Shipping giant Mitsui O.S.K. Lines Ltd. said Friday it will fall into the red in the business year ending in March after incurring huge restructuring costs amid deteriorating profitability on sluggish demand linked to China’s economic slowdown.
The company is forecasting a consolidated net loss of ¥175 billion ($1.45 billion) compared with an earlier projected profit of ¥17 billion as it expects to be forced to book up to ¥180 billion in extraordinary loss from retirement of vessels and other expenses related to its restructuring efforts.
The slowdown in China is dealing a heavy blow to the shipping industry. Daiichi Chuo Kisen Kaisha, a midsize maritime shipping company, filed for bankruptcy protection last Sept. 29, and Kawasaki Kisen Kaisha Ltd. on Friday cut its outlook for group net profit for the year to ¥5 billion from ¥12 billion.
Hideo Horiguchi, executive officer of Mitsui O.S.K. Lines, said at a news conference Friday in Tokyo that the company “is urged to streamline its operations because shipping fees of container and bulk vessels are unlikely to recover due to the Chinese economy’s slowdown and the deteriorating economies of Russia, Brazil and other natural resource countries.”
The company plans to reduce fixed costs through such restructuring as withdrawal from some shipping routes and streamlining of routes, forcing it to book the huge special loss.
The company also trimmed its forecast for group operating account to a loss of ¥5 billion from a profit of ¥5 billion on sales of ¥1.72 trillion, down 2.2 percent from the previous projection and 5.3 percent from the preceding year.