Japanese shipping giant K Line has taken the unusual step of halting dividends despite a big windfall from its boxship spin-off Ocean Network Express (ONE).
The company has instead decided to book a ¥15.56bn ($143m) impairment in the fiscal year ending 31 March for charter contracts to its daughter company, formed with partners NYK Line and Mitsui OSK Line.
This is to account for the difference between the rates at which it has chartered out its vessels to ONE and what it could have earned in current hot markets.
Tokyo-listed K Line called the figure a "rational" estimate of the "back-spread".
ONE's "significant" improvement in the financial year boosted K Line's bottom line by ¥118bn.
Profit soars
The group posted a net profit of ¥109bn as a result, against ¥5.3bn the year before.
K Line said its task is to maximise returns to shareholders by implementing a stable dividend.
But the company added it had to take into account future business and financial conditions, and investment for sustainable growth.
"Based on this policy, it is with sincere regret that the company announces it has decided to pay no dividend," K Line said.
"With sincerest apologies to all shareholders, the company further strives to improve the financial positions as well as to strengthen the capital base with a view to early resuming dividend payment."
Revenue fell to ¥625bn in the fiscal year, from ¥735bn a year earlier.
Bulkers turn to loss
Bulkers went from a ¥4.1bn profit in the previous year to a ¥9.1bn loss, due to sluggish first-half markets.
The energy division, including tankers and LPG carriers, saw profit eroded from ¥9.9bn to ¥1.1bn.
K Line had ¥130bn of total cash and cash equivalents at 31 March.
In March, the group had added another ¥25bn to its annual profit forecast.
The Tokyo-listed company said net earnings for the year to 31 March were expected to be ¥90bn.
And in April the group said it would book a gain of $116m from selling a US logistics subsidiary.
