Mitsui O.S.K. Lines New

This is Mitsui OSK Line's Fiscal Year 2023, First Quarter, Business Performance Briefing. Starting with an overview of our first quarter results. As shown on page 3 of the slides, we recorded business profit, which is operating profit plus equity in earnings, of affiliated companies. Of 58.1 billion yen. Wardmary profit of 90.3 billion yen, income before income taxes of 109.6 billion yen. And net income of 91.1 billion yen. In the container ships business, equity and earnings of affiliated companies, attributable to Ocean Network Express, 1, decreased by around 210.0 billion yen, year on year. due to the normalization of freight rates, which had surged on account of the supply chain disruptions caused by the COVID-19 pandemic. As a result, profit at each level fell sharply. However, ordinary profit excluding the container ships business increased, partly due to the favorable impact of a weaker yen, in addition to solid performances in the energy business and car carrier business. I will explain our full-year forecasts in detail later. However, taking into consideration our first quarter results and the market outlook, and based on our revised exchange rate forecast of a weaker yen, we have revised our initial forecasts announced on April 28th upward. Raising our ordinary profit forecast from 200.0 billion yen to 220.0 billion yen, income before income taxes from 240.0 billion yen to 260.0 billion yen, and net income from 210.0 billion yen to 215.0 billion yen. However, we plan to increase the dividend in line with our dividend policy if our results are better than expected, and even if our results sharply fall short of expectations, the minimum dividend we plan to pay is 150.0 yen. I will now explain results by segment. The dry bulk business posted an ordinary profit of 26.3 billion yen, an increase of 7.8 billion yen from the same period of the previous year. The profit increase was mainly due to the reversal of an allowance for doubtful accounts, recorded in the past, in relation to GearBulk, an equity method affiliate. As a result of improvement in this company's financial standing. Looking at the rates, for each type of vessel, rates for cape-size bulkers were not as strong as a year earlier, falling for a time, due to a sharp drop in steel product prices, on concerns about China's economic recovery, such as the real estate slump. Nonetheless, rates remain generally firm. Moving on to vessels operated by MOL Dry Bulk, which are Panamax, Handymax, smaller-sized bulkers, wood-chip carriers, and etc. Market rates for wood-chip carriers and short-sea ships remained firm, however, rates for small and medium-sized bulkers remained largely in a downward trend due to weak South American grain shipments. limited movements of other cargos such as cement, and, like the Cape-sized bulker market, deteriorating confidence amid concerns over China's delayed economic recovery. Meanwhile, market rates for open-hatch bulkers operated by Gearbulk, an equity method affiliate, were mostly unchanged year-on-year, reflecting continued strong demand for the transport of paper pulp to China. The energy business posted ordinary profit of 19.4 billion yen, rising by 9.9 billion yen, year-on-year. The tankers and offshore business, and the liquefied gas business, both achieved year-on-year profit growth. I will now explain the performance of each sub-segment. Tankers and Offshore Business In the very large crude oil carrier or VLCC market, cargo movements remained firm as a result of a resumption of economic activity in China, despite concerns over the impact of additional production cuts by OPEC+. Freight rates remained at a high level, compared with the year earlier, with the increase in tonn-miles due to the Russia-Ukraine conflict, and an increase in cargoes shipped from the U.S., and also with the limited vessel supplies. Product tanker market rates gradually weakened, reflecting a decrease in export volumes due to the start of scheduled maintenance at oil refineries in the Far East and the growth of domestic demand in oil-exporting countries due to the resumption of economic activity. Meanwhile, rates for chemical tankers held firm, primarily due to growth in ton miles, as in the VLCC market. In this market environment, the tanker business as a whole, posted a year-on-year increase in profits, as a result of cost-saving efforts. The offshore business reported higher profit than the level, a year earlier, in the FPSO business. With new offshore projects in Brazil, which commenced their operations last year, contributing to profit from the start of this fiscal year, and existing long-term charter contracts also generating stable profit. liquefied gas business. LNG carriers secured stable profits under long-term contracts. Although, some long-term contracts expired, the LNG business posted an increase in profit, year on year, by acquiring new contracts. The FSRU business saw its profit unchanged, year-on-year, with the start of an existing vessels entry into operation, under a long-term contract, in Hong Kong. The product transport business posted ordinary profit of 40.4 billion yen, a decrease of 209.1 billion yen, year-on-year. Because in the container ships business, equity and earnings of affiliated companies attributable to one, decreased by around 210.0 billion yen. Starting from this fiscal year, the ferries and coastal Roro ships business, which was previously included in the product transport business, is transferred to the newly established well-being and lifestyle business. For year-on-year comparison analysis, the segment results for the first quarter of the previous fiscal year have also been restated to reflect the new segments. I will now explain the performance of each subsegment. Containerships Please refer to page 3 of Once Magenta Colored Materials. In east-west trade, the supply-demand balance was still not restored, and spot freight rates trended gradually downward. Once profit for the first quarter is 513 million US dollars, down 4,986 million US dollars, from the same period last year. Global cargo demand from April through June was well below the level a year earlier in East-West trade, reflecting weak consumption in Europe and the US, under the impact of rising interest rates and inflation. On the supply side, vessel supply in real terms increased, as a result of the easing of port congestion. And, during the first quarter, there was no sign of any major improvement in the supply-demand balance. Consequently, freight rates were far below those seen a year earlier, pushing down profit. Looking at liftings and utilization rates, in comparison with the fourth quarter of the previous fiscal year, in Asia-North America eastbound trade, liftings increased with the easing of port congestion. while the utilization rate fell as a result of improvement in the vessel operating rate. In Asia-Europe westbound trade, liftings increased especially for Mediterranean routes, and the utilization rate was unchanged. 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 As economic activity resumed and domestic production of completed cars also returned to normal levels, with improvement in the supply of semiconductors and automotive components, cargo movements in the car carriers' business also gradually recovered. Although port congestion in some regions, such as Australia and Canada, led to delays, temporarily affecting the vessel operation efficiency, we flexibly revised vessel allocation plans, and, as a result, the car carrier's business achieved year-on-year profit growth. Terminal and Logistics Business The terminal and logistics business reported year-on-year decline in profit, reflecting a year-on-year decrease in container volumes, as a result of a slowdown in cargo movements at overseas terminals. while there were firm cargo movements at domestic terminals and weaker air and sea freight rates in the logistics business. Wellbeing and Lifestyle Business Starting this fiscal year, we newly established the Wellbeing and Lifestyle Business. The Wellbeing Lifestyle Business incorporates the existing real property business, the ferries, and coastal rural ships business, which were previously included in the product transport business, and a cruise business, which used to be included in associated businesses. Ordinary profit for the first quarter was 2.3 billion yen, which is mostly unchanged from the previous year. The real property business generated profit on a par with the previous year, thanks to higher occupancy at existing properties. Despite higher costs associated with new property acquisitions by Diberu, the core company in the group's real property business, ferries and coastal Roro ships saw a sharp rebound in the number of passengers, year on year, partly thanks to a boost from the National Travel Assistance Program, in addition to the contribution of new LNG-fueled ferries, which have already entered service. The cargo transportation business performed somewhat weakly due to the delayed recovery of automotive component-related business and other factors. Nonetheless, the ferries and coastal Roro ships business achieved year-on-year profit growth. Cruise business The cruise business achieved improved profitability year-on-year due to a recovery in traveling demand following the easing of COVID-19 restrictions. Associated businesses The cruise business, which was previously included in associated businesses, has been transferred to the well-being and lifestyle business. The tugboat business posted a year-on-year increase in profit, due to a revision of tugboat service fees. Though the situation varies, depending on each company and port. However, partly due to a deterioration in the business environment in the trading company business. Associated businesses registered a year-on-year decline in profit. This concludes the summary of the financial results for the first quarter. Next, I would like to explain our fiscal year 2023 full-year forecast. Please refer to slide 7 and the outline on slide 9 in the briefing materials. As explained earlier, we have raised our forecasts for ordinary profit and net income, having factored in our most recent results, and raised our initial exchange rate assumption of 125.00 yen per US dollar by 5 yen to 130.00 yen per US dollar. Compared to fiscal year 2022, fiscal year 2023's profits in the container ships business will post a significant drop, as supply chains normalize after the disruption. But the energy business and the car carrier business are expected to report higher. As a result, we forecast business profit of 180.0 billion yen, ordinary profit of 220.0 billion yen, and net income of 215.0 billion yen, all of which are down, year on year, but far higher than pre-COVID-19 levels. I will now explain the forecasts, for each segment. Dry Bulk Business Taking into account improvements in the first quarter, from our forecast announced on April 28, we have raised our full-year ordinary profit forecast for the dry bulk business by 12.0 billion yen to 35.0 billion yen. I will now explain the forecasts for each sub-segment. For Cape-sized bulkers, we forecast a decline in profit on expectation of risks such as China's delayed economic recovery, in addition to the impact of the expiration of some dedicated vessel contracts. For small and medium-sized bulkers operated by MOL Drybulk, the impact of future market fluctuation on profits is expected to be limited, as we have balanced the vessel capacity and cargo volume. However, woodchip carriers are likely to be impacted by China's overstocking of paper products, and we are expecting them to be less profitable as well. Open hatch bulkers operated by GearBulk, an Equity Method affiliate, are also likely to be less profitable, on the assumption of less inflow of cargo from container ships originally, in response to elevated container ship freight rates, as a result of normalization. The energy business is expected to record ordinary profit of 50.0 billion yen on a full-year basis, which represents an upward revision of 6.0 billion yen from the previous forecast, announced at the end of April. I will now explain the performance of each sub-segment. Tankers and Offshore Business In the tanker business, profits are expected to increase, as the market rates of crude oil tankers, product tankers, and chemical tankers, are all expected to remain firm, driven by an increase in ton-miles, due to the Russia-Ukraine conflict. In the offshore business, we are expecting an increase in profit, in the FPSO business, due to start of further new projects, in addition to the two offshore projects in Brazil, which started the previous fiscal year. In the liquefied gas business, the LNG carrier business will continue to maintain stable profit, due to the commencement of operation under new contracts. Even though profitability is expected to decrease, year on year, as a result of the expiry of some existing contracts. The FSRU business is expected to report a decrease in profit, although securing stable income generated as a result of the start of a project in Hong Kong due to temporary expenses incurred in other projects. Next, the product transport business is expected to record ordinary profit on a full-year basis of 122.0 billion yen due to a downward revision of 6.0 billion yen in total for the container ships business and the terminal and logistics business. From the forecast announced at the end of April, I will now explain the forecasts for each sub-segment. Containerships Our ordinary profit forecast for the containerships business is 47.0 billion yen, a downward revision of 3.0 billion yen from forecast announced at the end of April. In light of the recent rise in spot freight rates and the recovery of cargo movements, MOL expects to secure stable cargo movements and a certain level of freight rates. However, we are considering the possibility that the recovery of cargo movements and freight rates will be lower than initially expected due to the delay in the normalization of the inventory situation in the U.S. and therefore we revised our forecast, downward. In the car carrier business, cargo movements of completed cars from Japan are expected to recover in stages, and transportation volume is projected to exceed the fiscal year 2022 level. The vessel supply-demand balance will remain tight, and we expect profit to increase year-on-year, through more efficient ship allocation. Terminal and Logistics Business We are proceeding with the transfer of the container terminal business overseas, to one such as those on the west coast of North America, and we therefore forecast lower profit, due to the impact of this, and decreased ancillary revenue associated with the pileup of containers, as supply chain disruptions ease. The well-being and lifestyle business is expected to post ordinary profit of 9.0 billion yen, reflecting an upward revision of 0.5 billion yen for the real estate property business, from the forecast announced at the end of April. real property business. Daibaru, which is our real property business arm, will see a decline in rental income from last fiscal year, due to the rebuilding of more domestic properties, in addition to Yaesa Daibaru building in Tokyo, and Midosuji Daibaru building in Osaka. Despite the profit contribution of new properties partially acquired last year, such as Otemichi First Square and Otemon Tower Ineos Building. However, we forecast ordinary profit of 7.5 billion yen and upward revision of 0.5 billion yen from our initial forecast due to high occupancy at existing properties. Ferries and Coastal Roro Ships As announced in a press release, we plan to integrate MOL Ferry and Ferry Sunflower on October 1 and to make a fresh start as MOL Sunflower Company Limited. We seek to strengthen the business through management that takes advantage of the economies of scale, resulting from the integration of the two companies. In addition, this fiscal year, we anticipate recovery in the passenger transportation business and firm cargo movements, plus the contribution of the two newly built LNG-fueled ferries, Sunflower Carina and Sunflower Murasaki, which have already entered into service, and we forecast increased profit. Cruise Business Starting from August 1, Mitsui OSK Passenger Line Limited will change its trade name to MOL Cruise Company Limited and will prepare for business expansion through the operation of multiple cruise ships we plan in future. This fiscal year, we forecast revenue growth driven by a recovery in passengers, and we, therefore, anticipate improvement in profitability, even after taking the costs of preparing for the future into consideration. Associated Businesses In the tugboat business, increased profit is expected, due to the effect of the revision of tugboat service fees at ports, in Japan, including Kobe and Acei Bay. Turning to our dividend forecast, as explained earlier, our interim dividend forecast was 100.0 yen per share, in our previous announcement. and is now 110.0 yen, and our year-end dividend forecast was 80.0 yen and is now 70.0 yen. Our full-year dividend forecast is 180 yen per share, which is unchanged from our previous forecast. This concludes my explanation of the fiscal year 2023 forecast. We have revised our business forecast slightly upward, this time. The exchange rate is revised to 130 yen per US dollar. And although there is a difference from the current exchange rate, we have set it this way, as the impact of the exchange rate, at the end of the period, on equity method investment gains and losses, is significant. As you can see in the financial results document, the sensitivity against ordinary profit per yen is 2.2 billion yen. So please understand that if the current exchange rate situation continues, the possibility of a profit increase is very high. In terms of business performance, we are forecasting our business performance taking possible risk factors in each segment well into consideration. As we explained at the beginning of the fiscal year, this fiscal year is the first year of Blue Action 2035, MOL Group's Corporate Management Plan, announced on March 31, 2023. And we want to make sure that the profit level that we put out as the forecast is in line with it.