Mitsui O.S.K. Lines New

This is Mitsui OSK Lines Fiscal Year 2024 First Quarter Business Performance Briefing. I am Kazuya Hamazaki, CFO of Mitsui OSK Lines. Let me start with a general overview. In the first quarter of fiscal year 2024, we achieved business profit of ¥94.9 billion, ordinary profit of ¥108.6 billion, and net income of ¥107.1 billion. Overall, we achieved financial results that far exceeded both our initial forecasts and the levels achieved in the same period a year earlier. Reflecting strong performances in the container ships business and the energy business with the depreciation of the yen against the dollar. As a result, our balance sheet showed total assets exceeding 4.4 trillion yen and shareholders' equity exceeding 2.5 trillion yen. As for progress on the investment plan, set out in Blue Action 2035, in the first quarter of this fiscal year, we made various investments including ordering an FSRU for a project in Poland, joining a project to develop a frozen and refrigerated warehouse in Singapore, and joining an office building development project in India. Looking at our full year forecast of this fiscal year, we revised our initial ordinary profit forecast of 230 billion yen, upwards by 120 billion yen, to 350 billion yen. Our previous forecast for net income has also been raised by 120 billion yen to 335 billion yen. Considering prevailing exchange rates conditions, we also revised the exchange rate assumption in our outlook for fiscal year 2024 from 140 yen to the dollar to 150 yen to the dollar. Since, there has been no improvement in Red Sea tensions, we changed our assumption on resumption of transit through the Red Sea, from October 1, 2024, to January 1, 2025. Due to the upward revision of our forecast, we revised our annual total dividend forecast to 280 yen per share, which is an increase of 100 yen per share, in accordance with our shareholder return policy, which sets the dividend payout ratio at 30%. I will now give an overview of the financial results for the first quarter, based on the financial results presentation materials. I will now explain the financial results, by segment. Dry Bulk Business The dry bulk business posted ordinary profit of 6.9 billion yen, a decrease of 19.4 billion yen, from the same period of the previous year. The decrease in profit is largely attributable to, the absence of profit from the reversal of an allowance, for doubtful accounts recorded in the first quarter of the previous fiscal year. Looking at each type of vessels, the Cape size bulk or market rates trended upward, reflecting improvement in vessel supply and demand, especially in the Atlantic Ocean routes, as a result of steady iron ore shipments from Western Australia, and Brazil. as well as strong bauxite shipments from West Africa, resulting in a year-on-year increase in profit. Market rates for Panamax and other small and medium-sized bulkers operated by MOL Drybulk achieved a year-on-year increase in profit due to firm shipments of grain from South America. However, woodchip carriers and multipurpose vessels saw decline in profit, from the same period a year earlier, due to sluggish market rates, reflecting weak consumption in China. As a result, the dry bulk business, overall, posted year-on-year decline in profit, but generated higher profit than the previous forecast. Energy Business The energy business posted ordinary profit of ¥22.7 billion, rising ¥3.3 billion year-on-year, and contributing to push-up overall profit. Tankers and Offshore Business We LCCs and product tankers achieved a year-on-year profit increase, reflecting tight tonnage supply and demand, due to the prolonged Red Sea disruption, in addition to the contribution of long-term contracts. Chemical tankers performed strongly, due to persistently high market rates, and the contribution from Fairfield Chemical Carriers, which was acquired in March 2024. The FPSO business made a stable contribution to profit, posting a year-on-year profit increase, due to the contribution of two FPSOs, that started operations in the previous fiscal year. Liquified Gas Business The LNG carrier business and LNG infrastructure business reported lower profit than a year earlier, mainly due to drydock expenditures, despite the continued profit contribution of long-term charter contracts. Product transport business The product transport business, which includes the container ships business, posted ordinary profit of 65.3 billion yen, rising 24.9 billion yen, from the same period a year earlier, due to significant improvement in container freight rates. Container ships business The key points are shown on the material. The main point is that vessel demand increased due to rerouting through the Cape of Good Hope in connection with Red Sea tensions. Combined with congestion at major ports and shortage of container boxes, it led to tighter tonnage supply and demand and higher spot freight rates, resulting in a year-on-year increase in profit. Liftings also improved on the back of firm personal consumption in North America and recovering personal consumption in Europe. Capacity utilization rates also increased significantly due to demand for the buildup of inventory associated with geopolitical risks. In the first quarter, one reported, after tax profit of, 779 million US dollars, and MOL integrated its 31% share of these earnings, into segment profit as equity in earnings, of affiliated companies. Due to these earnings, at 1. Our container ships business reported ordinary profit of 42.7 billion yen for the first three months, which represents a year-on-year increase in profit. Car Carrier Business As in the previous fiscal year, car carriers continued to operate at almost full capacity. Although Red Sea tensions caused congestion at ports in the Persian Gulf, congestion eased at ports in Australia, Canada, and Central America, and the operational efficiency of vessels improved, resulting in a year-on-year increase in profit. Terminal and Logistics Business While the domestic terminal business performed solidly, the logistics business reported year-on-year profit decline, due to rising procurement costs of air and sea transportation. Wellbeing and Lifestyle Business The wellbeing and lifestyle business achieved ordinary profit of 5.7 billion yen, an increase of 3.4 billion yen, year-on-year, mainly reflecting the revenue and profit contribution of the real property business. Real Property Business The real property business achieved a year-on-year increase in profit, surpassing our initial forecast, due to the profit contribution of Equity Method affiliates, in addition to the profit contribution of existing properties. Ferries and Coastal Roro Ships Business The ferries and coastal Roro ships' business achieved higher profit than in the same period a year earlier, reflecting strong performances in the logistics business and the passenger transportation business. Cruise Business The cruise business reported a year-on-year decrease in profit, reflecting upfront expenditures, for the entry into service of Mitsui Ocean Fuji, MOL Cruise's second ship, in December. Associated businesses The associated businesses posted profit, mostly unchanged year-on-year, due to the contribution of the trading business. This concludes the summary of the financial results for the first quarter. Next, I would like to explain, our fiscal year 2024 full year forecast. As explained earlier, assuming an exchange rate of 150 yen to the dollar, and assuming that passage through the Red Sea will recommence from January, in 2025. and also factoring in market rate projections. For each business, we forecast ordinary profit of 350 billion yen and net income of 335 billion yen for fiscal year 2024. I will now explain the forecasts for each segment. Dry Bulk Business The dry bulk business is expected to post full-year ordinary profit of 22 billion yen, which represents an upward revision of 2 billion yen from the previous forecast. The Cape-sized bulker market is expected to remain firm, underpinned by continued steady shipments from Western Australia, Brazil, and West Africa, despite concerns over a slowdown in crude steel production in China. Looking at the market rates for Panamax and smaller vessels, there is a possibility of improvement in the vessel supply and demand balance, through the easing of transit restrictions in the drought-hit Panama Canal. However, the market rates are expected to remain firm, as growth in cargo movements, driven by increased grain shipments and limited supply of new vessels, are expected. Under these market conditions, the dry bulk business as a whole is expected to perform strongly. Energy Business The energy business is expected to record ordinary profit of 95 billion yen, which represents an upward revision of 18 billion yen from the previous forecast. This equates to a year-on-year profit increase of 28.1 billion yen. Tankers and Offshore Business In the tanker business, long-term contracts will contribute to profit, and market rates are holding firm, reflecting tighter vessel supply and demand, as a result of rising geopolitical tensions, since the previous fiscal year. Ordinary profit is expected to exceed our previous forecasts, in each subsegment. In particular, the chemical tanker business is likely to continue performing strongly due to rising spot freight rates and the profit contribution of acquired Fairfield chemical carriers. The offshore business is projected to generate stable profits due to the contribution of existing long-term charter contracts in the FPSO business. In the liquefied gas business, existing long-term contracts are likely to make a stable profit contribution. Product Transport Business The product transport business is expected to record ordinary profit of 227 billion yen, which represents an upward revision of 92 billion yen from the previous forecast. Containerships Business One has raised its previous forecast for after-tax profit by $1,745 million to $2,745 million. While the outlook for the supply and demand balance remains uncertain, beyond the second quarter, one raised its full-year forecast based on the assumption that, Red Sea tensions will last until the end of December, in 2024. And on expectations that, market rates will remain favorable for the time being. Taking once forecast into consideration, we raised our previous full-year forecast for our container ships business by ¥84 billion to ¥139 billion. Car Carrier Business In the car carrier business, we expect the market to remain tight for the time being. In the second half, we expect transportation volume to fall, based on the assumption of continued port congestion in the Middle East, due to restrictions on passage through the Red Sea. And port congestion in Australia, because of seasonal factors. However, we assume there will be solid transportation demand for completed cars, mainly in North America, and considering our recent favorable business results, we revised our previous forecast upward. Terminal and Logistics Business The terminal and logistics business is expected to fall short of the previous forecast, due to rising freight procurement cost mainly in the logistics business. Wellbeing and Lifestyle Business The wellbeing and lifestyle business is expected to post ordinary profit of 9.5 billion yen, which is an increase of 3.5 billion yen from our previous forecast. Real Property Business Diberu, the core company in the real property business, was likely to post-year-on-year decline in profit due to the reconstruction of domestically owned properties. However, we revised our previous forecast upward to reflect the profit contribution resulting from the increase in equity method affiliates, in addition to the high utilization of existing properties. Ferries and Coastal Roro Ships Business We raised our previous forecast for ferries and coastal rural ships because, both the logistics and passenger transportation businesses are expected to remain strong. Cruise Business Despite a favorable number of passengers, we maintain our previous forecast, as we still expect, upfront expenditures, for the entry into service of, Mitsui Ocean Fuji, in December. Associated Businesses We upwardly revised our previous forecast because a strong performance is expected for the trading business. Dividend Coming to dividends, we plan to pay an annual total dividend of 280 yen per share, which is an increase of 100 yen, to reflect the upward revision of our forecasts. We are planning an interim dividend of 180 yen per share, which is an increase of 80 yen, and a year-end dividend of 100 yen per share, which is an increase of 20 yen. This concludes my explanation of the fiscal year 2024 forecast.