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Japan's shipping giants seen plugging earnings leak

Turnaround seen as write-downs set to fizzle out, earnings forecasts upgraded

TOKYO -- Japanese marine shippers Nippon Yusen, Mitsui O.S.K. Lines and Kawasaki Kisen Kaisha each upgraded their earnings forecasts Tuesday amid a recovery in rates.

Nippon Yusen now expects to break even on a pretax basis for the year ending March 31 rather than incurring a 26 billion yen ($230 million) pretax loss as it projected earlier. Mitsui O.S.K. looks to earn a pretax profit of 8 billion yen, reversing a forecast of a 3 billion yen loss, and Kawasaki Kisen sees a smaller pretax loss of 47 billion yen rather than 54 billion yen.

Nippon Yusen's containership business and the segment of bulk vessels and roll-on, roll-off ships carrying cars swung to the black in the October-December quarter. The shift provides "evidence that shipping rates have bottomed out," corporate officer Noriko Miyamoto said.

But the bottom lines are soft for the three companies. Nippon Yusen is booking an impairment charge in the marine resources development business, and Mitsui O.S.K. warned of a possible write-down on container vessels. These come in addition to the heavy impairment charges the companies recorded recently.

Still, Ryota Himeno of Citigroup Global Markets Japan was positive about the charges. The companies will benefit next fiscal year from the charges in the current term, he said, referring to general improvement in the bottom line after a business takes a write-down.

The shippers' stock prices illustrate that investors foresee a recovery. Mitsui O.S.K. was the biggest gainer of the three over the past year. Investors apparently liked that the company was the first to begin structural reform, announcing in January 2016 plans to book an extraordinary loss of more than 170 billion yen for fiscal 2015.

The focus will turn to Nippon Yusen, whose stock is lagging. The company's extraordinary losses topping 200 billion yen are expected to improve full-year earnings next fiscal year. Hopes also are growing for synergy from Nippon Yusen's logistics business -- capable of earning a 10 billion yen profit annually -- and car carriers.

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