Japan’s K Line Group reflects on 100 years of activity

Kawasaki Kisen Kaisha, better known as K Line Group, is celebrating its 100-year anniversary in 2019. CEO and President of this Japanese shipping powerhouse, Eizo Murakami, used his new year speech to update interested parties on the company’s performance and plans, including the progress of container shipping company Ocean Network Express (ONE) – formed in 2017 by K Line, MOL and NYK.

As we enter 2019, I would like to take this opportunity to share a few words with you.

In our results for the first half of this fiscal year, with market conditions for the dry bulk segment remaining steady, together with the structural reform we have been implementing, we were able to show a profit. In the energy segment, in accordance with the course laid out in the medium-term management plan, we were able to build up steady gains from medium and long-term contracts.

(K Line’s) product distribution segment and logistics operations together with coastal and inshore operations all produced steady earnings, but for the container shipping company Ocean Network Express (ONE). While the synergic effect due to the integration of ONE’s operations became steadily apparent, some confusion regarding the providing of services at the start of business operations led to load volumes being less than was expected, resulting in a loss.

Added to this, car carrier operations also showed a loss, due to factors such as lower efficiency in shipping routes from Europe, and a reduction in cargos to resource-rich countries and developing markets. As a result, the company as a whole is expected to fall into the red for the entire fiscal year.

There is no change in our policy of steadily pressing ahead with each of the issues specified as being of importance in the three-year medium-term management plan: rebuilding our portfolio strategy, pursuing advanced management and strategy, and enhancing environment, social and governance initiatives.

Urgent issues to address

Taking into account the difficult business conditions that prevailed during the first period of this fiscal year, during the second period we are concentrating on tackling as urgently important issues; the recovery of ONE’s earning structure, improvement in the profitability of car carrier operations, and efforts aimed at selection and concentration.

ONE is making earnest efforts to recover the trust of its customers, and by carrying out structural reforms, such as overcoming temporarily worsening factors like load reductions, and reviewing its freight portfolio, it is working to rebuild a corporate structure which can be relied upon to deliver earnings.

Also, in our efforts aimed at selection and concentration, in order to thoroughly concentrate our business resources on the four pillars of dry bulk, car carrier, energy and logistics and related operations, we are advancing efforts to change our business choices and assets while looking towards the future shape of our group after spinning off our containership business.

I believe that by taking action with a sense of urgency to cope with these pressingly important issues, and reliably delivering results, our earning power will steadily recover from the next period onwards. Then, in order for this to lead to a heightening of our company’s competitiveness and growth, we have to further strengthen our relationship with our customers, who represent our greatest asset.

To this end, instead of seeking to increase the scale of dry bulk, automobile shipping, energy and logistics and related operations, it is our policy to advance a reform towards a business which creates a new kind of value, unique to us, which anticipates changes in our clientele, by means such as the construction of a business model adapted to changes in society.

100 years on

This year marks the 100th anniversary of the founding of our company. Looking back on the company’s history, there has been no small number of ships and services which brought about great change, adding value uniquely provided by our company, as a result of listening to our customers. Examples of this include the Toyota Maru No. 10, Japan’s first automobile transport ship built in response to the increase in automobile exports from Japan, and the wide-beam/shallow draft coal carrier Corona Series which is a type of vessel well suited for use by Japanese electric power companies.

Taking this opportunity of our 100th anniversary, I would like (K Line) to aim to be a corporate group that continuously provides unique value, taking a fresh look at our group’s DNA, and adding the new viewpoint such as group-wide marketing efforts and technologies including artificial intelligence and the internet of things.

Although recent results have been poor, it is clear what needs to be done. All of the executives and employees of our group must diligently work together in order to cope with the issues that need to be addressed, and step forward firmly towards the next 100 years.