Impairments hit Nippon Express profits


Market conditions remain challenging for Japan’s Nippon Express, which recently reported rising annual revenues but significantly lower profits due to impairment charges. 

In the fiscal year ended March 31, 2017, revenues grew to almost ¥2trn ($18.1bn), bucking the trend of declining sales in the previous year.

Meanwhile, operating income rose to ¥70.2bn, up 22.0% on a comparable annual basis, with higher margins at 3.5% against 3% in 2016, confirming the freight forwarder’s long-standing focus on underlying profitability.

Despite a good operating performance, some ¥51bn ($450m) of impairment charges (related to goodwill and non-current assets) weighed on net earnings, pushing down its bottom line to ¥6bn from ¥36bn in the prior year.

Moreover, net operating cash flow fell to ¥91bn from over ¥100bn one year earlier, which contributed to negative core free cash flow for year (-¥5.3bn), which was also affected by higher capital expenditure.

Debt proceeds were lower on a comparable annual basis and did not prevent a fall in its gross cash position, down to ¥137bn at the end of fiscal 2017 against ¥163bn one year earlier.

The Japanese economy was on a gradual recovery trend last year, the group said, due “to the pickup in exports and production activities, amid continued gradual recovery of overseas economies”.

In particular, domestic freight was helped by a rise “in transportation demand, including automotive parts and steel, and international freight was generally strong due to factors such as the steady air freight of electronic components, mainly to Asia”.

Its three–year corporate plan, which took effect in April 2016, is delivering mixed results, yet notably core activities have recorded solid growth rates across the world.

In Japan, core revenues rose by ¥47.7bn, +4.1% year on year, to ¥1.2trn (60% of group turnover), thanks to “robust air freight export and motor transportation transactions”, while operating income rose 18.9% to ¥45.9bn.

Headline results in the Americas (sales of ¥91.3bn) were mixed due to falling operating profits, but its performance was much stronger in Europe (sales of ¥96bn), both in terms of revenues and operating earnings growth. Elsewhere, its freight forwarding activates in East Asia (sales of ¥117.4bn) as well as in South Asia and Oceania (sales ¥85.3bn) were on a roll.

Its large “logistics support” unit – which focuses on the “sale of distribution equipment, wrapping and packaging materials, vehicles, petroleum, liquefied petroleum (LP) gas and so forth – turned over ¥443.2bn, up 9.7% for the year, with a much steeper growth rate (+17%) for operating income.

Key factors that contributed to that division’s performance were the “increase in the unit selling price of oil and increased transactions in the export packing services”.

Source: Transport Intelligence, May 22, 2018

Author: Alessandro Pasetti

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