NYK results fall back in 2023

NYK Line PCTCs

NYK appears to have had a reasonable Financial Year 2023 (FY 2023), with profits falling year-on-year largely due to the ‘return to normality’ seen in many logistics markets. For the year, revenue fell by 8.7%, operating profit by 41.1% to Y2,387.2bn (US$15.3bn), and ‘Recurring Profit’ by 76.5% at Y261.3bn (US$1.68bn). However, NYK Group’s management pointed out that even after these falls, the 2023 results were superior to those of 2019 and 2020.

NYK Group is a complex entity with exposure to a number of different markets, yet the trend across more or less all of these markets was one of contraction. For example, NYK is a major stakeholder in the container shipping line, ‘Ocean Network Express’. This saw a violent fall in profits compared to FY2022, with revenue down 50% at US$14.5bn and profits down 94% to US$974m despite an 8% increase in the number of containers handled. Whilst the results are still respectable, the performance during the year was volatile, with the third quarter seeing the company fall into a loss. ‘Ocean Network Express’ described the condition of the market as being one of “decline due to sluggish cargo movements and pressures from the supply side as new vessel deliveries continued” yet with the fourth quarter seeing freight rates rise “due to geopolitical uncertainty surrounding the situation in the Middle East in 4Q”, which is hardly surprising.

The condition of NYK’s Air Freight business was worse, with a 26.1% year-on-year fall in revenue and a 55.7% fall in recurring profit driven by mediocre demand and an excess of supply.

The logistics business, which is a mix of freight forwarding and contract logistics also experienced a fairly predictable downturn with recurring profits 28.3% lower year-on-year and revenue falling 18.6% as freight forwarding struggled to make money in what has generally been a difficult market. NYK said that the contract logistics business, in contrast, had been “stable due to strong cargo volumes in the e-commerce, healthcare, and automotive industries within Europe and firm demand for the general consumer”.

Less straightforward was NYK’s bulk shipping operation. Parts of this must be booming, notably the car-carrier business where the market is short of capacity. However, NYK just said that it had seen “increased handling volumes”. Similarly, the ‘Very Large Crude Carrier’ tanker business saw variable demand through 2023 but a marked improvement in the second half of the year, as did the chemical and LNG carrier markets. Yet recurring profits still fell by 40% on a revenue fall of 0.7%.

NYK is a complex and sophisticated company, with exposure to market segments as different as energy, automotive, and electronics. Its exposure to container shipping is clearly viable but it is hard to measure its strength in freight forwarding. The past year has been far from disastrous but it will be interesting to see what its response will be to the large-scale changes in so many of the markets it serves.

Author: Thomas Cullen

Source: Ti Insight


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