Warning signs seen in Kintetsu World Express annual results


While Japan’s Kintetsu World Express (KWE) reported annual headline figures that were not bad, its underlying profits fell against comparable numbers one year earlier.

Sales in the twelve months ended March 31 rose 12.9% to ¥474bn (US$4.17bn) from ¥420bn in 2015, yet operating income and net income dropped 14.9% and 54.1%, respectively, to ¥13bn and ¥4.4bn.

Operating costs rose to ¥389bn from ¥348bn, with gross profit coming in about 20% higher at ¥85bn, given the rise in sales. However, rising sales, general and administrative expenses weighed on its operating performance, as these costs surged to almost ¥72bn from ¥56bn in the prior year. 

Subsequently, earnings per share plunged to ¥62.3 from ¥135.7, while return on equity – a key measure of performance – plummeted to 3.7% from 7.9%. Operating margins, meanwhile, shrank to 2.8% from 3.7% in the twelve months ended March 31, 2016.

Cash flow from operating activities fell to ¥14bn from ¥20bn, but lower investment and financial discipline helped it maintain constant cash balances, which stood at ¥65.5bn versus ¥63.9bn in the prior year.

Alongside deteriorating fundamentals, macroeconomic conditions remain challenging.

“The future prospect of the global logistics market appears to remain unpredictable due to possible impacts of the policy trends in the US and major European countries on the global economy … and the economic tendency in emerging countries including China, as well as … geopolitical risks,” it said. 

The Japanese economy, it noted, continued to recover, albeit gradually, due to rising capital investment and exports, which came despite weak consumer spending trends.

Air freight exports out of Japan rose 16.5% (based on weight), thanks to favourable tonnage of electronic components, mainly semiconductors, as well as semiconductor manufacturing equipment. Meanwhile, based on total number of shipments, air freight imports increased 3.2% thanks to a steady growth rate in electronic products.

“As for sea freight, exports rose 9.9% (in TEUs) due to increases in equipment, machinery and construction materials, and imports rose 4.2% (based on the total number of shipments) due to steady movements in automotive-related products and computer peripherals. In logistics, the volume grew due to an increase in medical products.”

As a result, net domestic sales, including domestic subsidiaries, rose “0.8% to ¥110.3bn, and operating income increased 7.6% to ¥4.44bn yen.”

However, net sales fell across the remainder of its portfolio.

In global markets, “amid stagnant world trade volumes, demand for both air freight and sea freight forwarding showed only moderate growth,” it noted. Based on weight, freight operations saw air freight exports up 8.4%, while air freight imports were essentially unchanged based on the total number of shipments. Sea freight exports rose 22.3% in TEU, due mainly to “the consolidation of APL Logistics and its group companies (APLL)”

Source: Transport Intelligence, May 15, 2017

Author: Alessandro Pasetti