TOKYO -- Nippon Express plans to raise 100 billion yen ($912 million) in debt capital over two years to consolidate Japanese warehouses and install labor-saving equipment, taking advantage of low interest rates to cope with a deepening shortage of workers.
The logistics group had been planning 200 billion yen in facilities spending in the three years through fiscal 2018 but will raise that figure to 300 billion yen. Of the fresh 100 billion yen, 60% is expected to come from bonds and the rest from bank loans. Nippon Express floated 20 billion yen in 20-year debt in July 2016 paying a coupon of just 0.7%, and expects similarly favorable terms this time around.
Much of this capital will go toward consolidating smaller, aging warehouses in the Tokyo, Osaka and Nagoya areas into larger, centralized facilities. This is seen increasing efficiency and letting Nippon Express make the most of its workforce at a time when new labor is scarce, particularly in the logistics sector.
More work-saving technology, such as automated package-sorting machinery, will complement those efforts. Once the consolidation is complete, the company looks to use the sites of former warehouses for businesses such as hotels.
Nippon Express will also build transit warehouses in key overseas locations, such as Thailand, Malaysia and Indonesia. Vietnamese facilities are being weighed as well, in light of demand in that market for the distribution of consumer goods such as beverages and food.
While the new borrowing will raise Nippon Express's debt load to around 500 billion yen, up from about 390 billion yen at the end of June, a parallel increase in profit is seen keeping the company's equity ratio at the current level of around 35%.
Nippon Express' peers are also doubling down on investment as Japan's labor market grows tighter. Yamato Holdings intends to spend tens of billions of yen on technologies such as robotics and automated driving. Hitachi Transport System plans a 60% increase in capital spending this fiscal year and will introduce labor-saving equipment such as driverless forklifts.