Income statement		FY12/11	FY12/12	FY12/13	FY12/14	FY12/15	FY12/16	FY12/17	FY12/18	FY12/19	FY12/20	FY12/21
(JPYmn)		Cons.	Cons.	Cons.	Cons.	Cons.	Cons.	Cons.	Cons.	Cons.	Cons.	Est.
Sales		12,538	13,405	16,797	20,095	22,658	19,979	21,709	23,254	22,830	22,209	34,700
	YoY	9.6%	6.9%	25.3%	19.6%	12.8%	-11.8%	8.7%	7.1%	-1.8%	-2.7%	56.2%
Gross profit		3,981	4,115	4,843	5,663	6,185	5,745	5,990	6,296	6,324	5,997
	YoY	7.3%	3.4%	17.7%	16.9%	9.2%	-7.1%	4.3%	5.1%	0.5%	-5.2%
	Gross profit margin	31.8%	30.7%	28.8%	28.2%	27.3%	28.8%	27.6%	27.1%	27.7%	27.0%
Operating profit		1,079	908	1,142	1,145	1,578	1,309	1,500	1,617	1,528	1,411	3,720
	YoY	4.7%	-15.8%	25.8%	0.3%	37.8%	-17.0%	14.6%	7.8%	-5.5%	-7.7%	163.6%
	Operating profit margin	8.6%	6.8%	6.8%	5.7%	7.0%	6.6%	6.9%	7.0%	6.7%	6.4%	10.7%
Recurring profit		1,046	975	1,205	1,208	1,569	1,333	1,588	1,657	1,594	1,485	3,820
	YoY	1.0%	-6.8%	23.6%	0.3%	29.9%	-15.0%	19.1%	4.3%	-3.8%	-6.9%	157.3%
	Recurring profit margin	8.3%	7.3%	7.2%	6.0%	6.9%	6.7%	7.3%	7.1%	7.0%	6.7%	11.0%
Net income		568	459	730	216	1,006	439	1,192	1,147	1,092	851	2,610
	YoY	-12.9%	-19.2%	59.0%	-70.4%	365.1%	-56.4%	171.8%	-3.8%	-4.8%	-22.1%	206.8%
	Net margin	4.5%	3.4%	4.3%	1.1%	4.4%	2.2%	5.5%	4.9%	4.8%	3.8%	7.5%
Per-share data (split-adjusted; JPY)
Shares issued (year-end; '000)		2,616	5,261	5,349	5,349	10,698	10,698	10,698	10,698	10,698	10,698
EPS		54.6	21.9	68.9	20.2	94.7	45.2	122.9	118.2	112.4	87.5	268.2
EPS (fully diluted)		53.8	21.6	-	-	-	-	-	-	-	-
Dividend per share		13.8	13.8	16.3	16.5	25.0	30.0	32.0	34.0	34.0	36.0	50.0
Book value per share		477.7	264.4	613.8	643.9	664.3	664.4	773.2	834.1	900.5	945.9
Balance sheet (JPYmn)
	Cash and cash equivalents	3,895	3,957	4,033	4,914	4,694	4,497	5,101	5,744	6,319	6,808
Total current assets		4,573	4,988	6,138	6,993	6,746	6,615	7,284	8,021	8,497	9,293
Tangible fixed assets		612	633	631	639	702	1,909	1,989	2,056	2,846	2,663
Investments and other assets		715	931	947	687	660	666	669	726	650	711
Intangible assets		425	558	1,264	848	757	203	166	165	151	117
Total assets		6,326	7,110	8,980	9,167	8,864	9,394	10,108	10,969	12,145	12,785
	Accounts payable	620	762	1,197	1,117	1,040	985	1,059	1,106	1,158	1,236
	Short-term debt	87	49	256	29	-	24	-	-	-	-
Total current liabilities		1,030	1,232	2,026	1,836	1,698	1,640	1,696	1,910	1,986	2,327
	Long-term debt	42	27	-	-	-	500	-	-	-	-
Total fixed liabilities		256	268	329	353	380	898	438	451	674	593
Total liabilities		1,285	1,499	2,355	2,189	2,078	2,538	2,134	2,361	2,660	2,920
Total net assets		5,041	5,611	6,625	6,978	6,786	6,856	7,974	8,607	9,485	9,865
Total interest-bearing debt		129	75	256	29	-	524	-	-	-	-
Statement of cash flows (JPYmn)
Cash flows from operating activities		701	668	432	963	1,053	947	1,339	1,458	1,618	1,189
Cash flows from investing activities		-574	-671	-499	160	161	-1,305	-2	-351	-302	-153
Cash flows from financing activities		-106	-263	52	-416	-1,068	365	-817	-318	-673	-469
Financial ratios
ROA (RP-based)		17.1%	14.5%	15.0%	13.3%	17.4%	14.6%	16.3%	15.7%	13.8%	11.9%
ROE		11.7%	8.7%	12.0%	3.2%	15.1%	6.8%	17.1%	14.7%	13.0%	9.5%
Equity ratio		79.0%	78.2%	73.1%	75.1%	72.7%	68.6%	74.2%	73.8%	72.1%	72.0%

Source: Shared Research based on company data
Note: Figures may differ from company materials due to differences in rounding methods.
Note: The company conducted a 2-for-1 stock split in FY12/12 and in FY12/15.

Recent updates

Change in representative directors

2022-01-17

Naigai Trans Line Ltd. announced changes in representative directors.

Reason for changes

To revitalize the company business with a new management team, and to aim for sustainable growth and a reinforced management base

Details of change

Name	New position	Current position
Akira Tsuneda	Resignation upon expiration of his term	Representative director and president
Tomoko Okawa	Senior managing director	Representative director and senior managing director
Yoshihiro Kojima	Representative director and president	Senior managing director

Scheduled date of changes

The above changes will be officially approved at a General Meeting of Shareholders scheduled for March 25, 2022 and a subsequent Board of Directors' meeting to be held on the same day. The changes will take effect on the same day.

Revisions to full-year FY12/21 earnings forecast

2021-12-15

Naigai Trans Line Ltd. (NTL) announced revisions to its full-year FY12/21 forecast.

Revised full-year FY12/21 forecast

Sales: JPY34.7bn (previously, JPY32.0bn)
Operating profit: JPY3.7bn (JPY3.2bn)
Recurring profit: JPY3.8bn (JPY3.3bn)
Net income attributable to owners of the parent: JPY2.6bn (JPY2.2bn)
EPS: JPY268.2 (JPY226.1)

Reasons for revisions

Both the Japan segment and Overseas segment have exceeded the company's expectations. As such, consolidated sales and profit are projected to surpass the previous forecast.

In the Japan segment, the company focused on securing container space through negotiations with shipping companies, and both unit price and volume for mainstay marine LCL and FCL transport on a parent company basis exceeded prior forecasts. In addition, UCI Air Freight Japan, Inc. was able to capture air cargo demand, and at Flying Fish Inc., demand for food imports remained favorable, backed by the ongoing trend for home consumption.

In the Overseas segment, the bulk of sales at many of NTL’s overseas subsidiaries derive from cargo originating in Japan, and the volume of cargo handled by each local subsidiary increased. Freight forwarding business also remained steady.

Trends and outlook

Quarterly trends and results

Cumulative		FY12/20				FY12/21				FY12/21
(JPYmn)		Q1	Q1–Q2	Q1–Q3	Q1–Q4	Q1	Q1–Q2	Q1–Q3	Q1–Q4	% of Est.	FY Est.
Sales		5,397	10,758	15,935	22,209	7,196	15,370	24,508		70.6%	34,700
	YoY	-2.3%	-4.8%	-6.3%	-2.7%	33.3%	42.9%	53.8%			56.2%
Gross profit		1,502	2,922	4,320	5,997	1,936	4,136	6,417
	YoY	0.7%	-6.6%	-8.0%	-5.2%	28.9%	41.5%	48.5%
	Gross profit margin	27.8%	27.2%	27.1%	27.0%	26.9%	26.9%	26.2%
SG&A expenses		1,156	2,309	3,435	4,586	1,175	2,473	3,769
	YoY	-3.1%	-4.2%	-4.7%	-4.4%	1.6%	7.1%	9.7%
	SG&A ratio	21.4%	21.5%	21.6%	20.6%	16.3%	16.1%	15.4%
Operating profit		346	613	885	1,411	761	1,663	2,648		71.2%	3,720
	YoY	16.2%	-14.6%	-19.0%	-7.7%	120.2%	171.1%	199.3%			163.6%
	Operating profit margin	6.4%	5.7%	5.6%	6.4%	10.6%	10.8%	10.8%			10.7%
Recurring profit		336	640	940	1,485	820	1,734	2,739		71.7%	3,820
	YoY	7.9%	-13.3%	-16.1%	-6.9%	143.8%	171.0%	191.3%			157.3%
	Recurring profit margin	6.2%	5.9%	5.9%	6.7%	11.4%	11.3%	11.2%			11.0%
Net income		230	439	656	851	551	1,160	1,880		72.0%	2,610
	YoY	13.4%	-12.5%	-16.1%	-22.1%	140.2%	164.3%	186.7%			206.8%
	Net margin	4.3%	4.1%	4.1%	3.8%	7.7%	7.5%	7.7%			7.5%
Quarterly		FY12/20				FY12/21
(JPYmn)		Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4
Sales		5,397	5,361	5,176	6,275	7,196	8,174	9,137
	YoY	-2.3%	-7.2%	-9.3%	7.7%	33.3%	52.5%	76.5%
Gross profit		1,502	1,421	1,398	1,677	1,936	2,200	2,281
	YoY	0.7%	-13.3%	-10.8%	3.0%	28.9%	54.9%	63.2%
	Gross profit margin	27.8%	26.5%	27.0%	26.7%	26.9%	26.9%	25.0%
SG&A expenses		1,156	1,153	1,127	1,150	1,175	1,298	1,296
	YoY	-3.1%	-5.3%	-5.7%	-3.4%	1.6%	12.6%	15.1%
	SG&A ratio	21.4%	21.5%	21.8%	18.3%	16.3%	15.9%	14.2%
Operating profit		346	268	271	527	761	902	985
	YoY	16.2%	-36.4%	-27.3%	20.6%	120.2%	236.9%	262.9%
	Operating profit margin	6.4%	5.0%	5.2%	8.4%	10.6%	11.0%	10.8%
Recurring profit		336	304	301	544	820	914	1,005
	YoY	7.9%	-28.7%	-21.4%	14.8%	143.8%	201.0%	234.5%
	Recurring profit margin	6.2%	5.7%	5.8%	8.7%	11.4%	11.2%	11.0%
Net income		230	210	217	195	551	609	720
	YoY	13.4%	-30.0%	-22.5%	-37.2%	140.2%	190.6%	232.3%
	Net margin	4.3%	3.9%	4.2%	3.1%	7.7%	7.5%	7.9%

Source: Shared Research based on company data
Note: Figures may differ from company materials due to differences in rounding methods.

Performance breakdown by segment

Segment sales and profit			FY12/20				FY12/21
(JPYmn)			Q1	Q1–Q2	Q1–Q3	Q1–Q4	Q1	Q1–Q2	Q1–Q3	Q1–Q4
Sales			5,397	10,758	15,935	22,209	7,196	15,370	24,508
	YoY		-2.3%	-4.8%	-6.3%	-2.7%	33.3%	42.9%	53.8%
	Japan		3,715	7,453	10,985	15,348	5,107	10,908	17,272
		YoY	1.4%	0.1%	-2.5%	0.4%	37.5%	46.4%	57.2%
	Overseas		1,683	3,305	4,950	6,861	2,089	4,462	7,236
		YoY	-9.6%	-14.2%	-13.7%	-9.0%	24.1%	35.0%	46.2%
Operating profit			346	613	885	1,411	761	1,663	2,648
	YoY		16.2%	-14.6%	-19.0%	-7.7%	120.2%	171.1%	199.3%
	Japan		207	346	491	865	522	1,112	1,819
		YoY	0.8%	-25.4%	-29.4%	-13.8%	152.4%	221.4%	270.3%
		Operating profit margin	5.6%	4.6%	4.5%	5.6%	10.2%	10.2%	10.5%
	Overseas		147	284	418	580	248	567	854
		YoY	8.5%	-6.3%	-7.5%	-1.8%	68.2%	99.9%	104.1%
		Operating profit margin	8.7%	8.6%	8.5%	8.4%	11.9%	12.7%	11.8%
	Eliminations, company-wide		-8	-17	-25	-33	-8	-17	-25
Segment sales and profit			FY12/20				FY12/21
(JPYmn)			Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4
Sales			5,397	5,361	5,176	6,275	7,196	8,174	9,137
	YoY		-2.3%	-7.2%	-9.3%	7.7%	33.3%	52.5%	76.5%
	Japan		3,715	3,738	3,531	4,364	5,107	5,801	6,364
		YoY	1.4%	-1.2%	-7.7%	8.6%	37.5%	55.2%	80.2%
	Overseas		1,683	1,622	1,645	1,911	2,089	2,373	2,774
		YoY	-9.6%	-18.6%	-12.5%	5.8%	24.1%	46.3%	68.6%
Operating profit			346	268	271	527	761	902	985
	YoY		16.2%	-36.4%	-27.3%	20.6%	120.2%	236.9%	262.9%
	Japan		207	139	145	374	522	590	707
		YoY	0.8%	-46.2%	-37.5%	21.8%	152.4%	323.6%	387.1%
		Operating profit margin	5.6%	3.7%	4.1%	8.6%	10.2%	10.2%	11.1%
	Overseas		147	137	135	161	248	320	286
		YoY	8.5%	-18.2%	-9.9%	16.7%	68.2%	134.2%	112.8%
		Operating profit margin	8.7%	8.4%	8.2%	8.4%	11.9%	13.5%	10.3%
	Eliminations, company-wide		-8	-8	-8	-8	-8	-8	-8

Source: Shared Research based on company data
Note: Figures may differ from company materials due to differences in rounding methods.

External environment (reference)

Cumulative		FY12/20				FY12/21
(average for cumulative period)		Q1	Q1–Q2	Q1–Q3	Q1–Q4	Q1	Q1–Q2	Q1–Q3	Q1–Q4
Trade index (volume)		95.9	86.2	86.7	90.9	100.1	101.5	100.9
	YoY	-5.5%	-15.3%	-15.2%	-11.8%	4.5%	17.8%	16.4%
Trade index (value)		95.8	85.6	86.4	90.5	101.5	105.4	107.0
	YoY	-5.5%	-15.4%	-14.6%	-11.1%	6.0%	23.2%	23.7%
Marine container export (JPYtn)		2.62	2.40	2.43	2.55	2.83	2.95	2.99
	YoY	-7.1%	-15.4%	-13.9%	-10.0%	8.0%	22.8%	23.1%
USD/JPY		108.9	108.2	107.6	106.8	105.9	107.7	108.5
	YoY	-1.2%	-1.6%	-1.4%	-2.0%	-2.7%	-0.5%	0.9%
Quarterly		FY12/20				FY12/21
(three months average)		Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4
Trade index (volume)		95.9	76.6	87.7	103.5	100.1	103.0	99.6
	YoY	-5.5%	-25.0%	-15.0%	-1.9%	4.5%	34.4%	13.7%
Trade index (value)		95.8	75.4	88.1	102.5	101.5	109.3	110.0
	YoY	-5.5%	-25.3%	-13.0%	-0.8%	6.0%	45.0%	24.9%
Marine container export (JPYtn)		2.62	2.19	2.47	2.93	2.83	3.08	3.06
	YoY	-7.1%	-23.6%	-10.9%	1.6%	8.0%	40.6%	23.8%
USD/JPY		108.9	107.6	106.2	104.5	105.9	109.5	110.1
	YoY	-1.2%	-2.0%	-1.0%	-3.9%	-2.7%	1.7%	3.7%

Source: Shared Research based on company data
Note: Figures may differ from company materials due to differences in rounding methods.
Note: JPY/USD exchange rates are based on the monthly average of TTM.

Q3 FY12/21 results

Sales: JPY24.5bn (+53.8% YoY)
Operating profit: JPY2.6bn (+199.3% YoY)
Recurring profit: JPY2.7bn (+191.3% YoY)
Net income*: JPY1.9bn (+186.7% YoY)
*Net income attributable to owners of the parent

Performance overview

In Q3, the business environment remained generally unpredictable. While people returned to their pre-pandemic lifestyles in countries and regions where COVID-19 vaccination programs are making progress, where rollouts of vaccination programs have been slower, lockdowns and other restrictions have been instituted. Disruptions of international logistics continued with production delays due to restrictions surrounding outbreaks of COVID-19 and the disturbance of operations at certain ports. Freight rates, which spiked from fall 2020 due mainly to container shortages, have remained high.

Under these circumstances, NTL focused on procuring container space through negotiations with shipping companies and responded to the demands of both existing and new customers. As a result, the company recorded higher handling volume, sales, and profits YoY.

Gross profit grew in line with sales to JPY6.4bn (+48.5% YoY). With the increase in gross profit, all profit categories from the operating profit line down increased. Meanwhile, GPM fell to 26.2% (-0.9pp YoY). The decline here was attributed to changes in the sales mix accompanying business expansion, despite the company's efforts to mitigate the impact of rising container vessel freight rates by raising its service rates. SG&A expenses were up only 9.7% YoY to JPY3.8bn, as the company kept travel and transportation expenses under control in the wake of the pandemic. For these reasons, operating profit grew to JPY2.6bn (+199.3%).

Recurring profit was JPY2.7bn (+191.3% YoY), largely due to growth in non-operating income, specifically JPY44mn in forex gain (compared with JPY27mn in forex loss in Q3 FY12/20). Net income attributable to owners of the parent was JPY1.9bn (+186.7% YoY).

On a segment or subsidiary basis, the parent company posted higher sales and profit thanks to an increase in handling volume and higher freight rates in the core LCL export business. Among domestic subsidiaries, UCI Air Freight Japan, Inc. successfully captured air freight demand, and Flying Fish Inc. benefited from robust food import demand as people continued to spend more time at home due to the pandemic. Overseas group companies saw growth in sales and profit thanks to increased volume of shipments from Japan.

Q3 (July–September 2021) results

In Q3, the company posted sales of JPY9.1bn (+76.5% YoY, +11.8% QoQ), operating profit of JPY985mn (+262.9% YoY, +9.2% QoQ), recurring profit of JPY1.0bn (+234.5% YoY, +10.0% QoQ), and net income attributable to owners of the parent of JPY720mn (+232.3% YoY, +18.2% QoQ).

As mentioned above, in Q3, with recovery in global transport demand and higher freight rates, there were increases in LCL shipping demand at the parent company, handling volume at domestic subsidiaries, and import freight volume at overseas subsidiaries. As a result, sales rose YoY.

Gross profit increased 63.2% YoY to JPY2.3bn in tandem with the rise in sales, driving growth in all profit categories from the operating profit line down. Meanwhile, GPM was 25.0% (-2.0pp YoY). The company responded to the rise in container vessel freight rates by raising its service rates, but the change in sales mix due to business expansion caused the profitability to fall. Sales were up on a QoQ basis as well, contributing to increases in GPM and all profit categories from the operating profit line down versus the previous quarter.

Q3 progress versus company forecast

NTL upwardly adjusted its forecast for FY12/21 three times: in April, in June, and in September 2021. In the first revision (April 2021), it raised its 1H projections for sales by JPY2.5bn, operating profit by JPY530mn, recurring profit by JPY570mn, and net income attributable to owners of the parent by JPY380mn, and its full-year projections for sales by JPY3.0bn, operating profit by JPY690mn, recurring profit by JPY720mn, and net income attributable to owners of the parent by JPY500mn.

In the second revision (June 2021), the company raised its full-year projections for sales by JPY1.0bn, operating profit by JPY390mn, recurring profit by JPY380mn, and net income attributable to owners of the parent by JPY260mn. The company said it was examining its full-year forecast further and would make an announcement once it finished its investigation of freight rate trends and the international trade environment.

In the third revision (September 2021), the company raised its forecast for sales by JPY5.0bn, operating profit by JPY880mn, recurring profit by JPY870mn, and net income attributable to owners of the parent by JPY520mn.

Cumulative Q3 progress versus the full-year FY12/21 forecast put sales at 76.6%, (71.7% in cumulative Q3 FY12/20 versus the full-year FY12/20 result), operating profit at 83.0% (62.7%), recurring profit at 83.8% (63.3%), and net income attributable to owners of the parent at 85.5% (77.1%). Q3 progress exceeded year-ago levels.

Earnings results by segment

Japan

Sales: JPY17.3bn (+57.2% YoY)
Segment profit (operating profit): JPY1.8bn (+270.3% YoY)

The Japan segment comprises the parent and domestic consolidated subsidiaries UCI Air Freight Japan, Inc. and Flying Fish Inc. In cumulative Q3, sales and profit rose for all three of these companies.

In Q3 (three months), the Japan segment posted sales of JPY6.4bn (+80.2% YoY, +9.7% QoQ), segment profit of JPY707mn (+387.1% YoY, +19.7% QoQ), and OPM of 11.1% (+7.0pp YoY, +0.9pp QoQ). The segment posted higher sales and profit both on a YoY and QoQ basis, as well as an increase in profitability.

Results at parent

Parent sales and profit rose YoY due to increases in relatively high-margin LCL exports, along with FCL exports to regions with high unit selling prices. NTL's focused efforts to secure container space through negotiations with shipping companies contributed to this outcome. Amid tightening demand for container space, the company, as one of the largest LCL export business operators in Japan, was able to secure container space thanks to its ongoing business relations with shipping companies. However, it struggled to secure container space for imports, and its handling volume in this area increased by only a little. This notwithstanding, sales increased on higher unit prices.

Results at domestic subsidiaries

As for domestic subsidiaries, UCI Air Freight Japan posted higher sales and profit. Contributing factors included the acquisition of new business and an increase in air transport orders in light of the continuing shortage of marine shipping containers.

Flying Fish posted higher sales and profit due to a steady increase in its handling volume of food imports, as well as an increase in full container food exports and a surge in import freight rates.

Overseas

Sales: JPY7.2bn (+46.2% YoY)
Segment profit (operating profit): JPY854mn (+104.1% YoY)

The Overseas segment comprises 11 consolidated subsidiaries in Asia and the US. At overseas subsidiaries, the majority of sales come from the handling of freight from Japan.

Sales and segment profit rose YoY. Shipments from Japan increased and orders were robust in the freight forwarding and air cargo businesses. By region, subsidiaries in China, South Korea, and the US contributed to the growth in sales and profit.

In Q3 (three months), the Overseas segment posted sales of JPY2.8bn (+68.6% YoY, +16.9% QoQ), segment profit of JPY286mn (+112.8% YoY, -10.5% QoQ), and OPM of 10.3% (+2.1pp YoY, -3.2pp QoQ). While sales and profit both increased YoY, on a QoQ basis, sales were up but profit was down.

Full-year company forecast

Est.		FY12/20			FY12/21
(JPYmn)		1H Act.	2H Act.	FY Act.	1H Act.	2H Est.	FY Est.
Sales		10,758	11,451	22,209	15,370	19,330	34,700
	YoY	-4.8%	-0.7%	-2.7%	42.9%	68.8%	56.2%
Cost of sales		7,836	8,376	16,212	11,235
Gross profit		2,922	3,075	5,997	4,136
	YoY	-6.6%	-3.8%	-5.2%	41.5%
	Gross profit margin	27.2%	26.9%	27.0%	26.9%
SG&A expenses		2,309	2,277	4,586	2,473
	SG&A ratio	21.5%	19.9%	20.6%	16.1%
Operating profit		613	798	1,411	1,663	2,057	3,720
	YoY	-14.6%	-1.5%	-7.7%	171.1%	157.8%	163.6%
	Operating profit margin	5.7%	7.0%	6.4%	10.8%	10.6%	10.7%
Recurring profit		640	845	1,485	1,734	2,086	3,820
	YoY	-13.3%	-1.4%	-6.9%	171.0%	147.0%	157.3%
	Recurring profit margin	5.9%	7.4%	6.7%	11.3%	10.8%	11.0%
Net income		439	412	851	1,160	1,450	2,610
	YoY	-12.5%	-30.2%	-22.1%	164.3%	252.3%	206.8%

Source: Shared Research based on company data
Note: Figures may differ from company materials due to differences in rounding methods.

In December 2021, the company announced revisions to its forecast for FY12/21. The revisions include sales of JPY34.7bn (+56.2% YoY), operating profit of JPY3.7bn (+163.6% YoY), recurring profit of JPY3.8bn (+157.3% YoY), and net income attributable to owners of the parent of JPY2.6bn (+206.8% YoY).

The company has upgraded its outlook on four occasions: in April, June, September, and December 2021.

The first revisions made in April 2021 were to 1H forecast and full-year forecast. For 1H, the company raised its initial forecast by JPY2.5bn for sales, JPY530mn for operating profit, JPY570mn for recurring profit, and JPY380mn for net income attributable to owners of the parent. For the full-year, it raised its initial forecast by JPY3.0bn for sales, JPY690mn for operating profit, JPY720mn for recurring profit, and JPY720mn for net income attributable to owners of the parent.

The second revisions made in June 2021 were to 1H forecast only. The company raised its previous forecast to JPY1.0bn for sales, and by JPY390mn for operating profit, JPY380mn for recurring profit, and JPY260mn for net income attributable to owners of the parent. The company stated that it was scrutinizing full-year forecasts, and would make an announcement once this process was completed.

In its third revisions made in September 2021, it raised its full-year projections for sales by JPY5.0bn, operating profit by JPY880mn, recurring profit by JPY870mn, and net income attributable to owners of the parent by JPY520mn.

In its fourth revisions in December 2021, the company upgraded outlook for sales by JPY2.7bn, operating profit by JPY530mn, recurring profit by JPY550mn, and net income attributable to owners of the parent by JPY410mn.

Reasons for revisions

Explaining reasons for these revisions, the company said that container shortages and rising freight rates have continued since autumn 2020, and freight rates have remained downwardly rigid, partly because of the US government’s additional economic measures to stimulate consumption. As a result, the company now expects its FY12/21 earnings results to exceed its previous forecast in each segment.

Japan segment: Since NTL is focusing on procuring container space through negotiations with shipping companies, both unit price and volume for FCL and mainstay LCL marine shipping surpassed the company's initial and previously revised projections. In addition, UCI Air Freight Japan was able to capture air cargo demand, and Flying Fish saw robust food import demand as people continued to spend more time at home due to the COVID-19 pandemic. As a result, the company now expects Japan segment results to exceed the initial and previously revised projections.

Overseas segment: The bulk of sales at many of NTL’s overseas subsidiaries derive from cargo originating in Japan, and the volume of cargo handled by each local subsidiary increased. In addition, freight forwarding business has been robust. As a result, the company now expects Overseas segment results to exceed the initial and previously revised projections.

The following are company explanations based on the previous forecast.

Versus FY12/20 earnings results

Although the outlook for the global economy is uncertain, the company’s business environment was lifted by a recovery in global trade with Japan, particularly from China and the US, resulting in higher sales and profit YoY in Q4 FY12/20 (October—December 2020).

In FY12/21, the company expects sales growth to continue in the LCL business due to high ocean and air freight rates. In addition, the company expects the freight forwarding business, centered on UCI Air Freight Japan and Flying Fish, to continue contributing to earnings as it did in FY12/20.

Impact of measures in the company’s fourth medium-term plan

Through its fourth medium-term plan (2020–2022), which it formulated in 2020, the company is targeting sales of JPY30.0bn in FY12/22 (CAGR of 9.5% from FY12/19 to FY12/22), OPM of 7.0% (versus 6.7% in FY12/19), and ROE of 14.0% (versus 13.0% in FY12/19). The company has fallen behind on numerical targets in the first year of the plan (FY12/20) but has already started reforming its sales structure and personnel system, and will continue efforts to achieve its targets.

Handling volume has been gradually trending downward in the company’s core LCL exporting business (18.4% of sales and about 30% of gross profit in FY12/20), and the company projects that this handling volume will continue to decline in its fourth medium-term plan. In order to respond to this decrease in handling volume within its core business, the company is establishing and expanding a forwarding service business that will operate alongside its preexisting LCL exporting business. The company’s fourth medium-term plan also projects a decline in sales generated by LCL exports. The company will aim to compensate for this decline by generating increases in the handling volumes of FCL imports and exports, sales at overseas facilities, and sales and profit from M&A.

In terms of specific objectives, the company will aim to raise handling volumes associated with FCL exporting and importing through proposal-based selling, invest in the commercialization of domestic operations such as those associated with warehousing and 3PL, and build a network of overseas selling agents well-versed in forwarding services (see the section entitled “Medium- to long-term outlook” for more details).

Measures expected to contribute to business results in FY12/21

Enhancement of FCL exporting service for North America

To increase its handling volume of FCL exports to the United States, which are associated with relatively high profit margins, the company established a North American project team in FY12/18 and implemented a variety of enhancements, including Japanese support at its US subsidiary and local customs clearance and delivery services. Consequently, the handling volume of food product exports to the US increased from 183 twenty-foot equivalent units (TEUs) in FY12/18 to 388 TEU in FY12/20. The volume of FCL exports to North America in FY12/20 was level YoY, but food product exports rose roughly 40% YoY.

Company materials that cite documents from the Cabinet Office of Japan indicate the following targets for food product exports to the US from Japan in 2025: JPY18.5bn in beef (versus JPY3.1bn in 2019), JPY11.8bn in tea (JPY6.5bn), JPY6.3bn in confectioneries (JPY2.5bn), and JPY18.0bn in rice wine (JPY6.8bn).

Diversification of sales styles (enhancement and promotion of contactless sales)

Previously, the company had sent sales personnel to potential client companies as a means of customer acquisition. However, the spread of the COVID-19 pandemic has limited opportunities for this type of on-site selling. In response, the company began endeavoring to strengthen sales through online marketing, an area on which it had not been concentrating before. In terms of concrete measures, the company is promoting contactless sales through procedures such as creating digital pamphlets covering information on services including LCL transport of hazardous materials and special freight transport, sending these pamphlets to prospective clients, and holding subsequent online business negotiations before drafting estimates. The company is targeting an increase in deal closures by selecting prospective clients from a database compiling customer information and needs and subsequently sending them emails.

Additionally, the company is fleshing out features such as reservation and estimate functions on its website, which are accessible 24 hours per day.

Diversification of sales styles (launch of Naigai Cargo)

In February 2021, the company launched Naigai Cargo, a service that allows customers (shippers) to arrange cargo pickups for domestic truck-based shipping and manage these shipments (cargo tracing) upon making reservations for marine LCL transport. The company then bills customers for both truck freight and marine LCL transport. According to the company, customers generally make arrangements for cargo pickup when shipping through marine LCL transport, and Naigai Cargo is the first service in the marine LCL transport industry that also allows customers to make cargo pickup reservations.

Medium- to long-term outlook

Overview of third medium-term plan

Under its third medium-term plan spanning January 2017 to December 2019, the company set a goal of achieving JPY30.0bn in annual sales within a few years. NTL failed to meet that goal within the period covered by the third medium-term plan, so this pursuit has been carried over to the fourth medium-term plan. Also, whereas the third medium-term plan targeted an operating profit margin of 7% in FY12/19, the actual result was 6.7%, and ROE was 13.0% versus the target of 14.0%.

During the period covered by the third medium-term plan, NTL expanded its footprint as an international freight forwarder by tackling new businesses both domestically and overseas, leveraging the reputation as well as freight forwarding skills and resources it amassed in building up the LCL business.

In Japan, NTL has increased its exposure to customs clearance and other export ancillary services since being accredited as an authorized customs broker (AEO Customs Broker) by the Director-General of Tokyo Customs in April 2018. Domestic group companies also have worked at expanding transaction volume at core businesses, including food imports and air freight.

Overseas group companies have striven to diversify outside of the LCL business, and there have been earnings contributions since FY12/17 from Naigai-Eunsan Logistics Co., Ltd., which began operations in South Korea in November 2016. The Indian subsidiary has been handling more freight since adding new warehousing capacity in July 2018, and NTL’s warehousing business overseas got a further boost in April 2019 when the company converted Naigai Busan Logistics Center Co., Ltd. in South Korea into a subsidiary.

In terms of business with overseas forwarding agents, NTL ramped up dealings with its Brazilian agent during the period covered by the plan.

Overview of previous medium-term plans

Medium-term plan	Company initiatives
First medium-term plan (FY12/11–FY12/13)	Conducted enhancement of forwarding services that was based in LCL exports ・ January 2011: Converted Indian affiliate into a subsidiary ・ April 2012: Converted UCI Air Freight Japan into a subsidiary ・ February 2013: Established Flying Fish
Second medium-term plan (FY12/14–FY12/16)	Established the international freight forwarder business ・ November 2015: Established an affiliate in Shenzhen, China ・ November 2016: Launched operations at Naigai-Eunsan Logistics’ Busan warehouse
Third medium-term plan (FY12/17–FY12/19)	Achieved growth as an international freight forwarder ・ August 2017: Established an affiliate in Myanmar ・ April 2018: Accredited as an AEO customs broker ・ July 2018: Expanded warehouse in India ・ April 2019: Converted Naigai Busan Logistics Center into a subsidiary

Numerical targets of fourth medium-term plan

When reporting full-year FY12/19 results, NTL also released its fourth medium-term plan spanning from FY12/20 to FY12/22. The plan targets sales of JPY30.0bn in FY12/22 (CAGR of 9.5% from FY12/19), an operating profit margin of 7.0% (versus 6.7% in FY12/19), and ROE of 14.0% (13.0%).

Overview of fourth medium-term plan

FY12/20, the first year of the fourth medium-term plan, marks 40 years since NTL’s founding. During the period covered by the new plan, the company aims to harness the operational expertise it has accumulated thus far in expanding its business as a full-service international freight forwarder, targeting JPY30.0bn in annual sales in FY12/22.

In the core LCL export business, sales from LCL exports in FY12/19 were JPY4.5bn (-2.5% YoY, 19.6% of consolidated sales; 19.8% in FY12/18). The LCL export business has the highest GPM out of all of the company’s businesses, at around 40%. The company estimates that FY12/19 gross profit from LCL exports accounted for about 30% of consolidated gross profit.

Handling volume from LCL exports has been gradually declining over the long term as Japanese companies conduct a higher ratio of production locally. The company believes that handling volume will continue to decrease during the period covered by its fourth medium-term plan.

To make up for handling volume decline in its core LCL export business, NTL established the forwarding service business during the period covered by its first medium-term plan (FY12/11–FY12/13) and has since been expanding it. Although the company projects a decrease in LCL export sales during the period covered by its fourth medium-term plan, it also aims to achieve an overall increase in sales through higher handling volumes from FCL exports and import services, a rise in sales from overseas bases, and M&A.

The company targets OPM of 7.0% in FY12/22 under its fourth medium-term plan (OPM was 6.7% in FY12/19). As stated above, GPM in the LCL export business is higher than in any of the company’s other businesses at around 40%. Handling volume in this business is declining as the company aims to increase sales from FCL exports, import services, and overseas bases, dragging down overall profitability. In response, the company aims to maintain OPM through measures such as operational streamlining in the LCL export business and raising handling volume of shipments going to the US, which carry relatively high margin, in the FCL export business.

The key points in the fourth medium-term plan are explained in detail below. The fourth medium-term plan covers three years (FY12/20–F12/22), but the company does not expect initiatives below to produce results until the second half of the period covered by the plan.

Domestic business

Existing businesses

Consolidate the company’s (in particular, the parent’s) standing in LCL export services, which is NTL’s mainstay business but also a mature market, while at the same time pursuing profit improvement through efficiency gains. The company is aiming to establish a framework that will enable it to turn a profit even during periods of market decline by inventing operational procedures through the liberal use of AI and IT.

Invest in the growth area of freight forwarding with a view to increasing both sales and profit and building the business into a second pillar of earnings.

Realize stable earnings in both mature and growth areas.

To expand sales and profit in the forwarding business, the company will need to comprehend customer needs and make comprehensive sales proposals that combine services such as transport, warehousing, customs clearance, and packaging services. Accordingly, the company is considering dividing its sales into two departments: a department that handles sales of existing marine transport services (primarily LCL exports) and a department that handles sales of forwarding services and other proposal-based services. In terms of sales of proposal-based services, the company plans to begin marketing FCL export services to major companies, something it has not done previously.

New businesses

Expand and diversify freight forwarding business, including forays into new areas. As discussed below, the company indicates that it will develop agents overseas that specialize in forwarding services and respond to demand for services that combine warehousing, customs clearance, packaging, 3PL, and other operations by considering forming partnerships with warehousers, delivery companies, and other business entities in Japan.

Invest in rolling out businesses in Japan that NTL has launched overseas, including warehousing and 3PL.

Overseas businesses

Divide the overseas operation into five blocs (ASEAN [Singapore, Thailand, Indonesia, and Myanmar], China, South Korea, US, and India) with a view to lifting operational efficiency, devising sales strategies that are tailored to each bloc and that leverage NTL’s competitive edge. The company aims to increase overseas sales to JPY25.0bn by raising sales from the ASEAN, China, and South Korea blocs (which were all between JPY2.0bn and JPY3.0bn in FY12/19) to JPY5.0bn in each bloc over the long term and lifting sales in the US and India blocs (which were both around JPY1.0bn in FY12/19) to JPY5.0bn in both blocs over the long term.

Strengthen relationships with existing forwarding agents, at the same time seeking out new agents that are best suited to the format of each group company and business division. Specifically, the company possesses an overseas network of agents that primarily perform LCL export services. However, these agents have little capacity for developing forwarding services. The company plans to establish a new network of overseas agents that specialize in forwarding services. By starting to conduct business with new agents overseas, the company will provide a variety of services (such as receiving import cargo, warehouse operations, as domestic shipping) in Japan to forwarders and other business entities located abroad that do not have local Japanese affiliates. The company will apply initiatives related to both marketing and structure while developing and expanding the domain of its forwarding business, as mentioned above. In FY12/19, the company began conducting business with one new overseas agent, which drove sales upward by about JPY150mn. The company aims to accumulate success stories like these under its fourth medium-term plan.

Human resources

Reform the personnel system in order to boost job satisfaction for employees at each group company, at the same time offering education, training, and professional development befitting each job description.

Implement personnel exchanges between group companies, with a view to improving the group’s collective capabilities.

Fill more overseas positions with local hires, strengthening education of local staff and promoting more to management positions.

Investment strategy

In order to achieve the abovementioned basic objectives, NTL plans to invest approximately JPY5.0bn over the three years covered by the fourth medium-term plan. In the main, the investment will go toward:

M&A, capital and business alliances

Sales support, pursuit of operational efficiency, greater use IT and digitization with an eye to enhancing customer service

Acquiring assets including warehousing facilities domestically and overseas

Proactively hiring specialist personnel to oversee establishment of new businesses, investing in recruitment of sales staff for overseas bases and education aimed at bolstering group’s collective strength.

Other: Shareholder returns

Under its fourth medium-term plan, the company is aiming for ROE of 14.0% (13.0% in FY12/19). Based on the analysis below, Shared Research believes the company is implying that it will raise dividends or conduct share buybacks.

Shared Research projects that retained earnings will increase by about JPY800mn YoY because forecast for net income attributable to owners of the parent in FY12/21 is JPY1.2bn, projected DPS is JPY36.0, and total dividend payout is JPY350mn (The company revised up its forecast in April 2021. Its revised forecast for net income attributable to owners of the parent is JPY1.7bn, working out to around a JPY1.3bn increase in retained earnings).

If dividends remain fixed and retained earnings also increase in FY12/22, Shared Research estimates shareholders’ equity to reach about JPY11.5bn in FY12/22.

If the company records JPY30.0bn in sales and OPM of 7.0% in FY12/22 (both targets in its fourth medium-term plan), net income attributable to owners of the parent will be about JPY1.5bn, assuming a tax rate of 30%.

Shareholders’ equity of roughly JPY11.5bn and net income attributable to owners of the parent of approximately JPY1.5bn in FY12/22 would result in ROE below 14.0%.

Business

Description

Business model

Aiming to become comprehensive international freight forwarder

The company is looking to become a full-service international freight forwarder. In contrast to its old business model, in which parent company operations consisted largely of LCL/FCL export services and LCL/FCL import services, and focused mainly on handling the marine transport aspect of international shipments (port-to-port services), NTL is looking to become a provider of one-stop, door-to-door shipping services, including not only marine shipping but also land and air transport, as well as ancillary services such as warehousing, customs clearance, and packaging.

A forwarder is a business that does not own means of transportation (such as vessels, airplanes, railcars, and trucks) but acts as an agent on behalf of the shipper. A freight forwarder primarily conducts door-to-door multimodal transport through the use of other parties’ transport systems.

Primary business: less-than-container-load (LCL) exports

NTL’s business focus is on less-than-container-load (LCL) exports. In FY12/20, the company’s LCL export services generated JPY4.1bn (-9.0% YoY) in sales, or 18.4% of consolidated sales (versus 19.6% in FY12/19). With a gross profit margin of around 40%, this is the company’s most profitable service, and Shared Research estimates that it accounted for roughly 30% of consolidated gross profit in FY12/20.

However, with the surge in M&A in the wake of the 2008 global financial crisis, NTL moved away from dependence on LCL export services for profits at the parent level, aiming to diversify risk. Under this new business model, the ratio of LCL exports to consolidated sales and gross profit is on the decline.

Sales: consolidated, parent, and LCL exports

(JPYmn)				FY12/11	FY12/12	FY12/13	FY12/14	FY12/15	FY12/16	FY12/17	FY12/18	FY12/19	FY12/20
Sales: consolidated				12,538	13,405	16,797	20,095	22,658	19,979	21,709	23,254	22,830	22,209
	YoY			9.6%	6.9%	25.3%	19.6%	12.8%	-11.8%	8.7%	7.1%	-1.8%	-2.7%
	Sales: parent			9,096	9,022	9,494	10,156	10,911	9,938	10,337	10,930	10,666	10,202
		YoY		-0.4%	-0.8%	5.2%	7.0%	7.4%	-8.9%	4.0%	5.7%	-2.4%	-4.3%
		% of sales		72.6%	67.3%	56.5%	50.5%	48.2%	49.7%	47.6%	47.0%	46.7%	45.9%
		LCL export		5,177	4,672	4,625	4,708	4,946	4,450	4,483	4,596	4,482	4,080
			YoY	-4.1%	-9.8%	-1.0%	1.8%	5.1%	-10.0%	0.7%	2.5%	-2.5%	-9.0%
			% of sales	41.3%	34.9%	27.5%	23.4%	21.8%	22.3%	20.6%	19.8%	19.6%	18.4%
	Sales: Excluding parent			3,442	4,383	7,302	9,939	11,747	10,042	11,372	12,324	12,165	12,007
		YoY		49.2%	27.4%	66.6%	36.1%	18.2%	-14.5%	13.3%	8.4%	-1.3%	-1.3%
		% of sales		27.4%	32.7%	43.5%	49.5%	51.8%	50.3%	52.4%	53.0%	53.3%	54.1%

Source: Shared Research based on company data

Main suppliers: marine shipping companies and warehouse operators

The company’s main service suppliers are the large marine shipping companies with which it books ocean freight transport, and warehousing companies that fill containers with cargo.

In addition to Ocean Network Express Pte. Ltd. (ONE), formed by the merger of container shipping businesses of three Japanese liner companies, NTL also has contracts with other major foreign liner companies. On the warehousing side, the company has contracts for space with Sankyu Inc., Tokai Transportation Co., Ltd., and Tatsumi Shokai Co., Ltd., among others.

Main customers: trading companies and manufacturers

The company serves various customers, such as manufacturers and trading companies, large and small. These customers engage NTL to transport all kinds of cargo, including machinery, auto parts, chemicals, and textiles. Also, because NTL is an independent non-vessel operating common carrier (NVOCC), it can use space of industry peers (e.g., shipping companies) when they cannot fill a container with their consigned shipments. This is called co-loading. Roughly 50% of sales come from co-loading involving shipments handled by industry peers. NTL aims to increase sales from dedicated container shipments directly consigned by shippers.

Source: Shared Research based on company data

LCL export services

Under LCL export services, the company consolidates small-lot shipments from multiple shippers into a single container going to the same destination port. Revenues come from the rates charged for these LCL export services, which vary depending on the volume of cargo shipped by the customer; on the cost side, the main costs related to the sales are the shipping costs of the container (ocean freight) and warehousing fees. Because the cost of shipping incurred by the company for a single container (i.e., the ocean freight charges) is the same regardless of the amount of cargo loaded into the container, the more the company can load into a container the higher its profit margin on that container shipment. From the customer’s standpoint, LCL shipping reduces their shipping costs in cases where they are not shipping enough to fill a container.

According to the company, LCL exports are characterized by high gross profit margins, at around 40%, compared with about 15% for full-container-load (FCL) exports, which use an entire container for each client. The industry average load factor necessary to break even appears to be around 45% for LCL exports, while NTL claims its average load factor is about 60%.

In this business, per-client sales are low, at a maximum of JPY5mn per month, due to the small size of the shipments handled. NTL regularly serves approximately 6,000 corporate clients. The company’s advantage is that it does not heavily depend on particular industries and clients. However, as company materials indicate, Japan’s total export value influences NTL’s performance. As a result, its business tends to be affected by macroeconomic conditions.

As mentioned above, the majority of the company’s clients are regulars. They appear to value NTL’s reliable services. The company said its shipping charges are set 10-20% higher than those of competitors, reflecting its comprehensive strengths, such as frequent shipping schedules, the greater ability to secure container space from shipping companies, and the use of reliable business partners. NTL also offers direct connections to key ports across the world, providing distinct advantages in the form of swift information delivery and lower cost, compared with competing services.

NTL currently offers LCL export shipping from Japan to 47 ports in 23 countries using direct routes as well as shipping services to countries in the Middle East and Central/South America where there is no direct liner service from Japan but shipments can be routed through international hub ports (such as Singapore, Hong Kong, and Busan) where NTL has local subsidiaries. For shipments going to the US, NTL uses the Port of Los Angeles as its hub and from there routes LCL shipments to other major US cities via rail or truck; in the case of Chicago and New York, where there is an especially large amount of freight traffic from Japan, the company provides direct LCL marine shipping services. In Europe, NTL has contracts with major forwarding agents in every country and through these connections is able to provide LCL marine shipping to various destinations via the large hub ports in Rotterdam and Hamburg.

Source: Shared Research based on company data

Segments

The company’s segments consist of Japan and Overseas. In FY12/20, the Japan segment accounted for 69.1% of consolidated sales and 59.9% of operating profit. The Overseas segment accounted for 30.9% of sales and 40.1% of operating profit (simple aggregate of segment profits).

In recent years, the proportion of sales and operating profit accounted for by the Japan segment has been declining and proportion accounted for by the Overseas segment has been increasing.

Sales and profit by segment

			FY12/11	FY12/12	FY12/13	FY12/14	FY12/15	FY12/16	FY12/17	FY12/18	FY12/19	FY12/20
(JPYmn)			Act.	Act.	Act.	Act.	Act.	Act.	Act.	Act.	Act.	Act.
Sales			12,538	13,405	16,797	20,095	22,658	19,979	21,709	23,254	22,830	22,209
	YoY		9.6%	6.9%	25.3%	19.6%	12.8%	-11.8%	8.7%	7.1%	-1.8%	-2.7%
	Japan		9,128	9,798	11,829	14,293	15,346	13,636	14,558	15,630	15,290	15,348
		YoY	1.9%	7.3%	20.7%	20.8%	7.4%	-11.1%	6.8%	7.4%	-2.2%	0.4%
		% of total	72.8%	73.1%	70.4%	71.1%	67.7%	68.2%	67.1%	67.2%	67.0%	69.1%
	Overseas		3,410	3,607	4,968	5,801	7,312	6,343	7,151	7,624	7,540	6,861
		YoY	37.0%	5.8%	37.7%	16.8%	26.0%	-13.2%	12.7%	6.6%	-1.1%	-9.0%
		% of total	27.2%	26.9%	29.6%	28.9%	32.3%	31.8%	32.9%	32.8%	33.0%	30.9%
Operating profit			1,079	908	1,142	1,145	1,578	1,309	1,500	1,617	1,528	1,411
	YoY		4.6%	-15.8%	25.8%	0.3%	37.8%	-17.0%	14.6%	7.8%	-5.5%	-7.7%
	Operating profit margin		8.6%	6.8%	6.8%	5.7%	7.0%	6.6%	6.9%	7.0%	6.7%	6.4%
	Japan		782	638	631	846	850	827	924	1,036	1,003	865
		YoY	5.8%	-18.4%	-1.2%	34.1%	0.5%	-2.7%	11.7%	12.1%	-3.2%	-13.8%
		Operating profit margin	8.6%	6.5%	5.3%	5.9%	5.5%	6.1%	6.3%	6.6%	6.6%	5.6%
		% of total	69.5%	65.9%	52.5%	71.0%	53.0%	62.0%	60.6%	63.1%	62.9%	59.9%
	Overseas		342	331	572	346	754	507	602	606	590	580
		YoY	16.9%	-3.4%	72.8%	-39.5%	117.8%	-32.7%	18.6%	0.8%	-2.6%	-1.8%
		Operating profit margin	10.0%	9.2%	11.5%	6.0%	10.3%	8.0%	8.4%	8.0%	7.8%	8.4%
		% of total	30.5%	34.1%	47.5%	29.0%	47.0%	38.0%	39.4%	36.9%	37.1%	40.1%
	Eliminations, company-wide		-45	-61	-60	-47	-25	-25	-25	-25	-65	-33

Source: Shared Research based on company data
Figures may differ from company materials due to differences in rounding methods.

Japan segment

The Japan segment is composed of the parent company, UCI Air Freight Japan, Inc., and Flying Fish Inc. In FY12/20, the parent company generated 66.5% of segment sales (versus 69.8% in FY12/19), and 60.7% of segment operating profit (versus 73.1% in FY12/19) (Shared Research estimates based on company data).

Japan segment: sales and profit at parent and consolidated levels

			FY12/11	FY12/12	FY12/13	FY12/14	FY12/15	FY12/16	FY12/17	FY12/18	FY12/19	FY12/20
(JPYmn)			Act.	Act.	Act.	Act.	Act.	Act.	Act.	Act.	Act.	Act.
Sales			9,128	9,798	11,829	14,293	15,346	13,636	14,558	15,630	15,290	15,348
	YoY		1.9%	7.3%	20.7%	20.8%	7.4%	-11.1%	6.8%	7.4%	-2.2%	0.4%
	Parent		9,096	9,022	9,494	10,156	10,911	9,938	10,337	10,930	10,666	10,202
		YoY	-0.4%	-0.8%	5.2%	7.0%	7.4%	-8.9%	4.0%	5.7%	-2.4%	-4.3%
		% of segment total	99.7%	92.1%	80.3%	71.1%	71.1%	72.9%	71.0%	69.9%	69.8%	66.5%
	Cons.- Parent difference		32	776	2,334	4,138	4,435	3,698	4,221	4,700	4,624	5,146
		YoY	-117.3%	2,356.2%	201.0%	77.2%	7.2%	-16.6%	14.1%	11.3%	-1.6%	11.3%
		% of segment total	0.3%	7.9%	19.7%	28.9%	28.9%	27.1%	29.0%	30.1%	30.2%	33.5%
Operating profit			782	638	631	846	850	827	924	1,036	1,003	865
	YoY		5.8%	-18.4%	-1.2%	34.1%	0.5%	-2.7%	11.7%	12.1%	-3.2%	-13.8%
	Parent		748	646	672	806	744	728	707	761	758	526
		YoY	-0.9%	-13.6%	4.0%	20.0%	-7.7%	-2.1%	-3.0%	7.7%	-0.3%	-30.7%
		% of segment total	95.7%	101.2%	106.5%	95.3%	87.6%	88.1%	76.5%	73.5%	75.6%	60.8%
	Cons.- Parent difference		34	-8	-41	40	106	99	217	275	244	339
		YoY	-	-	-	-	166.1%	-6.6%	120.2%	26.4%	-11.1%	38.7%
		% of segment total	4.3%	-	-	4.7%	12.4%	11.9%	23.5%	26.5%	24.4%	39.2%
Number of employees			194	219	241	256	262	257	275	283	297	297
	Parent		190	190	182	191	186	186	196	198	209	212
	Cons.- Parent difference		4	29	59	65	76	71	79	85	88	85

Source: Shared Research based on company data
Figures may differ from company materials due to differences in rounding methods.

Breakdown of parent sales by service

Sales by service at the parent can be divided into LCL exports, FCL exports, LCL imports, and FCL imports. In FY12/20, exports accounted for 69.8% of parent sales (versus 71.2% in FY12/19) and imports 30.2% (versus 28.8% in FY12/19). In terms of past business results, LCL exports have accounted for a progressively lower percentage of sales while the sales shares of other exports (transport of large cargo and other special freight, etc.) and imports have been rising.

Parent sales and handling volumes by service line

Handling volume by service				FY12/13	FY12/14	FY12/15	FY12/16	FY12/17	FY12/18	FY12/19	FY12/20
('000 tons)				Act.	Act.	Act.	Act.	Act.	Act.	Act.	Act.
Total handling volume				1,590	1,603	1,652	1,622	1,676	1,762	1,764	1,579
	YoY			6.2%	0.8%	3.1%	-1.8%	3.3%	5.1%	0.1%	-10.5%
	Export			1,005	1,052	1,127	1,107	1,158	1,252	1,267	1,082
		YoY		4.2%	4.7%	7.1%	-1.8%	4.6%	8.1%	1.2%	-14.6%
		LCL export		449	457	470	462	467	481	448	390
			YoY	-6.5%	2.0%	2.8%	-1.8%	1.1%	3.0%	-6.9%	-12.9%
		FCL export		475	501	562	535	560	634	611	534
			YoY	13.8%	5.3%	12.3%	-4.8%	4.7%	13.2%	-3.6%	-12.6%
		Other export		81	94	94	110	131	137	209	158
			YoY	20.8%	15.8%	0.7%	16.5%	19.2%	4.6%	52.6%	-24.4%
	Import			585	551	538	516	517	510	497	496
		YoY		9.8%	-5.8%	-2.5%	-4.1%	0.3%	-1.4%	-2.5%	-0.2%
		LCD import		181	195	206	192	196	206	200	183
			YoY	-6.1%	7.7%	5.4%	-6.9%	2.3%	5.1%	-2.9%	-8.5%
		FCL import		359	306	287	281	272	251	248	256
			YoY	28.4%	-15.0%	-6.3%	-1.8%	-3.3%	-7.7%	-1.2%	3.2%
		Other import		44	51	46	43	49	54	48	57
			YoY	-25.8%	14.0%	-9.9%	-6.6%	15.3%	10.2%	-11.1%	18.8%
Sales by service: parent				FY12/13	FY12/14	FY12/15	FY12/16	FY12/17	FY12/18	FY12/19	FY12/20
(JPYmn)				Act.	Act.	Act.	Act.	Act.	Act.	Act.	Act.
Sales				9,494	10,156	10,911	9,938	10,337	10,930	10,666	10,202
	YoY			5.2%	7.0%	7.4%	-8.9%	4.0%	5.7%	-2.4%	-4.3%
	Export			6,918	7,388	8,007	7,089	7,335	7,842	7,594	7,121
		YoY		-	6.8%	8.4%	-11.5%	3.5%	6.9%	-3.2%	-6.2%
		% of total		72.9%	72.7%	73.4%	71.3%	71.0%	71.7%	71.2%	69.8%
		LCL export		4,625	4,708	4,946	4,450	4,483	4,596	4,482	4,080
			YoY	-	1.8%	5.1%	-10.0%	0.7%	2.5%	-2.5%	-9.0%
			% of total	48.7%	46.4%	45.3%	44.8%	43.4%	42.0%	42.0%	40.0%
		FCL export		1,703	1,984	2,285	1,855	1,901	2,191	2,184	1,956
			YoY	-	16.5%	15.1%	-18.8%	2.5%	15.2%	-0.3%	-10.5%
			% of total	17.9%	19.5%	20.9%	18.7%	18.4%	20.0%	20.5%	19.2%
		Other export		569	696	943	784	951	1,056	928	1,085
			YoY	-	22.3%	35.6%	-16.9%	21.3%	11.0%	-12.1%	16.9%
			% of total	6.0%	6.9%	8.6%	7.9%	9.2%	9.7%	8.7%	10.6%
	Import			2,577	2,768	2,903	2,849	3,001	3,089	3,071	3,081
		YoY		-	7.4%	4.9%	-1.9%	5.4%	2.9%	-0.6%	0.3%
		% of total		27.1%	27.3%	26.6%	28.7%	29.0%	28.3%	28.8%	30.2%
		LCD import		1,334	1,491	1,675	1,561	1,603	1,695	1,736	1,671
			YoY	-	11.8%	12.4%	-6.8%	2.7%	5.7%	2.4%	-3.8%
			% of total	14.1%	14.7%	15.4%	15.7%	15.5%	15.5%	16.3%	16.4%
		FCL import		903	900	956	932	1,004	954	910	964
			YoY	-	-0.3%	6.2%	-2.6%	7.8%	-5.0%	-4.6%	6.0%
			% of total	9.5%	8.9%	8.8%	9.4%	9.7%	8.7%	8.5%	9.5%
		Other import		360	377	272	356	394	440	425	446
			YoY	-	4.7%	-27.9%	30.8%	10.6%	11.7%	-3.2%	4.8%
			% of total	3.8%	3.7%	2.5%	3.6%	3.8%	4.0%	4.0%	4.4%

Source: Shared Research based on company data
Figures in table may vary from company materials due to differences in rounding methods.

Service lines	Overview
LCL exports	The company’s LCL export service handles small-lot shipments for export. These shipments are not enough to fill a standard marine shipping container on their own, so NTL consolidates shipments from multiple clients going to the same destination into a single container.
FCL exports	The company’s FCL export service handles marine shipping for clients that can fill at least one shipping container.
LCL imports	Under its LCL import service, the company provides a seamless service package for small-lot importers, receiving marine containers packed with multiple small-lot shipments that have been consolidated for shipment to Japan by one of its overseas subsidiaries or an agent acting on its behalf, unloading the container in a warehouse at the receiving port, sorting the freight into the lots designated for individual customers, handling customs clearance, and providing the transportation of the individual shipments to their final destination.
FCL imports	Under its FCL import service, the company provides a seamless service package for importers dealing in container-sized shipments, arranging transportation on both ends via one of its overseas subsidiaries or an agent acting on its behalf, receiving the container at the destination port, handling customs clearance, and delivering the container to its final destination.

NTL is a non-vessel operating common carrier (NVOCC) authorized to arrange marine freight shipments from port to port. As an NVOCC, NTL does not own any ships, but operates as a marine transportation company that books space on ships and handles shipments for client companies. NTL says it is looking to expand its business as a full-line freight forwarder with its primary focus on LTL export/import services and FCL shipping services. (A freight forwarder serves as an intermediary, receiving the freight from the shipper then providing door-to-door service by handling all the transportation arrangements with companies that will actually transport the freight.)

Sales contributions from imports have been rising. However, according to the company, import operations require specific knowledge not only about ocean freight transport and customs clearance but also about imported goods and related industries. In response, in February 2013, NTL established a subsidiary, Flying Fish Inc., which specializes in international multimodal transport operations.

Domestic subsidiaries

UCI Air Freight Japan
International air and ocean freight transport; acquired in April 2012 to enter the air freight forwarding business. In FY12/20, sales were JPY2.8bn (+4.6% YoY) and recurring profit was JPY153mn (+10.8% YoY).

Flying Fish
International multimodal transport operations; Flying Fish provides six services: international marine transport, international air transport, import and export custom clearance, warehouse storage, temperature-controlled shipping, and special cargo transport. It was established in February 2013 and inherited the international multimodal transport operations business from Flying Fish Services in June 2013. Flying Fish is characterized by its planning and implementation of logistics as a 3PL service provider and its business of importing food products from Europe, which is one of its core businesses. In FY12/20, sales were JPY3.0bn (+16.7% YoY) and recurring profit was JPY190mn (+57.7% YoY).

Overseas segment

The Overseas segment comprises subsidiaries in China (a local subsidiary of the parent, and a local subsidiary of Flying Fish), South Korea, Hong Kong, Singapore, Thailand, Indonesia, India, Myanmar, and North America.

Overseas segment: sales and profit

		FY12/11	FY12/12	FY12/13	FY12/14	FY12/15	FY12/16	FY12/17	FY12/18	FY12/19	FY12/20
(JPYmn)		Act.	Act.	Act.	Act.	Act.	Act.	Act.	Act.	Act.	Act.
Sales		3,410	3,607	4,968	5,801	7,312	6,343	7,151	7,624	7,540	6,861
	YoY	37.0%	5.8%	37.7%	16.8%	26.0%	-13.2%	12.7%	6.6%	-1.1%	-9.0%
	% of consolidated sales	27.2%	26.9%	29.6%	28.9%	32.3%	31.8%	32.9%	32.8%	33.0%	30.9%
Operating profit		342	331	572	346	754	507	602	606	590	580
	YoY	16.9%	-3.4%	72.8%	-39.5%	117.8%	-32.7%	18.6%	0.8%	-2.6%	-1.8%
	Operating profit margin	10.0%	9.2%	11.5%	6.0%	10.3%	8.0%	8.4%	8.0%	7.8%	8.4%
	% of consolidated operating profit	30.5%	34.1%	47.5%	29.0%	47.0%	38.0%	39.4%	36.9%	37.1%	40.1%
Number of employees		235	250	270	287	302	308	328	340	351	347

Source: Shared Research based on company data
Note: Figures may differ from company materials due to differences in rounding methods.
Note: Ratios to operating profit are calculated before adjustments are deducted.

In FY12/20, JPY2.4bn of overseas sales were generated in China, JPY2.3bn in South Korea, JPY1.5bn in ASEAN territories (the nations of Singapore, Thailand, and Indonesia), JPY992mn in the US, and JPY644mn in India.

Functions of overseas subsidiaries

Country	Company Name	Established	Primary business areas
Singapore	NTL NAIGAI TRANS LINE (S) PTE LTD	Apr. 1997	LCL import/export, FCL, warehousing, transshipment
Thailand	NAIGAI TRANS LINE (THAILAND) CO., LTD.	Jun. 2000	LCL import/export, FCL, equipment import (two locations)
Indonesia	PT. NTL NAIGAI TRANS LINE INDONESIA	Apr. 2001	LCL import/export, FCL, equipment import
China (Shanghai)	SHANGHAI NTL-LOGISTICS LIMITED	Jan. 2003	LCL import/export, FCL, equipment import (four locations)
China (Hong Kong)	NTL-LOGISTICS (HK) LIMITED	Feb. 2006	LCL import/export, FCL, transshipment in the South China region
China (Shenzhen)	NTL-LOGISTICS (SHENZHEN) LIMITED	Nov. 2015	LCL import/export, FCL (two locations)
US	NTL NAIGAI TRANS LINE (USA) INC.	Aug. 2003	LCL import/export, FCL, shipment through domestic customs (two locations)
South Korea	NTL NAIGAI TRANS LINE (KOREA) CO., LTD.	Sep. 2003	LCL import/export, FCL, cargo transshipment (two locations)
	Naigai-Eunsan Logistics Co., Ltd	Jun. 2015	Warehousing, cargo transport, cargo packaging, multiple transport intermediary
	Naigai Busan Logistics Center Co., Ltd.	March 2019	Warehousing, cargo transport, cargo packaging, multimodal transport intermediary
India	NTL-LOGISTICS (INDIA) PRIVATE LIMITED	Jan. 2011	Import/export, LCL, FCL, domestic shipping, warehousing (five locations)
Myanmar	NTL NAIGAI TRANS LINE (MYANMAR) CO., LTD.	Aug. 2017	Import/export, LCL, FCL, domestic shipping

Source: Shared Research based on company data
NTL-Shenzhen is a wholly owned subsidiary of NTL Logistics (HK)

Nine of the company’s overseas subsidiaries are tasked with import agency duties for freight, primarily LCL and FCL cargo, that is shipped from Group companies to overseas ports, as well as freight that is being shipped from overseas to either Japan or other overseas locations.

The Indian subsidiary acts as a comprehensive freight forwarder for air, land, and ocean freight, including warehousing for the freight. Naigai-Eunsan Logistics Co., Ltd in Korea provides services including warehousing and cargo transport.

Profitability snapshot, financial ratios

For the company’s margins, a growing economy means higher container freight-in prices and thus lower GPMs, while a shrinking economy means lower container freight-in prices, resulting in higher GPMs. In contrast, for operating profit, a growing economy usually contributes to higher sales and gross profit, which absorb fixed costs and accordingly improve OPMs, despite lower GPM.

Profit margins		FY12/11	FY12/12	FY12/13	FY12/14	FY12/15	FY12/16	FY12/17	FY12/18	FY12/19	FY12/20
(JPYmn)		Cons.	Cons.	Cons.	Cons.	Cons.	Cons.	Cons.	Cons.	Cons.	Cons.
	Gross profit	3,981	4,115	4,843	5,663	6,185	5,745	5,990	6,296	6,324	5,997
	Gross profit margin	31.8%	30.7%	28.8%	28.2%	27.3%	28.8%	27.6%	27.1%	27.7%	27.0%
	Operating profit	1,079	908	1,142	1,145	1,578	1,309	1,500	1,617	1,528	1,411
	Operating profit margin	8.6%	6.8%	6.8%	5.7%	7.0%	6.6%	6.9%	7.0%	6.7%	6.4%
	EBITDA	1,212	1,059	1,324	1,337	1,749	1,489	1,658	1,781	1,825	1,711
	EBITDA margin	9.7%	7.9%	7.9%	6.7%	7.7%	7.5%	7.6%	7.7%	8.0%	7.7%
	Net margin	4.5%	3.4%	4.3%	1.1%	4.4%	2.2%	5.5%	4.9%	4.8%	3.8%
Financial ratios
	ROA (RP-based)	17.1%	14.5%	15.0%	13.3%	17.4%	14.6%	16.3%	15.7%	13.8%	11.9%
	ROE	11.7%	8.7%	12.0%	3.2%	15.1%	6.8%	17.1%	14.7%	13.0%	9.5%
	Total asset turnover	2.0	2.0	2.1	2.2	2.5	2.2	2.2	2.2	2.0	1.8
	Working capital (JPYmn)	-57	93	509	423	571	691	526	591	394	604
	Current ratio	444.0%	405.1%	302.9%	380.8%	397.3%	403.5%	429.6%	419.9%	427.8%	399.4%
	Quick ratio	431.7%	389.9%	282.7%	351.0%	370.7%	375.8%	393.5%	389.0%	395.9%	371.2%
	OCF / Current liabilities	0.67	0.59	0.27	0.50	0.60	0.57	0.80	0.81	0.83	0.55
	Net debt / Equity	-68.8%	-60.3%	-52.8%	-67.2%	-69.2%	-57.9%	-64.0%	-66.7%	-66.6%	-69.0%
	OCF / Total liabilities	0.55	0.45	0.18	0.44	0.51	0.37	0.63	0.62	0.61	0.41
	Cash conversion cycle (days)	-10.5	-7.8	-2.0	0.3	1.5	4.1	3.7	2.5	1.0	1.0
	Change in working capital	46	150	416	-87	149	120	-165	65	-197	209

Source: Shared Research based on company data
Note: Figures may differ from company materials due to differences in rounding methods.

Strengths and weaknesses

Strengths

High-quality services: The forwarder industry is essentially a service business, and therefore service quality leads to differentiation. Such factors as frequent shipping schedules, reliability, efficient documentation, and appropriate trouble follow-ups underpin service quality. Handling many clients and cargos put the company in the position to ship more frequently to more ports of destination than its competitors. Frequent shipping schedules enable NTL to attract more clients and offer less-than-container-load (LCL) services more frequently.

Sound balance sheet: As of end-FY12/20, NTL’s net assets were JPY9.9bn (versus JPY9.5bn at end-FY12/19). The company maintains a high level of cash and deposits, which accounted for 69.0% of net assets, or JPY6.8bn (versus JPY6.3bn, or 66.6% of net assets as of end-FY12/19). Additionally, the company has no interest-bearing debt. Such a strong financial position will be an advantage for NTL in future investments and acquisitions, while showing the company’s immunity from external conditions.

Drive for growth: Performance from the company’s core LCL exporting service is in the midst of a long-term decline, but Shared Research believes that the company has fostered a corporate culture that encourages employees to maintain high levels of vitality as they aim to cement the company’s status as a global corporation.

Weaknesses

Low growth potential in Japan: NTL’s growth potential is limited in Japan, partly due to the Japanese economy. Japan’s exports market, where NTL has been traditionally strong, has been hollowing out as manufacturers (the company’s customers) increasingly move production overseas. However, since 2010 the company has been planning to transition toward the international freight forwarder business, with LCL exports as a base. It has therefore progressed with the expansion of its international base with the acquisition of international air freight company UCI Air Freight Japan, and the establishment of international multimodal transport services company Flying Fish Inc.

Executives step in after acquisitions: NTL’s growth largely depends on acquisitions. But changing management at a newly acquired company requires executives of considerable skill—particularly due to differing management styles between companies in Japan and overseas. NTL possesses a limited number of executives capable of managing overseas.

Industry lacking skilled workers: The company is faced with a lack of skilled workers. The shipping industry is a conservative one, and given that staff turnover is low, finding qualified and skilled workers is difficult. According to the Survey on Employment Trends released by the Ministry of Health, Labour and Welfare, in 2019, the average accession rate for all industries was 16.7% (15.4% in 2018) and the separation rate was 15.6% (14.6% in 2018). In contrast, in the shipping industry the accession rate was only 14.3% (11.7% in 2018) and the separation rate was 12.5% (10.5% in 2018). (The accession rate: the number of new employees divided by the number of full-time employees as of January 1 times 100. The separation rate is the number of departing employees divided by the number of full-time employees as of January 1 times 100.)

Market and value chain

Market overview

Exports and the forex rate

	2011		2012		2013		2014		2015		2016		2017		2018		2019		2020
	1H	2H	1H	2H	1H	2H	1H	2H	1H	2H	1H	2H	1H	2H	1H	2H	1H	2H	1H	2H
Marine container export value (JPYtn)	2.4	2.5	2.5	2.4	2.6	2.7	2.7	2.8	2.8	2.8	2.5	2.6	2.7	2.9	2.9	3.0	2.8	2.8	2.4	2.7
Foreign exchange rate (USD/JPY)	81.7	77.2	79.7	80.6	95.9	100.0	102.1	111.2	120.7	121.5	111.8	105.9	112.3	112.0	108.6	112.2	110.0	108.0	108.2	105.3
Export volume index	104.6	109.8	104.3	99.7	98.8	102.1	98.6	103.5	99.9	100.1	97.8	103.2	102.8	108.9	107.8	107.5	101.8	104.3	86.2	95.6

Source: Shared Research based on Ministry of Finance, “Foreign Trade Statistics”
Note: All figures are the average for each period.
Note: The export volume index is indexed to 100 starting in 2015.

The company’s earnings are influenced by the value of exports shipped in marine containers (i.e., containerized exports), trade data, and the yen–dollar exchange rate. The export volume index remained flat from 2H 2012 to 1H 2016. During this time, the value of containerized exports was largely affected by the forex rate. Since 2H 2016, amid the yen remaining high, the value of containerized export has shown a rising trend. We can conclude that the increase in export volume has been the primary driver of the recent upturn in the value of containerized exports.

The marine container export value and export volume index increased over the period spanning from the second half of 2016 to the second half of 2017 before subsequently stabilizing. In the first half of 2020, these values declined due to the COVID-19 pandemic but began recovering during the second half.

Export shipments

According to the Trade Statistics of Japan released by the Ministry of Finance, Japan’s exports totaled JPY68.4tn in 2020 (-11.1% YoY). Exports included automobiles (14.0% of total exports in 2020), electronics components such as semiconductors (6.0%), auto parts (4.3%), and steel (3.8%).

Total exports

Source: Shared Research based on the Trade Statics of Japan by the Ministry of Finance

Total exports, and major export items

(JPYbn)			2008	2009	2010	2011	2012	2013	2014	2015	2016	2017	2018	2019	2020
Total exports			81,018	54,171	67,400	65,546	63,748	69,774	73,093	75,614	70,036	78,286	81,479	76,932	68,400
	YoY		-3.5%	-33.1%	24.4%	-2.7%	-2.7%	9.5%	4.8%	3.4%	-7.4%	11.8%	4.1%	-5.6%	-11.1%
	Automobiles		13,736	6,693	9,174	8,204	9,225	10,413	10,919	12,046	11,333	11,826	12,308	11,971	9,580
		YoY	-4.1%	-51.3%	37.1%	-10.6%	12.4%	12.9%	4.9%	10.3%	-5.9%	4.3%	4.1%	-2.7%	-20.0%
		% of total	17.0%	12.4%	13.6%	12.5%	14.5%	14.9%	14.9%	15.9%	16.2%	15.1%	15.1%	15.6%	14.0%
	Semiconductors and other elec. components		4,625	3,419	4,153	3,565	3,339	3,553	3,691	3,915	3,607	4,022	4,150	4,006	4,077
		YoY	-11.8%	-26.1%	21.5%	-14.2%	-6.3%	6.4%	3.9%	6.1%	-7.8%	11.5%	3.2%	-3.5%	1.8%
		% of total	5.7%	6.3%	6.2%	5.4%	5.2%	5.1%	5.0%	5.2%	5.2%	5.1%	5.1%	5.2%	6.0%
	Automobile parts		3,066	2,309	3,083	2,997	3,205	3,476	3,475	3,483	3,462	3,897	3,991	3,602	2,912
		YoY	-8.6%	-24.7%	33.5%	-2.8%	6.9%	8.5%	0.0%	0.2%	-0.6%	12.6%	2.4%	-9.8%	-19.1%
		% of total	3.8%	4.3%	4.6%	4.6%	5.0%	5.0%	4.8%	4.6%	4.9%	5.0%	4.9%	4.7%	4.3%
	Steel		4,574	2,906	3,675	3,709	3,496	3,793	3,958	3,668	2,843	3,284	3,441	3,074	2,574
		YoY	13.1%	-36.5%	26.5%	0.9%	-5.8%	8.5%	4.4%	-7.3%	-22.5%	15.5%	4.8%	-10.7%	-16.3%
		% of total	5.6%	5.4%	5.5%	5.7%	5.5%	5.4%	5.4%	4.9%	4.1%	4.2%	4.2%	4.0%	3.8%

Source: Shared Research based on the Trade Statics of Japan by the Ministry of Finance

Container ships

Container ships account for approximately 16% of the world seaborne trade (source: materials from Mitsui O.S.K. Lines). NTL thinks less-than-container-load (LCL) exports account for about 2% of all containers shipped from Japan. NTL commands approximately 20% of this LCL export market.

The world seaborne trade has gradually expanded. In the chart below, cargos that NTL handles are likely included in the “Containers” category. It is clear that this category drove world seaborne trade growth in line with global economic expansion.

World seaborne trade

Source: Shared Research based on the Shipbuilder’s Association of Japan

Container freight rates

Container freight rates (USD/TEU)

Source: Shared Research based on materials created by the Planning and Research Department of the Japan Maritime Center

Container rates are generally affected by seasonal factors (i.e., shipping volume fluctuations by season). Usually, container prices tend to be higher from summer to calendar year end because the shipping volume increases as European and US markets near the Christmas selling seasons. As container rates are directly linked to NTL’s costs, the price fluctuations would be a short-term risk factor for NTL.

Despite strong demand for shipping, global container freight rates faced conditions that made it difficult for them to rise in 2014 because of oversupply.

In 2015 and also in 2016, a surplus of shipping capacity together with the introduction of very large ships (intended to improve the operating efficiency of shipping companies) increased the demand-supply gap and pushed container freight rates down.

In 2017, in addition to a steady increase in demand for shipping, major shipping companies overseas sought to improve shipping efficiency by forming and reorganizing alliances. However, due to an increase in supply of shipping capacity with the introduction of very large ships, container freight rates recovered slowly.

In 2018, container freight rates moved up along with the increase in freight traffic on North American routes; for freight going to Europe, volumes were basically flat YoY and container freight rates were down slightly.

In the second half of 2019, container freight rates associated with North American routes fell due to a decline in shipping volume. Meanwhile, rates associated with European routes rose gradually thanks to strong shipping volumes.

In 2020, freight movement fell YoY during the first half of the year due to the spread of the COVID-19 pandemic, and container freight rates were stable. In the second half, freight movement began to increase and container freight rates rose substantially. In December 2020, container freight rates for shipping over North American routes rose 84.4% YoY while container freight rates for shipping over European routes rose 95.7% YoY.

Barriers to Entry

As forwarders do not own ships, barriers to entry are low. NTL is the industry leader with a roughly 20% share in Japan’s LCL shipping market. The 20% share is not particularly high, meaning the market has many players. Considering most of these players are running small businesses, again, barriers to entry are low.

Competition

As mentioned above, NTL is the leader in the domestic LCL shipping market with a 20% share. Main competitors in the market are Seino Logix Co., Ltd. (a wholly owned subsidiary of Seino Holdings [TSE1: 9076]), Transcontainer Ltd. (unlisted), and other large forwarders. The company also competes with overseas and small and medium-sized forwarders that compete on price.

Although not competing head to head, NTL is often compared with AIT Corporation (TSE1: 9381), which has roughly the same scale of earnings with FY02/20 operating revenue of JPY45.0bn (+62.0% YoY) and an operating profit of JPY1.6bn (+2.1% YoY)*. However, AIT’s focus is on China, mainly importing garments and other goods.
*AIT corporation added Nisshin Transportation Co., Ltd. to its group as a consolidated subsidiary in March 2019. Non-consolidated results for the AIT Corporation in FY02/20 were operating revenue of JPY22.0bn (-0.9% YoY) and operating profit of JPY849mn (-7.3% YoY).

In contrast, NTL aims to grow into an international comprehensive freight forwarder that can compete with Kintetsu World Express, Inc. (TSE1: 9375) and Yusen Logistics Co., Ltd. (a wholly owned subsidiary of NYK Line [TSE1: 9101]).