Japan +1% to 364,000). Sea freight exports grew 5.4% to 700,000 TEU (Japan +2.4% to 149,000), with shipments from imports up 3.4% to 287,000 TEU (Japan +0.8% to 115,000).

Domestic air freight exports activities grew mildly thanks to demand for automotive and semiconductor goods; machinery and equipment were mainly responsible for ocean exports growth.

Benign trends for electronic products helped both air and sea imports, with net sales for its domestic freight forwarding unit up 14% to ¥145.7bn (about 25% of group sales) and operating income fell 7% to ¥5.7bn.

Other key highlights internationally included volume growth of 8.3% in air freight exports in the Americas, with air imports up 7.3% from there, with sea freight delivering a relatively solid performance.

Its logistics business, APL Logistics, showed “stable growth”, it said, mainly thanks to its performance in east Asia – net sales grew only 1% to ¥196bn (33% of net sales at group level).

Gross cash and operating cash flow rose as it showed good financial discipline, with higher cash outflows from financing partly offset by lower cash outflows from investment.

Its headline financials were not impacted by swings in the ¥/$ exchange rate, which was relatively stable during the 12-month period ending 31 March 2019. Finally, annual dividends grew by about 11%.

Source: Transport Intelligence, May 14, 2019

Author: Alessandro Pasetti

*$ = ¥109.91 / € = ¥125.85


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