Nippon Yusen Kabushiki Kaisha Q1 FY2026 earnings call

• Core Q1 Performance Drivers
  • The largest declines in profit were driven by falling market conditions in the dry bulk and liner shipping segments, alongside accelerating yen appreciation and negative impacts from U.S. tariff policies across most business segments
  • Liner shipping faced continued growth in vessel supply, paired with large short-term freight rate volatility from shifting China-origin export demand caused by U.S. tariff policy, leading to lower full-quarter average freight rates compared to the prior year
  • Air freight and logistics both saw lower U.S.-related profit year-over-year due to macroeconomic uncertainty from tariff policy
  • Automobile shipping maintained flat shipment volumes year-over-year, but profit fell due to yen appreciation and inflation-driven cost increases
  • Dry bulk saw lower market conditions versus a strong prior year, plus foreign exchange losses on dollar-denominated bonds and overseas subsidiary assets leading to a quarterly operating loss
  • Energy segment performance was solid: LNG shipping was supported by stable long-term contracts, VLCC market conditions were firm; VLGC and chemical tanker rates recovered after an April drop driven by tariff-related demand concerns but remained lower year-over-year, with the segment boosted by a one-time gain from a new offshore project
• Strategic Update: Healthcare Logistics Acquisition
  • NYK has agreed to acquire all shares of Movianto International B.V., the healthcare logistics business of European logistics firm Walden Group, with the share purchase agreement signed on August 1. The acquisition is expected to close following regulatory approval, after which the business will become a 100% NYK subsidiary
  • The acquisition aligns with NYK’s mid-term management plan, expanding its stable, growing logistics business to reduce overall group earnings volatility and scale profit size
• Capital Return Update
  • As of July 31, NYK has acquired 7,921,200 treasury shares under its 2025 share repurchase program, for a total consideration of approximately 40.7 billion yen

2025 Q1 Actual Results (converted to English magnitude)

• Liner & Logistics Segment (aggregate of liner shipping, air freight, and logistics):
  • Liner shipping: 12.8 billion yen operating profit, down 40.8 billion yen year-on-year
  • Air freight: 0.22 billion yen operating profit, down 1.2 billion yen year-on-year
  • Logistics: 0.34 billion yen operating profit, down 2.1 billion yen year-on-year
  • Segment total: 18.4 billion yen operating profit, down 44.1 billion yen year-on-year
• Automobile Shipping Segment: 29.4 billion yen operating profit, down 8.3 billion yen year-on-year
• Dry Bulk Segment: 3.0 billion yen operating loss, down 17.1 billion yen year-on-year
• Energy Segment: 16.4 billion yen operating profit, up 5.3 billion yen year-on-year
• Company-wide Total: 600.9 billion yen total revenue (down 50.7 billion yen YoY), 59.7 billion yen operating profit (down 66.0 billion yen YoY), 52.0 billion yen net profit (down 58.1 billion yen YoY)

• Full-year 2025 guidance has been revised downward from the May 2025 estimate:
  • Total revenue: 2.35 trillion yen, a 30.0 billion yen downward revision
  • Operating profit: 240.0 billion yen, a 15.0 billion yen downward revision
  • Net profit: 240.0 billion yen, a 10.0 billion yen downward revision
  • The revised guidance now incorporates the impact of U.S. tariff policy changes (previously held as an external upside/downside buffer) for a total annual impact of 24.0 billion yen, with: -19.0 billion yen for liner shipping, -1.0 billion yen for logistics, -3.0 billion yen for automobile shipping, -1.0 billion yen for energy. Dry bulk impact is deemed immaterial and incorporated into baseline market assumptions
  • The impact of proposed additional port entry fees for non-U.S.-built car carriers (under USTR review) is not included, as fee details are not finalized and customer surcharge negotiations are pending
• Segment full-year operating profit guidance versus prior estimate:
  • Liner shipping: 70.0 billion yen, an 11.0 billion yen downward revision, due to tariff impacts and no expected short-term freight rate increase on North American routes after summer that was previously forecast
  • Logistics: 17.0 billion yen, a 1.0 billion yen downward revision, due to tariff policy impacts despite solid air and sea freight volume expectations
  • Automobile shipping: 100.0 billion yen, a 4.0 billion yen upward revision, as strong Q1 performance offset the 3.0 billion yen negative tariff impact concentrated on Atlantic routes
  • Dry bulk: 10.0 billion yen, a 7.0 billion yen downward revision, due to Q1 cost increases, foreign exchange impacts, and lower-than-forecast profitability for some vessel types
  • Energy: 48.0 billion yen, unchanged from prior guidance; the segment remains supported by stable LNG shipping profits with VLCC/VLGC market conditions in line with initial forecasts
• Dividend guidance is maintained from the initial forecast: 115 yen per share interim dividend, 120 yen per share final dividend, for a total annual dividend of 235 yen per share, based on shares outstanding excluding treasury shares acquired through July 31. The 40% target payout ratio remains in place
• Foreign exchange assumption: The Q2 assumption is revised to 145 yen per U.S. dollar to reflect current market rates, while the H2 assumption is maintained at 140 yen per dollar as a conservative estimate given potential yen appreciation from U.S. monetary policy

• Sustained yen appreciation against the U.S. dollar creates negative foreign exchange impacts for dollar-denominated revenue, assets, and earnings across all segments
• U.S. tariff policy has created significant macroeconomic uncertainty and demand volatility, particularly for China-origin export cargo in liner shipping and U.S.-related volumes across logistics and air freight
• Proposed additional port entry fees for non-U.S.-built car carriers could hurt automobile shipping profitability if implemented, and the impact of this policy is not yet included in guidance due to unresolved details
• Continued growth in global liner shipping vessel supply is putting downward pressure on freight rates and profitability
• Inflation-driven cost increases are pressuring margins across multiple operating segments, particularly automobile shipping

Q: Why did NYK lower full-year profit guidance instead of simply adjusting the foreign exchange rate assumption to 145 yen, which would have avoided a large overall downward revision? / A: NYK saw significant foreign exchange-related losses in Q1 from yen appreciation: the quarter started at 149 yen/dollar, dropped to near 142 yen, creating marked-to-market losses on dollar-denominated assets and receivables held by overseas subsidiaries. The Q2 assumption was adjusted to 145 yen to reflect current spot rates, but the team kept the H2 assumption at 140 yen as a conservative measure, given ongoing uncertainty around U.S. interest rate policy that could drive further yen appreciation. This approach was agreed as appropriate by internal leadership, so a downward profit revision was still necessary.

Q: What synergies does NYK expect from the Walden Group healthcare logistics acquisition, and when will these be realized? / A: Near-term synergies include cross-selling opportunities: NYK can offer its existing services to Walden's broad customer base, and Walden's in-house trucking network will replace NYK's current third-party outsourcing in Europe, cutting costs. One-time transaction costs will likely offset acquisition benefits in the first full year post-close, so measurable positive earnings impact is not expected until the following fiscal year. Medium-to-long term, the acquisition will enable NYK to expand its growing global healthcare logistics footprint beyond Europe into existing markets in Asia and North America, leveraging Walden's technical capabilities and customer relationships.

Q: How does this acquisition fit into NYK's existing capital allocation and investment plan? Is the purchase included in the announced 450 billion yen new technology/services investment budget? / A: The acquisition is included in the overall 1.4 trillion yen total investment budget for existing business reinvestment, new investment, and M&A that NYK has already publicly disclosed, so it does not change the overall capital allocation plan. The purchase is reallocated from the 800 billion yen core business investment budget to the new technology/services category, but there is no change to the total planned investment size or the 200 billion yen management buffer. The small downward adjustment to full-year profit guidance has been absorbed by the existing management buffer, with no change to the buffer size going forward.