By Costas Paris
Japanese shipping giant Nippon Yusen Kaisha Ltd. replaced its top executive after posting a Yen44.5 billion ($398.5 million) annual loss, indicating its struggle to set up a merged container business with two of its rivals.
Company president Tadaaki Naito will be replaced in June by Hitoshi Nagasawa, the head of NYK's profitable natural gas shipping division. Mr. Naito will become group chairman, a largely ceremonial role, after four years at the helm.
NYK made a Yen20.2 billion profit in fiscal year 2017, the company reported Friday. The Japanese firm is the biggest partner in Ocean Network Express, one of the world's biggest container operators, which formed last year after NYK, Kawasaki Kisen Kaisha (K Line) and Mitsui O.S.K. Lines Ltd. merged their container operations to better compete with bigger rivals in Asia and Europe.
ONE launched last April and over the first six months struggled with what it called "teething troubles" from a new information technology system that led to booking delays and scores of angry customers switching to other operators. There were also staff shortages across the world as new teams were formed and employees were relocated from Japan.
"We are viewing the results of this year seriously," NYK said in a statement, adding that the poor showing mainly came from the "extraordinary losses of the liner trade."
NYK which is also active in tankers, general cargo ships and air cargo transportation, said it expects a Yen26 billion profit this fiscal year, which runs through March 31, 2020.
K Line said it posted an annual loss of Yen11bn for the last fiscal year, reversing a Yen10.4 billion profit from the prior year, and blamed the ONE launch for the loss. The negative result prompted its senior management to add Ryuhel Uchida, a longtime critic of some of K Line's management decisions, to the board. Mr. Uchida is also a director at Effissimo Capital Management, one of K-Line's biggest shareholders.
Mitsui made a net profit of Yen26.6 billion for the period, up from a year-ago loss of Yen47.4 billion, on a strong showing by its natural gas and dry bulk transport divisions. But losses in its container business widened to Yen14.3 billion compared with a loss of Yen10.6 billion in the year earlier period.
ONE warned in October that it would lose around $600 million during its first year in operation.
Write to Costas Paris at firstname.lastname@example.org
Corrections & Amplifications Ocean Network Express is one of the world's biggest container operators. An earlier version of this article incorrectly identified it as Orient Network Express. (4/27/2019)