Mitsui O.S.K. Lines New

This is Mitsui OSK Lines Fiscal Year 2024, Second Quarter Business Performance Briefing. I am Takashi Hashimoto, President of Mitsui OSK Lines. Let me start with a general overview. In the first half of fiscal year 2024, we achieved ordinary profit of 249.0 billion yen and net income of 246.6 billion yen. The containerships business and the energy business performed strongly, and our results exceeded the previous forecasts and results of the same period, a year earlier. As a result, our balance sheet showed total assets exceeding 4,470.0 billion yen and shareholders' equity exceeding 2,660.0 billion yen. With a shareholders' equity ratio of 49%, including estimated lease obligations of 900.0 billion, our balance sheet shows a strong financial position. As for progress on the investment plan, set out in MOL Group Management Plan Blue Action 2035. We ordered an FSRU for Singapore LNG, which will be the second FSRU business we have made investment decision this fiscal year, following the FSRU for Poland, announced in the first quarter. and invested in HIF Global, which develops and operates projects to develop, produce, and transport green hydrogen, synthetic fuel, and synthetic methanol. In our full year outlook for fiscal year 2024, we forecast ordinary profit of ¥365.0 billion, which represents an upward revision of ¥15.0 billion from our previous forecast, and net income of ¥350.0 billion. Our exchange rate assumption is unchanged at 150 yen per 1 US dollar. We changed our assumption of resumption of the Red Sea transit from the end of December 2024 to the end of March 2025. Due to the upward revision of our full-year forecast, we plan to pay an annual total dividend of ¥300 per share, which is an increase of ¥20 per share, in accordance with our shareholder return policy, which sets the dividend payout ratio at 30%. Today, we announced the share buyback, up to 100.0 billion yen. We resolved to repurchase our own shares, on the basis that, our fiscal year 2023 results, and our fiscal year 2024 outlook, far exceed the profit projection made at the time of formulation of the management plan, and that, one, which is an equity method affiliate, has decided to increase its dividend. We reached this decision in view of our investment capacity, which have been strengthened by the adequacy of our shareholders' equity level, in spite of our prioritization of increased investment in Phase 1 of Blue Action 2035, as well as the financial position, and our stock price, which remains low, compared with other companies in the same industry. As for the repurchased shares, we will consider using our own shares as a form of consideration in strategic M&A transactions and offering stock compensation to the group's officers and employees to further incentivize them. Our CFO, Kazuya Hamazaki, will now give an overview of the financial results based on the financial results presentation materials. Dry Bulk Business The dry bulk business posted ordinary profit of 9.0 billion yen, a decrease of 3.9 billion yen from the previous forecast. Looking at the rates for each type of vessel, the Cape size bulk or market rates remained firm, due to steady iron ore shipments from Western Australia and Brazil, and bauxite shipments from West Africa. The market rates for Panamax, operated by MOL Dry Bulk, declined due to weak tonnage demand from July, however, market rates for Supermax and smaller vessels, remained firm, due to steady shipments of steel products in addition to minor bulks, such as mineral cargos and forest products. On the other hand, increased operation costs and one-time costs for vessel purchases were incurred, leading to results that fell short of our previous forecasts. Energy Business The energy business posted ordinary profit of 62.7 billion yen, which is 7.7 billion yen higher than our previous forecast, and helped to push up overall profit. Tankers and Offshore Business The market rates of very large crude carriers , product tankers, and methanol tankers, remained high, reflecting tight vessel supply and demand, due to the prolonged Red Sea disruption, in addition to the contribution of long-term contracts. Although spot freight rates sank for a time in the summer, Chemical tankers continue to enjoy favorable market conditions and perform strongly. Profit in the FPSO business increased from the previous forecast due to the stable profit contribution of 11 FPSOs and equity method investment profit, with the application of equity method to MODEC. Liquefied Gas Business The LNG carrier business and LNG infrastructure business reported higher profit than previous forecast due to the delivery of new vessels and the profit contribution of existing charter contracts. Product transport business The product transport business, which includes the container ships business, posted ordinary profit of 180.0 billion yen, rising 24.0 billion yen from the previous forecast, and significantly contributing to our business performance, due to significant improvement in container freight rates. Container Ships Business achieved higher profit than the previous forecast, mainly due to, high spot freight rates, reflecting the rerouting vessels, round the Cape of Good Hope, amid Red Sea tensions, as well as significant improvement in utilization, on the back of robust cargo movements, driven by strong consumer demand, and an early peak season. In the first half of fiscal year 2024, ONE reported after-tax profit of US$2,778 million and MOL integrated its 31% share of these earnings 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. Due to these earnings at 1, our container ship business reported ordinary profit for the first half of fiscal year 2024 of 130.9 billion yen, which represents an increase of 20.9 billion yen from our previous forecast. Car Carrier Business Despite lower transport volumes than the previous forecast, due to port congestion in the Middle East and unfavorable weather conditions, profit was higher than the previous forecast, partly due to the reduction of operation costs. Terminal and Logistics Business While the domestic terminal business performed solidly, the logistics business reported lower profit than the previous forecast, due to rising freight procurement costs of air and sea transportation. Wellbeing and Lifestyle Business The well-being and lifestyle business achieved ordinary profit of 9.4 billion yen, an increase of 1.4 billion yen from the previous forecast, mainly reflecting the revenue and profit contribution of the real property business. Real Property Business The real property business surpassed our previous 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 In the ferries and coastal roro ships business, both the cargo transportation and the passenger transportation business performed strongly. 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 second quarter. Next, I would like to explain our fiscal year 2024 full-year forecast. Assuming that, transit through the Red Sea will be resumed in April 2025, and factoring in the market rate assumptions of each business, we forecast ordinary profit of ¥365.0 billion and net income of ¥350.0 billion. Dry Bulk Business The dry bulk business is expected to post ordinary profit of 18.0 billion yen, which represents a downward revision of 4.0 billion yen from the previous forecast, to reflect the profit decline in the first half. The Cape size bulk or market rates are expected to remain firm, due to steady shipments of iron ore and bauxite, towards the year end. However, we forecast weaker rates from the beginning of next year, due to decline in Brazilian iron ore shipments, during Brazil's rainy season. The market freight rates of Panamax bulker and smaller vessels are expected to remain firm for the rest of the year, supported by increased grain shipments and demand for fuel for heating, but are expected to weaken from the beginning of next year. Energy Business The energy business is expected to record ordinary profit of 100.0 billion yen, which represents an upward revision of 5.0 billion yen from the previous forecast. With the energy business expected to achieve year-on-year profit growth of 33.1 billion yen, our forecast for this fiscal year is far higher than last year's result, largely due to the profit contribution of the energy business. Tankers and Offshore Business In the tanker business, long-term contracts will contribute to profit, and market rates are likely to hold firm, reflecting tighter vessel supply and demand, as a result of rising geopolitical tensions, since the previous fiscal year. The chemical tanker business, which is the top performer in the energy business, is likely to continue performing strongly, due to rising spot freight rates, and the profit contribution of newly acquired Fairfield chemical carriers. In the offshore business, the forecast for the FPSO business was revised upward, due to the reporting of equity method investment profit from MODEC, in addition to the contribution of the existing long-term charter contracts. We have lowered our previous forecast for the liquefied gas business due to increased expenditure for dry docks and higher operation costs, despite the expected effective delivery of new vessels and stable profit contribution from existing long-term contracts. Product Transport Business In the product transport business overall, we forecast ordinary profit of 244.0 billion yen, which represents an upward revision of 17.0 billion yen from our previous forecast, due to the upward revision of the container ships business in the second quarter. Container Ships Business One has raised its previous forecast for after-tax profit by $350 million to $3,095 million. Although One raised its full-year forecast, spot freight rates are expected to fall toward the end of the fiscal year due to the massive delivery of new container vessels. and one, forecasts after-tax profit for the second half of $317 million, a downward revision of $183 million from the previous forecast. Please refer to one's response to recent changes in the business environment later, on page 6, for further details. Taking, once forecast into consideration, we raised our previous full-year forecast for our container ships business by 18.0 billion yen to 157.0 billion yen. Car Carrier Business Performance is expected to be in line with our previous forecast, taking into consideration longer delays in cargo operation and the possibility of slower cargo movements due to the normalization of inventory levels in the second half. Terminal and Logistics Business The terminal and logistics business is expected to fall short of the previous forecast, due to rising freight procurement cost in the logistics business. Wellbeing and Lifestyle Business The wellbeing and lifestyle business is expected to post ordinary profit of 6.0 billion yen, which is a decrease of 3.5 billion yen from our previous forecast. Real Property Business Diberu, our core real property subsidiary, is expected to generate stable profit, in line with the previous forecast. Ferries and coastal Roro ships business In the business of ferries and coastal rural ships, the logistics business and the passenger transportation business are both expected to perform strongly. Cruise Business We assume profit will be lower than the previous forecast because Mitsui Ocean Fuji, which is scheduled to enter into service in December, will not be utilized in the meantime, resulting in decreased income alongside upfront expenditures for its entry into service. Associated Businesses We upwardly revised our previous forecast, as strong performance is expected for the trading business. I will explain the dividend forecast. We plan to pay an annual total dividend of 300 yen per share, which is an increase of 20 yen, to reflect the 15.0 billion yen upward revision of our forecasts. We are planning an interim dividend of 180 yen per share and a year-end dividend of 120 yen per share, which is an increase of 20 yen. Cash Allocation Finally, I would like to explain our latest forecast for Phase 1, Cash Allocation. Please look at page 16 of the presentation materials. Taking into consideration our outlook for fiscal year 2024 and once interim dividend, total cash flow from operating activities is expected to be approximately 100.0 billion yen, more than initially estimated. We plan to apply 100.0 billion yen, which includes an additional 50.0 billion yen, that we aim to generate from asset replacement to the share buyback, and 50.0 billion yen to an increase in dividends, in line with the dividend payout ratio of 30%.