27-12-2017

Japan containership merger seen saving $440m in first year

Japan’s three big maritime transport companies expect the integration of their container-shipping operations to reduce costs by a combined 50 billion yen ($440 million) for the fiscal year ending in March 2019, top officials told The Nikkei.

Nippon Yusen President Tadaaki Naito and Kawasaki Kisen President Eizo Murakami discussed the merger of their companies’ containership businesses with that of Mitsui O.S.K. Lines. Ocean Network Express, the joint venture created by the three shippers, begins operating in April.

Annual savings should reach 110 billion yen over the following three years or so due to streamlining efforts such as consolidating bases and trimming payroll. Each shipper’s contracts setting port usage fees and the like will be consolidated to get the best of the three rates for Ocean Network Express, or ONE. Subsidiaries and shipping agencies will be combined and scrapped as well, Naito and Murakami said.

ONE’s profits and losses will accrue to each shipper based on their respective stakes: 38% for Nippon Yusen and 31% each for Mitsui O.S.K. and Kawasaki Kisen. Nippon Yusen would reap 19 billion yen in benefits from the expected 50 billion yen in fiscal 2018 cost savings, for example.

For the fiscal year ending in March 2018, Nippon Yusen sees group pretax profit surging nearly 34-fold to about 35 billion yen. Mitsui O.S.K. forecasts a 2% decline to 25 billion yen, while Kawasaki Kisen expects to return to the black with a 13 billion yen profit, rebounding from the previous year’s 52 billion yen loss.

Naito, Murakami and Mitsui O.S.K. President Junichiro Ikeda all anticipate improvement next fiscal year thanks to synergies from the merger as well as a stronger market.

Source: Nikkei

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