Mitsui O.S.K. Lines New

Thank you all very much for joining us today. This is Mitsui OSK Lines FI 2022, 3rd Quarter, Business Performance Briefing. Overall, in our third quarter results, we achieved business profit, which is operating profit plus equity in earnings of affiliated companies, of 703.9 billion yen, ordinary profit of 739.2 billion yen. Profit attributable to owners of parent was 723.2 billion yen, posting large profit gains up by almost 240 billion yen over the same quarter a year earlier. Our results for the first nine months, from April to December, already exceeded the last fiscal year's full-year results, which were record high levels, and are expected to set a new record this year. Based on an exchange rate assumption of 130 yen per 1 US dollar, which represents an appreciation of 5 yen from the exchange rate assumption announced last October 31, we revised our ordinary profit forecast downward from 800 billion yen to 785 billion yen. However, we revised our net income forecast upward from 790 billion yen to 800 billion yen due to extraordinary profits, such as profits coming from liquidation of overseas subsidiaries. Accordingly, To maintain the dividend payout ratio of 25% indicated at the start of the fiscal year, we raised our year-end dividend forecast from 250 yen to 260 yen, which combined with the interim dividend of 300 yen already paid, will bring the annual total dividend to 560 yen. I will now provide further details based on the financial results briefing materials. Please look at the outline on pages 3 and 5 of the financial results briefing material slides. Revenue increased 329.4 billion yen year-on-year. Strong performances overall, in areas such as the energy and car carrier businesses, plus the effect of a weaker yen during the period led to higher revenue. Business profit and ordinary profit increased 231 billion yen and 251.5 billion yen year-on-year, respectively. Profits in the three main segments, dry bulk, energy, and product transport, increased due to favorable market conditions and the impact of a weaker yen. Even excluding the profit of the container ships business, which pushes up profit, ordinary profit for the first nine months was more than 170 billion yen, up approximately 100 billion yen year on year. In the third quarter, October to December, while profits from the previously strongly performing container ships business declined year-on-year due to a sharp drop in spot freight rates, other businesses such as energy and car carrier recorded steady growth. I will now explain the financial results by segment. Please look at the explanation on page 4 and the middle of page 5 of the slides. Dry Bulk Business The dry bulk business posted ordinary profit of 52.3 billion yen, an increase of 20.3 billion yen from the same period of the previous year. Looking at each subsegment, while iron ore and coal carriers posted year-on-year profit decline, wood chip carriers and open-hatch bulkers achieved large profit gains. Market rates for iron ore and coal carriers, cape-sized bulkers, continued to lack buoyancy, reflecting a less tight supply-demand balance due to uncertainty in the global economy and improved utilization with the relaxation or removal of COVID-19 quarantine restrictions in some ports. namely in China. Market rates for the small and medium-sized bulkers operated by MOL Drybulk also remained weak, reflecting the less tight supply and demand balance from July and lackluster shipments of grain and coal destined for China from October. On the other hand, market conditions for woodchip carriers and multipurpose vessels that transport cargo such as palm kernel shells, PKS, remained firm. In addition, open-hatch bulkers operated by Equity Method affiliate GearBulk continued to benefit from a recovery in cargo movements of paper pulp, the primary cargo for outbound voyages, and favorable market conditions for inbound general bulk cargoes. Due also to the partial reversal of an allowance for doubtful accounts recorded in the past, in relation to a loan to GearBulk, as a result of improvement in its financial standing, profit in the other subsegment rose year on year. Energy Business The energy business posted ordinary profit of 34.8 billion yen, rising 16.5 billion yen year on year. Higher profit was achieved in all areas, including the tankers, offshore, and liquefied gas subsegments. I will now explain the performance of each subsegment. Tankers and Offshore Business In the very large crude oil carrier market, while conditions remain challenging during the first half due to the oversupply of vessels, conditions improved from the summer due to an increase in ton-miles attributable to the impact of the Russia-Ukraine conflict, higher crude oil demand in preparation for the winter, and releases from the US Strategic Petroleum Reserve. Rates for oil product tankers and chemical tankers also remained at a high level due to the aforementioned increase in ton-miles and a tight supply and demand balance. As a result, the tanker business posted an increase in profit year on year. The offshore business reported higher profit than the level a year earlier in the FPSO business, reflecting commencement of operation in Brazilian offshore project. Liquefied gas business LNG carriers secured stable profits under long-term contracts. The FSRU business posted a year-on-year increase in profit, reflecting additional operation of an existing vessel in Singapore before deployment for operation in a project in Hong Kong. Product transport business The product transport business recorded 567.1 billion yen in equity in earnings of affiliated companies attributable to one and posted ordinary profit of 638.9 billion yen, an increase of 208.8 billion yen year on year. I will now explain the performance of each sub-segment. Container Ships Please refer to page 3 of Once Magenta Colored Materials. As stated in the summary, due to a sharp decline in spot freight rates, once after tax profit for the third quarter, October to December, was down US$2,120 million year on year and down US$2,752 million from the previous quarter, but nonetheless amounted to US$2,768 million. From October to December, transportation demand especially on east-west routes was even weaker than in the previous quarter due to rebound of a noticeable build-up of product inventories in North America from July and August and depressed consumption in Europe due to rising inflation. Easing of congestion at ports around the world, with some exceptions, resulted in an increase in transportation capacity. As the supply and demand balance grew even less tight, spot freight rates fell sharply from the second quarter, causing earnings to decrease considerably year-on-year and quarter-on-quarter. As stated in the middle of the chart in the center of the page, after-tax profit for the first nine months from April to December was $13,788 million, an increase of $2,120 million year-on-year. MOL converted its 31% share of these earnings into yen based on the exchange rate at the end of December and integrated this amount into segment profit as equity in earnings of affiliated companies. Please look at page 4 of the slides for details of changes in liftings, capacity utilization rates and freight index. Please return to page 6 of MOL's blue-colored materials. Car Carriers Despite continued shortages of semiconductors and other automotive parts, transportation volume was higher than the level a year earlier due to efforts to tap into demand for the transportation of used cars. Decile allocation plans were also flexibly reviewed on an ongoing basis, resulting in year-on-year profit growth. Terminal and Logistics Business Container volumes in the terminal business held firm through the summer and beyond. Meanwhile, the logistics business was affected by worsening market conditions. However, thanks to the contribution of profit accumulated in the first half, the terminal and logistics business as a whole posted higher profit than a year earlier. Ferries and Coastal Roro Ships Business In the ferry's business, the number of passengers improved considerably due to the creation of demand through campaigns such as the National Travel Discount Program run by the Japanese government and the capturing of demand to return home for the New Year holidays. The logistics business also remained on the recovery path and the ferries and coastal rural ships business overall achieved improved profitability compared with the same period a year earlier. Real Property Business The real property business secured stable profit, despite a year-on-year profit decline due to a decrease in rental income associated with the reconstruction of some buildings held by Diber Corporation, the core company in the group's real property business. and costs borne as a result of the proportional allocation of head office expenses associated with the establishment of a real property business division this fiscal year. Associated Businesses The cruise ship business achieved improved profitability compared with the same period a year earlier, reflecting an increase in the number of days of operation, despite failing to make a full-scale recovery from the impact of COVID-19 pandemic. The tugboat business posted a year-on-year increase in profit due to a rise in the number of vessels requiring tugboat services entering or leaving port, though the situation varies depending on each group company and port. This concludes the summary of the financial results for Quarter 3. Next, I would like to explain our fiscal year 2022 forecast. Please refer to slide 7 and the outline on slide 9 in the briefing materials. The revenue forecast is unchanged from the previous forecast announced at the end of October, with revenue expected to amount to 1,600 billion yen. Based on the assumption of a stronger yen than assumed previously, the business profit forecast has been revised downward by 20 billion yen to 750 billion yen and the ordinary profit forecast has been revised downward by 15 billion yen to 785 billion yen. The forecast for ordinary profit excluding the container ships business is 194 billion yen, up around 30 billion yen from the previous forecast, despite the impact of exchange rates. The net income forecast has been revised upwards by 10 billion yen due to increased extraordinary profits. such as profits coming from the liquidation of consolidated subsidiaries, and net income is expected to hit a record high of 800 billion yen. Accordingly, we plan to pay a year-end dividend of 60 yen per share, an increase of 10 yen. I will now explain the forecasts for each segment. Please refer to slide 8 and the by-segment section in the middle of slide 9 of the materials. Dry Bulk Business The dry bulk business is expected to post full-year ordinary profit of 58 billion yen, which represents an upward revision of 7 billion yen from the previous forecast. I will now explain performance in each sub-segment. In the iron ore and coal carrier subsegment, a continued lack of buoyancy in Cape size bulk or market rates is forecasted on expectations for slow growth in shipments of iron ore from Brazil due to the rainy season, cyclones in Australia, and decreased shipments due to maintenance of loading ports. With no prospect of the high charter rates seen in the previous fiscal year from January onwards, we anticipate year-on-year profit decline on a full year basis. Rates for the small and medium-sized bulkers operated by MOL Drybulk are expected to remain weak especially given that China's economic recovery from the COVID-19 pandemic is likely to be slow and cargo movements are also still lackluster. However, for woodchip carriers and multipurpose vessels, cargo movements are expected to remain robust. Gearbulk, which operates open-hatch bulkers, has already come to the end of the fiscal year that will be reflected in this fiscal year's consolidated results and achieved a higher level of profit than previously forecasted thanks to demand for the transportation of pulp on return voyages. Energy Business The energy business is expected to record ordinary profit of 42 billion yen on a full year basis, which represents an upward revision of 2 billion yen from the previous forecast. I will now explain the performance of each sub-segment. tankers and offshore business. Dairy-large crude oil carrier, DLCC, rates are likely to hold firm based on expectations for a rebound in demand with the end of China's zero-COVID policy and a continued increase in ton-miles due to sanctions against Russia. Charter rates for product tankers are also expected to remain firm due to the aforementioned increase in ton-miles and the Chinese government's issuance of additional oil product export quotas for state-owned oil companies. As for chemical tankers, the overseas subsidiary which operates this business has already come to the end of its fiscal year and achieved a higher level of profit than previously forecast thanks to the favorable market conditions. The offshore business is projected to continue generating stable profit, with a new FPSO charter set to start during fiscal year 2022. Liquefied Gas Business In the liquefied gas business, the LNG carrier business will continue to maintain stable profit even though profitability is expected to decrease year on year as a result of the expiry of some long-term contracts. More than 20 new LNG vessels are due to be delivered in the future and a stable build-up of profit is expected from fiscal year 2024. Meanwhile, we expect the FSRU business to report a higher profit as a result of continued operation under an additional contract in Singapore. Product Transport Business Next, the full-year ordinary profit forecast for the product transport business is 675 billion yen, a downward revision of 25 billion yen from the previous forecast, because the profit decline in the container ships business will be offset chiefly by the car carrier business. I will now explain the performance of each sub-segment. Containerships The ordinary profit forecast for the containerships business is 591 billion yen, a downward revision of 44 billion yen from the previous forecast. Please refer to page 6 of Once Magenta Colored Materials. As stated in the outline, one forecasts decreased profit in the fourth quarter on the basis that it will take time for the cargo volume to recover and the freight market to improve. Once full year after-tax profit forecast for FI 2022 is US$14,728 million, which is down. $2,028 million, down 12%, year-on-year and down $542 million, down 4%, from the previous forecast. When integrating 31% of this profit into the consolidated financial statements as equity in earnings of affiliated companies, we apply the exchange rate at the end of the fiscal year and reverse entries from the beginning of the fiscal year. Please return to page 10 of MOL's blue, colored materials. Car Carriers We anticipate that the annual shipping volume will exceed the level a year earlier as economic activity returns to normal. We expect to increase profit by continuing flexible ship allocation according to cargo movements. Terminal and Logistics Business In the terminal and logistics business, full-year profit is expected to increase year on year due to accumulated profit in the first half, despite signs of a downward trend in container handling volumes. We have already announced the sale of overseas terminal, but this will have no impact on ordinary profit this fiscal year. Ferries and Coastal Roro Ships In the ferries and coastal Roro ships business, demand for the transportation of passengers and cargoes is likely to remain on a recovery path. There are also expectations of an increase in passengers with the entry into service of Japan's first LNG-fueled ferry Sunflower Kurenai on the Osaka-Bepu route on January 13, and for revenue growth in the cargo transportation business due to an increase in truck loading capacity, and a return to profit is anticipated. Real Property Business Diberu is expected to continue posting solid profits due mainly to the rising occupancy rates of overseas properties, despite a decline in rental income as a result of the reconstruction of owned properties and a greater burden of head office expenses. Associated Businesses The cruise ship business anticipates a recovery in demand as the restrictions on activity to prevent the spread of COVID-19 are lifted and profit and loss is expected to improve. This concludes all the presentations we have for today. Please do reach out to us should you have any questions or inquiries. Thank you very much once again for your joining us today.