Nippon Yusen Kabushik New

Good afternoon, everyone. I am Soka, President and CEO of the company. Thank you very much for taking time despite your busy schedule to attend this briefing today. Today I will provide an overview of the financial results for the second quarter of fiscal year 2023 and explain the revisions to the full year earnings forecast for fiscal year 2023, followed by a brief explanation of the progress of the new medium-term management plan that has started this fiscal year. After that, we will have a question and answer session. As the moderator said, the presentation materials are the ones for the second quarter financial results briefing, which was uploaded at your website at noon today. You can either download it or see it on the screen. First, I would like to give you an overview of the Q2 financial results. Please turn to the table on page 6. As you can see in the blue column on the right, cumulative revenues for Q1 and Q2 combined 1,168.3 billion yen. Operating profit was 98.7 billion yen. Recurring profit was 159.2 billion yen, and net income was 113.3 billion yen, all of which were lower than the same period last year. The recurring profit decreased by 606 billion yen from the same period of the previous year. The main reasons for which is, as shown in the far right column on page 7, titled Year on Year, 590 billion yen decrease in the liner and logistics business. This was mainly due to 520 billion yen reduction in profit from the liner trade segment, including O&E, and 43.6 billion yen reduction in profit from air cargo transportation segment. In the container ship business of O&E, demand for cargo remained sluggish throughout the first half of the year and market conditions did not recover. In the air cargo transportation segment as well, freight rate levels were sluggish due to an increase in supply of space and a softened supply-demand balance as international passenger flights, which can also carry cargo, recovered. On the other hand, in the bulk shipping business, the first half of this fiscal year has been solid with more than 100 billion yen recurring profit, the same as last year. In the dry bulk carrier business, although cargo volumes were firm, Recurring profit declined compared to the first half of last year when market conditions were robust due to the impact of the economic slowdown in China, etc. However, the automotive and energy business supported the division as a whole. In the automotive business, demand for transportation remained strong, and in the energy business, in addition to the strong LNG business, demand for long-distance transportation by VLGC also increased. contributing to market conditions improvement. What I have just explained is described on pages three to five of the presentation material, which I would like you to refer to. One thing I would like to add, although it is not explicitly stated in the material, is while the first half recurring income decreased by 606 billion yen compared to the same period last year, it was about 27 billion yen above the previous forecast, made in early August. Next, I would like to explain the full year forecast for FY 2023. Please refer to page 12. The blue figures on the right side are for the full year. As a result of a review of the full year forecast for FY2023, which we announced in early August, net income remains unchanged, but revenue, operating profit, and recurring profit have been revised up. For the full year, we now forecast a revenue of 2,280 billion yen, up 110 billion yen from the previous forecast, operating profit of 165 billion yen, up 19 billion yen, recurring profit of 235 billion yen, up 15 billion yen, and net income of 220 billion yen unchanged from the previous forecast. Please return to page 14 of the document. Looking at the current full-year forecast of recurring profit by segment, the overall increase of 15 billion yen from the previous forecast consists of an increase of 23.5 billion yen in the bulk shipping business, a decrease of 10 billion yen in the liner trade business, including O&E, and an increase of 1 billion yen in air cargo transportation and logistics segments. so air cargo transportation and logistics segments combined.

As for O&E's container ship business, we expect a moderate recovery in the cargo traffic towards the second half of this fiscal year, but a full-fledged recovery is still expected to take some time as the pressure on the shipping supply capacity due to the introduction of the new vessels will continue in the second half. we may have to go one step further down from the last forecast. On the other hand, the profit for the bulk shipping business is expected to increase by 23.5 billion yen from the previous forecast. Out of this, in the dry bulk business, we do not expect any change from the previous forecast. But in the automotive business, that tight supply and demand for shipping space will continue in the second half, and strong demand for the transportation will continue for some time. And in the energy business, in addition to strong LNG carriers, we also expect active cargo traffic demand of VLGC, especially the long-distance transportation from North America. So all in all, we expect a positive growth of income. If you can go back to page 12 of the document, and look at the forecast for the current fiscal year from the perspective of the comparison with the previous year, the recurring profit will decrease by 874.7 billion yen from last year's 1 trillion 109.7 billion yen. But this was already factored in at the time of the initial forecast and is not a surprise. Rather, the recurring profit for this fiscal year has been increasing from 200 billion yen in the initial forecast to 220 billion yen in the August revision and up to 235 billion yen in the current revision. In the new mid-term management plan starting from this fiscal year for the coming four years, which we announced back in March, we aim to achieve in the range of 200 billion yen to 300 billion yen so we believe that the current forecast is a good start as the first year of the new mid-term plan. Now, as for the dividend based on these four-year forecasts, please refer to page 9. Since the net income forecast of 220 billion yen remains unchanged from the previous forecast, the interim dividend of 60 yen is now fixed, and the year-end dividend is planned to be 70 yen. However, the year-end dividend of 70 yen is calculated based on the total number of shares before the share buyback and will be finalized based on the change in the total number of shares at the end of the fiscal year due to the share buyback currently underway. The target annual dividend payout ratio of 30% will remain unchanged. So much on the explanation of our four-year forecast for fiscal year 2023. Next, I would like to briefly touch upon the progress of our newly launched medium-term management plan. Please refer to page 16 of the document. First, on the left-hand side, I would like to talk about our core strategies. In the air cargo transportation business, we have decided to transfer all shares of NCA to ANA Holdings. and we are in the process of final confirmation for the transfer on February 1st, 2024. In the logistics business centered on use and logistics, several new investments, including M&A, are being considered, although there is nothing specific we can announce at this point in time yet. In the energy business as well, We have secured several new medium to long-term contracts for LNG carriers, and we are working to expand our fleet. In our efforts to achieve net zero emissions, we are expanding our fleet of environmentally friendly vessels, including LNG-fueled vessels, LPG-fueled vessels, and methanol-fueled vessels. We are also preparing for the launch of the world's first ammonia-fueled tugboat in Yokohama next year as a demonstration vessel. And we're working with related companies to develop an ammonia-fueled medium-sized ammonia carrier to be in service in 2026. We have also recently completed a review of the NYK Group's decarbonization targets as suggested in the Midterm Management Plan and have included details in the NYK Group ESG Story 2023, which was released separately today. We will provide a detailed explanation at a briefing scheduled later today in the evening. With regard to our financial strategy, We are currently implementing a share buyback program totaling 200 billion yen, which is scheduled to be completed by the end of April 2024. In addition, we are in the process of issuing transition bonds and introducing ROIC or ROIC within the company as planned. Progress on the main financial indicators is shown on the next page, page 17. So the progress on the financial indicators will be shared with you on a regular basis going forward. So much on the brief explanation of the progress made in the Midterm Management Plan. Now I would like to conclude my presentation. Thank you very much. So thank you very much. Now I would like to move on to a Q&A session. So any questions, please?

The first, the question. Can you hear me? Yes, I can. Thank you. I have two questions, July to September, or the first half results vis-a-vis the company plan. The bulk shipping business was rather robust, but the automotive, dry bulk, the bunker, if you could share with us the split, and also if you could share with us the assumptions for the second half. Given the rather good first half results, how things are likely to evolve in the second half, I would like to understand more in details. My second question is, so the net profit forecast remains unchanged, but are there any special factors like special profit and loss and the like? So, or are there any ups and downs anticipated at this point in time? Thank you for your question. Your first question, July to September. the bulk shipping business was rather robust, and you are interested in knowing the split. And in the second half, this bulk shipping business is likely to decline somewhat. And how much is your question? I understood. So July to September, the second quarter, automotive and dry bulk, as well as LNG, vessels compared of its original budget. All three exceeded the budget. To some extent, dry bulk, market conditions, or market assumptions, we took a conservative view, but basically, all of the three businesses had the positive growth. Having said that, however, automotive, as was pointed out in the past, our forecast for automotive business was rather pessimistic, and therefore, in comparison, the automotive business is likely to enjoy a rather huge upside. So, that is July to September situation. Turning to the second half, dry bulk, which I touched upon, is unclear. at this point. Of course, we have set some assumptions, but we would assume that it will decline somewhat. With regards to the automotive business, in the second half, we are not assuming a decline and whether it will be at the same level as the first half. Maybe not. So taking into account all those factors, compared with the first half, inclusive of July to September, the second half will be somewhat smaller, but how much smaller it will not be so different from the assumption included in the original budget. In other words, it is within the expectation. So, this is my response to your first question. Responding to your second question, the net income seems low. So, only net income remains unchanged, and background of that will be explained by CFO, the Vice President Takuno. Thank you for your question. So, net income from recurring profit minus tax, et cetera. and carried over losses, there was a big amount. And therefore, effective tax rate was suppressed to low level, but it was almost entirely used up in the first half. And therefore, inclusive of international taxation, the taxes, which were almost non-existent, is now added on top. So that is one impact. So I hope we answered your question. Thank you.