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"K" Line Reports Financial Results for the First Half; Revenues, Income Sharply Higher.

Tokyo, Japan, Oct 30, 2007 - (JCN Newswire) - Kawasaki Kisen Kaisha ("K" Line; TSE: 9107), a global shipping company with highly-developed operations encompassing all sectors of the shipping industry, has announced interim results through September 30, 2007. Through the term, the "K" LINE Group deployed aggressive business operations in accordance with the policies under the "K" LINE Vision 2008+, and focused on expanding the scale of business. As a result, consolidated operating revenues for the half accounted for JPY 646.643 billion, an increase by JPY 128.614 billion on the same period of the preceding year.

Consolidated operating income was JPY 61.552 billion, an increase by JPY 38.049 billion compared with the same period last year, and ordinary income was JPY 63.716 billion, an increase by JPY 39.130 billion against the same period a year earlier. Consolidated net income for the 1st half of fiscal 2007 was JPY 44.044 billion, up by JPY 23.489 billion compared with the same period last year.

I. Summary of Consolidated First Half Operating Results of the Year ending March 31, 2008
 (Millions of Yen/Thousands of U.S. Dollars)
 6 months 6 months 6 months Year
 ended ended ended ended
 9/30/06 9/30/07 9/30/07 3/31/07
Consolidated Yen Yen USD Yen

Operating revenues 518,028 646,643 5,602,037 1,085,539

Operating Income 23,502 61,552 533,247 61,356

Net income 20,555 44,044 381,568 51,514

Per share of Common stock 34.75 70.18 0.61 86.67

Total Assets 824,262 955,925 8,281,429 900,438

Net assets 297,441 412,644 3,574,849 357,624

Per share of Common stock 482.50 627.41 5.44 556.55


Operating revenues 409,995 523,659 4,536,599 857,279

Operating Income 8,932 42,805 370,838 28,103

Net income 10,191 29,776 257,962 25,250

Per share of Common stock 17.21 47.41 0.41 42.45

Total Assets 525,137 551,091 4,774,253 518,500

Net assets 198,326 275,578 2,387,409 241,181

Per share of Common stock 334.94 433.08 3.75 389.35

* U.S. Dollar amounts are converted from the yen amount at
JPY 115.43/U.S.$1.00, exchange rate prevailing on Sept.20, 2007.

In addition, effective from the 1st half of fiscal 2007, the Company changed the accounting method to recognize freight revenues for containership business to the multiple transportation progress method, from in full as of the date on which a vessel embarks from the port where the cargo was loaded.

Under the multiple transportation progress method, freight revenues are recognized in accordance with the progress of transportation for each cargo. With this change, operating revenues, operating income, ordinary income and income before income taxes for the first half of fiscal 2007 decreased by JPY 13.964 billion respectively.

Effects of the fluctuation in foreign exchange rates and fuel prices on the Company's ordinary income are as follows:
 First half First half
 fiscal 2006 fiscal 2007 Increase Effect

Forex rate JPY115.26/US$ JPY119.64/US$ JPY4.38/US$ +JPY2.6 bil

Fuel oil prices US$337/MT US$353/MT US$16/MT -JPY2.1 bil

A) Marine transportation

Containership Business

Cargo movement in the containership business steadily grew, supported by expanding world economy, and in particular, cargo movement in the overall European service routes grew by around 20% compared with the same period last year, thanks to expanded EU, stronger euro and the constantly growing Russian economy. Supply and demand relationship for cargo spaces continued to be tight. The Company's tonnage movement in the North European route increased by about 16% compared with the same period last year, contributed by large-sized 8,000 TEU type containerships launched in this service since autumn 2006. In the North American services, though cargo movement of general consumer goods were brisk, tonnage movement of housing related products, the leading item of cargos, was staggered due to the sluggish housing industry in the U.S.

As a result, overall cargo movement grew only by the mid-single digits percent compared with the same period of the previous year. On the other hand, in the supply side of cargo spaces, there was no opening for new service routes, and some shipping companies decreased their services. As a result, supply and demand relationship remained tight. The Company's tonnage movement in the North American routes increased by about 17% from the same period a year earlier, thanks to enhanced cargo space in the U.S. East Coast service in the second half of the previous year.

In other North/South service routes, cargo movements sharply hiked by about 31% against the same period last year, due mainly to two newly opened services in the Europe/South America East Coast route and Asia/ South America East Coast route, and a newly launched large-sized vessel in the Asia/South Africa service, as well as strongly expanding cargo movements.

The overall operating results increased in both operating revenues and profits against the same period a year earlier, due to progresses in restoring of freight rates supported by strong cargo movements in the European service routes and the North/South service routes, despite negative effects from soaring fuel oil prices.

Bulk Carrier and Car Carrier Business

In the dry bulk transport, market freight rate has remained at unprecedented high levels as seen in the Baltic Dry Index continuing to break a record-high level almost daily from July 2007, due to sharply increased China's imports of iron ore and tightened supply and demand relationship in shipping space resulting from prolonged demurrage in Australia. The Company's transportation services of steel raw materials, thermal coals, and woodchip and pulp secured stable profits by concluding a long-term transportation agreement with each customer, and at the same time, general bulk carriers, particularly small and medium-sized carries increased profits, buoyed by sharply hiked spot freight rates. As a result, the overall dry bulk carrier business increased both its operating revenues and profits against the same period last year.

With respect to the car carrier business, the total number of cars transported by the Company was able to increase by about 9% compared with the same period a year earlier, despite the temporary suspension of shipping of cars by domestic car manufacturers due to Niigata Chuetsu Offshore Earthquake in July this year. As for cargo movements from Japan and Asia, though those for the North America only slightly increased, cargo movements for the Europe and other regions constantly grew, and particularly, those for the Middle East, Africa, and the Central and South America and Caribbean region hiked significantly by around 20% compared with the same period last year. The Company opened a new service connecting China, India, Middle East and South Africa to meet the demand for car transportation, which contributed to increases in number of cars transported.

Operating results of the overall dry bulk carrier and car carrier business for the 1st half of fiscal 2007 rose in both operating revenues and profits against the same period last year.

Energy Transportation and Tanker Business

As for LNG carriers, the fleet of LNG tankers consisting of 31 carriers including two newly built ones in the preceding year, operated smoothly on the whole, and secured stable profitability. Furthermore, the Company responded flexibly to customer needs by chartering one LNG carrier for the short-term to meet the strong spot demand for LNG.

As for tanker services, one VLCC and two combined carriers for LPG and ammonia were newly completed, which contributed to secure stable profits through long-term transportation agreements. However, overall profits went below those in the same period last year, due to softened freight rates amid surging crude oil prices. The overall operating revenues of the energy transportation and tanker business increased in operating revenues, but declined in profits on a year-on-year basis.

Coastal Shipping Business

In the coastal shipping business, the Company secured stable transport volumes for specialized coastal vessels supported by domestic demand, and the fleet of roll-on roll-off ships connecting Hokkaido, Northern Kanto and Kyushu showed results due to active business deployment. As a result, volumes of transportation of general goods hiked. In addition, in the Hachinohe/Tomakomai services which were increased to four services per day, transport volumes of both trucks and passengers increased significantly.

As a result, in the overall marine transportation business, operating revenues for the first half of fiscal 2007 were JPY 571.582 billion, and operating income was JPY 53.874 billion.

B) Logistics/Harbor Transportation

The comprehensive logistics business saw increases in both operating revenues and profits compared with the same period a year earlier, supported by robust shipment of major customers in the air cargo forwarding business amid the sluggish overall air cargo forwarding market, as well as contribution of other freight forwarding businesses in each overseas country. The harbor transportation business increased its volumes of transport, backed up by strong cargo movement in containership business. The overall operating revenues in this business segment were JPY 64.133 billion, and operating income stood at JPY 6.241 billion.

C) Other business

As for other business not mentioned above, operating revenues amounted to JPY 10.926 billion, and operating income was recorded at JPY 1.362 billion.

II. Prospects for Fiscal 2007
 Prospects for Increase
 Fiscal 2006 Fiscal 2007 (decrease)
 (ended 3/2007) (ended 3/2008) amount/rate

Operating revenues 10,885 13,000 +2,145/+20%

Operating income 614 1,280 +666/+109%

Ordinary income 639 1,280 +641/+100%

Net income 515 840 +325/+63%

Foreign exchange rates JPY116.91/US$ JPY116.07/US$ JPY0.84/US$

Fuel oil prices US$319/MT US$387/MT US$68/MT

With respect to the second half of fiscal 2007, though the containership business goes into a slack season in winter in trunk line East/West services, cargo volumes in the North American routes are expected to grow steadily, and those in the European and the Mediterranean services are forecasted to continue to grow constantly. In the supply side, each shipping company is expected to decrease its services as a countermeasure for the winter season, and particularly, the problem of infrastructures at the North European ports is prevailing. As a result, supply and demand relationship is expected to remain tight.

In the bulk carrier business, demand for marine transportation is anticipated to continue to expand globally as seen in sharp increases in China's imports of iron ore, and dry bulk freight rate will stay at high levels. As for car carrier business, brisk cargo movement will continue generally, in spite of the slightly declining trend in marine transportation of completed cars bound for North America. In the energy transportation and tanker business, the tanker business is certain to secure stable profits, contributed by full operations of three tankers newly built in the first half of fiscal 2007.

Business environments surrounding the shipping industry will continue to make a good progress. However, at the same time, negative factors including continuously hiking fuel oil prices, a rise in interest rates and stronger yen are also forecasted. The Company expects consolidated operating results for fiscal 2007 to be JPY 1,300.0 billion for operating revenues, JPY 128.0 billion for operating income, JPY 128.0 billion for ordinary income and JPY 84.0 for net income. As for non-consolidated operating results for fiscal 2007, operating revenues will be JPY 1,050.0 billion, and operating income will be JPY 86.0 billion. Non-consolidated ordinary income and net income will be JPY 89.0 billion and JPY 59.0 billion respectively.

In addition, preconditions for foreign exchange rates and fuel oil prices are:

2nd half: Exchange rate JPY 112.50 per US dollar, fuel price US$420 per ton

III. Consolidated Financial Status

1) Assets, liabilities and net assets

As of the end of September 2007, total assets as increased by JPY 55.486 billion from the end of the preceding fiscal year to JPY 955.925 billion, due to increases in vessels and construction in progress, increases in accounts and notes receivable-trade and inventories resulting from the expanded scale of business operations and an increase in investment securities.

Total liabilities increased by JPY 0.466 billion from the end of fiscal 2006 to JPY 543.280 billion increases in accounts and notes payable and accrued income taxes resulting from expanded scale of business operations, despite a decrease in short-term loans. Long-term liabilities fell by JPY 3.862 billion against the end of the previous year, due mainly to a decrease in bonds, despite increases in long-term debt and accrued expenses for overhaul of vessels. Total net assets increased by JPY 55.020 billion from the end of March 2007 to JPY 412.644 billion, due primarily to an increase in retained earnings.

As a result, debt/equity ratio improved by 20 percent points from the end of the previous year to 75%.

2) Consolidated Cash Flows

As of the end of September 2007, cash and cash equivalents were JPY 604.886 billion, an increase by JPY 0.393 billion from the end of fiscal 2006. Details of consolidated cash flows for the first half of fiscal 2007 are as follows:

Cash flow from operating activities resulted in a gain of JPY 66.784 billion, due to an increase in income before income taxes (first half of fiscal 2006: +JPY 20.792 billion).

Cash flow from investing activities ended with a loss of JPY 47.092 billion, due to expenditures for acquisition of vessels (first half of fiscal 2006: -JPY 60.246 billion).

Cash flow from financing activities saw an outflow of JPY 21.226 billion, owing mainly to expenditures for repayment of borrowings (first half of fiscal 2006: +JPY 43.724).

IV. Basic Policy on Payment of Dividends and Dividend Payment for the Current Fiscal Year

"K" LINE considers that maximization of profits returned to the shareholders, after due consideration of matters such as securing internal reserves for capital spending aiming to expand the scale of our operations systematically and for the improvement and enhancement of the corporate structure, as one of its most important issues, and makes it its basic policy to maintain a stable dividend. With respect to dividend payment, the Company will increase the target payout ratio to 20% of the consolidated net income. "K" LINE will make further efforts to increase the payout ratio in the future.

In terms of the interim dividend for the fiscal year ending March 2008, the Company resolved to pay JPY 12 per share at the board of directors held on October 30, 2007. In addition, the Company currently intends to pay JPY 25 per share as the final dividend for fiscal 2007.

V. Management Policies

Management policies remain materially unchanged sincve the Financial Highlights for FY 2006 reported on May 9, 2007.

Additionally, the Financial Highlights is available at

About Kawasaki Kisen Kaisha Ltd.

Kawasaki Kisen Kaisha Ltd. ("K" LINE) was established in April 1919. Containership services has had the distinction of being the centerpiece of "K" LINE's global sea transportation services. Providing stable and reliable service, this business has been developing and expanding with the present global network offering coverage around the world. By keeping abreast of changing business circumstances and in order to meet customer's requirements, we are also constantly reinforcing our company's international competitiveness. For more information, please visit

Source: Kawasaki Kisen Kaisha Ltd.

Kawasaki Kisen Kaisha, Ltd., Tokyo
IR & PR Group,
Tel.: +81-3-3595-5063

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Publication:JCN Newswires
Date:Oct 31, 2007
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