MOL Will Record Extraordinary Loss - Global Trade Magazine
  April 11th, 2016 | Written by

MOL Will Record Extraordinary Loss

Sharelines

  • Mitsui O.S.K. Lines, Ltd. will record an extraordinary loss of $1.63 billion during the fourth quarter of this year.
  • MOL conducted a review of its dry bulk business and decided to implement a major scale-down of the fleet.
  • MOL established a new Dry Bulk Business Unit to better meet customer needs.

Mitsui O.S.K. Lines, Ltd. has confirmed plans to implement measures for business structural

reforms in its dry bulker and containership operations.

The carrier has also decided to record an extraordinary loss of $1.63 billion as a result of those reforms.

The company decided to conduct a drastic review of its business models related to mid- and small-size bulkers, scale down the Capesize bulker fleet in the dry bulker business, and take steps that include recording an impairment loss on business assets and so on in the containership business. It will implement some of the measures starting this month, but will record the loss from business structural reforms in the fourth quarter of this fiscal year’s consolidated financial results.

In fiscal year 2012, the company implemented business structural reforms. As a part of the reforms,

it established MOLBC in Singapore as the key operator of free vessels in the mid- and small-size

bulker markets. However, the company deemed it necessary to conduct an urgent review of its

business models due to the prolonged sluggish dry bulker market, and decided to implement a major

scale-down of the fleet to minimize its market exposure by free vessels, dissolve MOLBC, and

transfer its business operations from Singapore to Tokyo. MOL will assume, as the key fleet,

about half of the mid- and long-term chartered-in vessels currently operated by MOLBC, to meet

expected demand for cargo transport and has decided to return the other vessels.

In a move to reduce the number of surplus vessels in service, the company decided to reduce its

Capesize fleet by about 10 percent by cancelling some charter-in contracts and selling some vessels it

owns. It has already started returning chartered-in vessels based on agreements with business

partners.

Effective April 1, MOL restructured its internal dry bulker business divisions and established the new Dry Bulk Business Unit. This aims to strengthen internal ties among different divisions to more swiftly meet diversified customer needs by optimizing its portfolio of ship types. MOLBC is slated to suspend its business operations by the end of September 2016.

Considering the prolonged market stagnation and freight rates on many key routes hovering at

historic lows, the company decided to record an impairment loss on all vessels owned by group companies and write off their book values down to recoverable values based on an examination of the future recoverability of the containership business, and to sell some of its surplus vessels.

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