One Line in the Non-Operating Section

Operating income at Kawasaki Kisen Kaisha fell 18.2 per cent in the year to 31 March 2026. Ordinary income fell 64.6 per cent. The same twelve months, the same consolidated accounts — with one company added to the scope of consolidation and one removed, and with the earnings release stating that it is not subject to audit by a certified public accountant or an audit corporation; the securities report filed in June carries the audited statements. Almost all of the distance between the two percentages is one line: equity in earnings of affiliates, which the release reports inside non-operating income and which came in ¥179,284 million ($1,095 million) below the prior year. Operating income never sees it. The results presentation attributes the fall in ordinary income to the container shipping business.

The headline figures: revenue ¥1,018,364 million ($6,217 million), down 2.8 per cent; operating income ¥84,164 million ($514 million); ordinary income ¥109,100 million ($666 million); profit attributable to owners of the parent ¥132,986 million ($812 million), which is larger than ordinary income because special gains of ¥25,679 million ($156.8 million) and a net credit in income taxes sit below it. Equity in earnings of affiliates was ¥22,768 million ($139 million), against ¥202,052 million ($1,234 million) the year before.

That is the whole year in four subtractions. Ordinary income fell ¥198,989 million ($1,215 million), from ¥308,089 million ($1,881 million). Equity in earnings accounts for ¥179,284 million ($1,095 million) of the fall, or 90.1 per cent (179,284 ÷ 198,989). Operating income accounts for ¥18,691 million ($114 million). The two sum to ¥197,975 million ($1,209 million), leaving ¥1,014 million ($6.19 million) as the net movement of everything else below the operating line. The results presentation gives variances by stage of profit and by segment rather than a bridge; the subtraction is mine.

The equity line itself splits by segment, and the split is one-sided. Product Logistics went from ¥201,967 million ($1,233 million) to ¥16,103 million ($98.3 million), a fall of ¥185,864 million ($1,135 million). Energy Resource went the other way, from minus ¥218 million ($1.33 million) to ¥6,221 million ($38.0 million), a swing of ¥6,439 million ($39.3 million) that the company attributes to a prior-year impairment dropping out and a tax-effect review, both at equity-method companies. Dry Bulk added ¥71 million and Other ¥70 million, $0.43 million each at this rate. Minus 185,864 plus 6,439 plus 71 plus 70 is minus 179,284, which ties.

Where that line lands matters. Equity in earnings is booked in non-operating income, so operating income is untouched by it; but K Line defines segment profit on an ordinary-income basis, so equity earnings flow straight into the segments. Product Logistics reported segment profit of ¥90,877 million ($555 million) on external revenue of ¥616,498 million ($3,764 million). The four segments' external revenue adds up to less than the whole: 292,783 plus 100,666 plus 616,498 plus 8,415 is 1,018,362, or ¥1,018,362 million ($6,217 million), two million yen short of the ¥1,018,364 million ($6,217 million) reported as consolidated revenue. The statements are truncated to whole millions, and at this exchange rate the two dollar figures are the same number. Prior-year segment figures were restated this year for a change in how certain non-operating items are allocated.

The affiliate in question is Ocean Network Express. K Line's table of related companies shows a 31.0 per cent voting interest in Ocean Network Express Holdings, a Tokyo company with stated capital of ¥50 million ($305,000), and a dash in the ownership column for OCEAN NETWORK EXPRESS PTE. LTD. of Singapore, stated capital US$3,000,000,000, which the holding company owns entirely. NYK's filing shows 38.00 per cent of the same holding company and 0.00 per cent of the operating company; MOL's shows 31.00 per cent. Thirty-eight plus thirty-one plus thirty-one is one hundred.

The scale is the thing. In the summary financial information K Line publishes for the operating company, ONE's revenue for the year was ¥2,496,855 million. Divide by K Line's consolidated revenue of ¥1,018,364 million and you get 2.45. The affiliate is two and a half times the size of its shareholder by revenue, and none of that revenue passes through the shareholder's revenue line, because equity earnings arrive as profit only, on one row, in the non-operating section — which, as above, is also why they reach the segments. The yen figure is itself a translation: ONE keeps its accounts in dollars, the note gives no rate, and converting the translated yen back at ¥163.8 gives $15,243 million, against the US$16,620 million ONE publishes for itself.

Container revenue does appear in one place: the results presentation for the year, where the container line inside Product Logistics carries revenue of ¥66.8 billion ($408 million) and ordinary profit of ¥24.0 billion ($146.5 million). Dividing 66.8 by 1,018.364 gives 6.6 per cent of consolidated revenue; the presentation's own text states the share as 0.7 per cent. The profit share is 22.0 per cent of consolidated ordinary income (24.0 ÷ 109.1). The prior year is the same shape, further out: ¥68.5 billion ($418 million) of revenue and ¥206.0 billion ($1,258 million) of ordinary profit, the latter being 66.9 per cent of that year's ordinary income of ¥308.0 billion ($1,880 million) as the presentation states it (206.0 ÷ 308.0), a share the presentation rounds to 67 per cent.

Three adjacent numbers describe roughly the same territory on three different bases — the ONE equity pick-up, the segment's equity earnings, container ordinary profit — and the documents state each on its own. The MD&A puts ONE's contribution to equity earnings at ¥15.0 billion ($91.6 million). The segment note puts Product Logistics equity earnings at ¥16,103 million ($98.3 million) and does not break the figure down by company, so the ONE portion cannot be isolated from it. The presentation puts container ordinary profit at ¥24.0 billion ($146.5 million), which is a segment-stage profit rather than an equity pick-up. Within Product Logistics the presentation gives car carriers ¥51.2 billion ($313 million) and containers ¥24.0 billion, leaving about ¥15.6 billion ($95 million) — 908 minus 512 minus 240, in the same hundred-million units the presentation uses — for coastal, near-sea and logistics, a residual it does not itemise.

On the balance sheet the proportions are starker than in the income statement. Investments in equity-method companies were ¥1,109,649 million ($6,774 million), of which Product Logistics held ¥1,032,540 million ($6,304 million). Total assets were ¥2,343,989 million ($14,310 million). So equity-method investments are 47.3 per cent of assets (1,109,649 ÷ 2,343,989) and the Product Logistics portion alone is 44.1 per cent. There is no separate line for shares of affiliates; they sit inside investment securities of ¥1,201,899 million ($7,338 million).

The carrying amount moved down even though the equity line was a positive ¥22,768 million ($139 million) — itself down from ¥202,052 million ($1,234 million) a year earlier. Investments in equity-method companies fell from ¥1,141,831 million ($6,971 million) to ¥1,109,649 million, a decrease of ¥32,182 million ($196.5 million). The segment note gives the opening and closing amounts; a roll-forward between them is not part of that note, so dividends, translation and the seven companies added to the equity-method scope this year cannot be separated from these filings.

Cash behaves differently from profit here, in the direction the equity method requires. Operating cash flow was ¥264,772 million ($1,616 million) against ordinary income of ¥109,100 million. The cash flow statement deducts the ¥22,768 million of equity earnings as a non-cash item, then shows interest and dividends received of ¥143,853 million ($878 million); the income statement recognises interest of ¥6,216 million ($38.0 million) and dividends of ¥3,630 million ($22.2 million), ¥9,846 million ($60.1 million) in total. The difference is ¥134,007 million ($818 million). The cash flow statement reports interest and dividends received on a single line and does not break out the dividend component, so the gap cannot be attributed to any particular payer from these documents. K Line's prior-year filing flagged ONE dividends of about ¥125.3 billion ($765 million) as a subsequent event falling into this year.

Now the part that requires reading three filings at once. All three shareholders publish summary financial information for the same operating company, for the same year, in yen. K Line: revenue ¥2,496,855 million, pre-tax profit ¥96,991 million ($592 million), profit ¥68,080 million ($416 million), net assets ¥3,415,814 million ($20,854 million). NYK: revenue ¥2,496,855 million, pre-tax ¥46,818 million ($286 million), profit ¥17,879 million ($109 million), net assets ¥3,285,737 million ($20,059 million). MOL: revenue ¥2,656,841 million ($16,220 million), pre-tax ¥49,825 million ($304 million), profit ¥19,027 million ($116 million), net assets ¥3,285,737 million ($20,059 million).

Two of the three pairs agree on something: K Line and NYK on revenue, NYK and MOL on net assets. K Line and MOL agree on nothing in the list, and did not the year before either — K Line's prior-year summary shows revenue ¥2,937,390 million ($17,933 million) and net assets ¥3,557,593 million ($21,719 million), MOL's ¥2,875,606 million ($17,556 million) and ¥3,478,123 million ($21,234 million). ONE's own release is in dollars: revenue US$16,620 million, profit US$338 million, EBIT US$310 million, with a loss of US$88 million in the third quarter. Dividing K Line's translated revenue by ONE's gives ¥150.23 = US$1 (2,496,855 ÷ 16,620), which is exactly the average rate K Line states for the year; the same division on the prior year gives ¥152.73, again its stated average. The same division on MOL's figures gives ¥159.86 this year and ¥149.51 last. None of the notes states a translation rate or method, so whether the difference is one of basis or of period cannot be determined from them.

Multiplying the summaries by the published ownership percentages does not reproduce the pick-ups either, and the percentages are not held against the company being summarised: the voting interests sit in the holding company, the summary financial information is for the operating company it owns entirely. NYK's 38 per cent of ¥17,879 million is ¥6,794 million ($41.5 million), against the ¥19.0 billion ($116 million) its MD&A states for ONE. MOL's report describes ONE's year in words — a decline on falling freight rates — without an amount; its container segment note shows equity earnings of ¥15,588 million ($95.2 million) for the segment as a whole, and 31 per cent of ¥19,027 million is ¥5,898 million ($36.0 million). K Line's MD&A states ¥15.0 billion ($91.6 million) for ONE and its notes carry no company-level breakdown. The reconciliations are not part of these notes, and the differences cannot be decomposed from them.

Volumes live in the affiliate's document rather than the shareholder's. K Line's filing states that the group does not conduct production or take orders and therefore shows no production or order scale by segment, giving external revenue by segment instead; there are no TEU, tonnage or fleet-utilisation tables in it. ONE published liftings of 12,927 thousand TEU, up 1 per cent; utilisation of 92 per cent on Asia to North America eastbound against 100 per cent the prior year, and 89 per cent against 95 per cent on Asia to Europe westbound; and its own freight index, on which those two trades read 126 against 160 and 154 against 230.

From those two figures one can derive what the shareholders' documents do not carry: US$16,620 million ÷ 12,927 thousand TEU is US$1,286 per TEU, against US$1,508 the prior year, down 14.8 per cent. It is a derived number and a rough one — the numerator is all revenue, not only freight, and the denominator is all trades — but it is the only place volume and price meet. Bunker consumption rose 5 per cent while liftings rose 1 per cent, with Cape of Good Hope routings continuing.

The risk chapter is organised differently from the income statement. It lists seven risks — people and human rights, legal and compliance, vessel operations, changes in economic activity, information systems, disasters, climate change — with impact graded as very large or large rather than in yen, and folds market rates, foreign exchange, fuel and geopolitics into the fourth. It is written by category rather than by counterparty; the name Ocean Network Express does not appear anywhere in the chapter. ONE is accounted for elsewhere: in the related-companies table, in the equity line of the consolidated income statement, in the segment note, and in the MD&A. Separately, the executive compensation formula uses ordinary income excluding the container business as its performance coefficient.

Forward, both documents state assumptions about the same water. K Line guides to consolidated ordinary income of ¥100,000 million ($611 million), with the container line at ¥26.0 billion ($158.7 million) against this year's ¥24.0 billion ($146.5 million), assuming ¥150.82 to the dollar, bunker at US$697 per tonne against US$528 realised, the Strait of Hormuz closed until end-June, and no Suez transits for the year. ONE guides to revenue of US$18,500 million, EBITDA US$3,000 million, EBIT US$500 million and profit US$300 million, with a first-half loss of US$50 million, assuming conditions stabilise to pre-conflict levels by summer.

The shape dates from April 2018. Consolidated revenue was ¥1,162,025 million ($7,094 million) in the year to March 2018 and ¥836,731 million ($5,108 million) the following year, a fall of ¥325,294 million ($1,986 million), or 28.0 per cent. The fact book that carries both numbers carries no container revenue line for the earlier year, so how much of the fall is the transfer and how much is market, currency and everything else cannot be separated from it. Ordinary income has exceeded operating income in most years since.

One last set of figures, from the share register and the buyback. The ownership table prints 51.76 per cent for foreign corporations and 0.05 per cent for foreign individuals; from the unit counts behind them, (3,304,721 + 3,424) ÷ 6,384,288 is 51.82 per cent, a figure the table does not print as a sum. A year earlier the same calculation gave 49.46 per cent. In June the company began buying back up to 44,429,000 shares, 6.96 per cent of shares outstanding excluding treasury, for up to ¥130,000,000,000 ($794 million); treasury shares went from 1,114,301 at year-end to 20,718,418 by 2 June. The revenue line and the profit line describe different companies, and both are true.

Yen amounts are converted at ¥163.8 = US$1, the rate on 24 July 2026, applied uniformly to all periods; dollar figures therefore carry no exchange-rate movement of their own. Significant figures follow the yen originals, which are stated in millions in the financial statements and in hundred-millions in the MD&A. ONE's own figures are published in US dollars in its results release and are given here as published.