“K” Line to focus on growing its non-container business

“K” Line to focus on growing its non-container business
The company will focus on LNG transport, bulk and car transport

Japanese carrier Kawasaki Kisen Kaisha, Ltd., or  “K” Line, is set to focus on growing its non-container shipping segments as well as cut costs to maintain the viability of its struggling container business.

The company’s annual report reveals a US$161.7m profit for the fiscal year through March 2014 but its container business only just broke even, with just 47.6% of the line’s revenue stemming from containers.

The company will focus on other sectors, such as LNG transport, bulk and car transport that it considers more stable.

CEO Jiro Asakura said in the report: “In terms of businesses that contribute to a more stable earnings structure, ‘K’ Line has particular strength in dry bulk carriers, car carriers and LNG carriers. We hope to make these particular areas even stronger.

“Stable earnings are generated by businesses in which we can expect a certain level of earnings for a certain period,” he said.

The shipping line currently operates 74 container vessels boasting combined capacity of over 350,000 teu, but said it was given a large helping hand by joining the CKYHE Alliance along with COSCO, Yang Ming, Hanjin and latest member Evergreen.

All told, the alliance has a capacity of 3.2m teu deployed on the east-west trades. The companies represent 16.7% of global capacity, according to Alphaliner.

The company’s container segment posted losses in 2009 and 2011 in the wake of a pair of earthquakes, one economic and the other tectonic.

“In fiscal 2013, although market conditions in the containership business took a sharp turn for the worse, we implemented further measures to reduce costs, streamline and improve profitability,” Asakura said.

The company will also add five 14,000 teu ships to its fleet next year, with another five expected to join them by 2018, which should bring down costs per teu. Meanwhile it will focus on reefer transport and other segments to improve overall profitability.

In 2013-14 its container cargo volumes grew by 4% on North American and European routes, the report added.

The line’s financial concerns will not have been helped by the news that is to pay a US$68m fine under plea bargain to the US Department of Justice for breaching anti-trust laws.

The line said it had co-operated fully with the investigation, into the sale of ro-ro shipping services, and would continue to do so.

“K Line takes this matter seriously and has taken steps to further strengthen its compliance and training programmes to ensure compliance to applicable laws and regulations,” the company said.

In better news, as a part of the strategy to expand its logistics business further in Asia, the company has agreed to establish a joint venture with Cool Japan Fund Inc. and Japan Logistic Systems Corp. and to construct and operate a cold storage facility on the outskirts of Ho Chi Minh City, Vietnam.

The line said the move comes as living styles in Vietnam are rapidly modernising and dietary practices changing, with Japanese supermarkets, convenience stores and restaurants expected to expand further into the country.

The new facility will have a total floor area of approximately 9,300 sq. m occupying a 20,000 sq. m site. Bangkok Cold Storage, a member company of the “K” Line Group, has been engaged in the cold storage business in Bangkok, Thailand for since 1989. The company’s experience and expertise will be transferred to the new joint.

Japan Logistic Systems Corp., which has been doing business in Vietnam for more than 20 years, will provide incidental services such as delivery arrangements.