Nippon Yusen Kabushik New

It's the time, it's the schedule's time, so now we'd like to begin. Thank you very much for taking your time to attend this meeting despite your busy schedule. We would now like to start NYK Group's fiscal 2024 first quarter results presentation. I'll be serving as your moderator today, and my name is Okada, Head of Investor Relations. Please bear with me. As always, we would like to first introduce the speakers for today's meeting. Executive Vice President, Executive Officer, and CFO, Mr. Kono, is here with us. And also, we have Chief Executive of Liner and Logistics Business, Mr. Banno. Today, Mr. Kono will begin with the overview of the financial results for the first quarter of fiscal 2025. And after that, we would like to entertain your questions. The materials to be used for today's session is already posted on our homepage, so please refer to them as adequate. Please also be advised that the video of this session, including the Q&A session, will be posted for our on-demand video distribution later. Now, without further ado, we would like to begin the explanation. Mr. Kono, the floor is yours. This is Kono, CFO. Thank you for taking your precious time despite your busy schedule to attend our fiscal 2025 first quarter earnings call. We thank you very much indeed. I will first explain the overview of our first quarter results and then the forecast for the full year of fiscal 2025. I would also like to take this opportunity to explain the acquisition of the healthcare logistics business that we announced the other day. Once I finish the presentation, we would like to entertain your questions. The presentation material will be projected on the screen, but if you have already downloaded it from our homepage, please refer to them. Now, let me start with the financial highlights for the first quarter of fiscal 2025. Please see the table on page 6. The second columns from the right, highlighted in light blue, are the results for the first quarter of fiscal 2025. Revenues were 609 billion yen, down 50.7 billion yen year-on-year. Recurring profit was 59.7 billion yen, down 66 billion yen year on year. Profit attributable to owners of the parent was 52 billion yen, down 58.1 billion yen year on year. The major reasons behind this decline include the deterioration of market conditions in dry bulk and liner trade businesses. In addition, other business segments were also affected by the US tariff policy and the appreciation of yen. Next, about the results by segment. Please see the table on page 7. The second columns from the right, marked in light blue, show the first quarter results. the liner and logistics business comprising liner trade air cargo transportation and logistics recurring profit for liner trade was 12.8 billion yen down 40.8 billion yen year on year air cargo was 2.2 billion down 1.2 billion year on year and logistics business was 3.4 billion yen down 2.1 billion year on year in particular in the liner trade business amid the increased supply of ships. Due to the U.S. tariff policy and the fluctuation of transportation demand from China, the freight rates changed significantly over a short period of time. As a consequence, the freight level for the first quarter declined compared to the same period of last year. Thus, recurring profit recorded a decrease year on year. In air, cargo, transportation, and logistics businesses, due to uncertainties over the economic outlook caused by the U.S. tariff policies and other factors, profit level primarily of U.S.-related business declined compared to the same period last fiscal year, and we recorded a year-on-year drop in both revenues and profit. Consequently, the recurring profit for overall liner and logistics segment decreased by 44.1 billion yen year-on-year and came in at 18.4 billion yen. Next, automotive business. Recurring profit was down 8.3 billion yen year-on-year and came in at 29.4 billion yen. The number of units transported remained nearly unchanged from the same period of last fiscal year, but the Japanese currency appreciated over the dollar compared to last year, and because of the cost increases resulting from inflation, the profit recorded a decrease. In dry bulk business, Profit decreased compared to the same period of last year when the market conditions were favorable, and also because of the impact of exchange rate fluctuations, which caused exchange losses in our dollar-denominated receivables and the dollar-based assets owned by overseas subsidiaries. Dry bulk business recorded a recurring loss of 3 billion yen, down 17.1 billion yen year-on-year. With respect to the energy business, LNG carrier and offshore business performed favorably sustained by long-term contracts. VLCC market condition was also strong. On the other hand, VLGC and chemical vessels dropped significantly in April due to concerns over demand reduction caused by the U.S. tariff before they started to recover afterwards. However, for the first quarter overall, they recorded a year-on-year decline. Recurring profit for energy business, including the one-off profits associated with the start of the new offshore business project, was 16.4 billion yen, up 5.3 billion yen year-on-year. Now if you can go back to page 3, please. Again, overall recurring profit for the first quarter was 59.7 billion yen, down 66 billion yen year-on-year. After subtracting the special profit and losses and taxes, the net income amounted to 52 billion yen, down 58.1 billion yen year-on-year. As for the share buyback program for fiscal 2025, which was started on May 9, as of July 31, we repurchased a total of 7,921,200 shares worth approximately 40.7 billion yen so far on an accumulated basis. Now, please turn to page 8, please. As you can see from the table on the left, the 66 billion yen year-on-year decrease in recurring profit was largely due to the changes in market conditions, handling volume, and exchange rate, primarily in the liner trade business. So that was about the overview of our fiscal 2025 first quarter results. Next, I would like to move on to the full year forecast for fiscal 2025. Please open page 9. As for a full year forecast for fiscal 2025, Compared to the previous forecast that we announced during the earnings call for fiscal 2024 full year on May 8, the revenue projection was revised downwards by 30 billion yen to 2 trillion and 350 billion yen. Recurring profit was revised downwards by 15 billion yen to 240 billion yen. And net income was revised downwards by 10 billion yen to 240 billion yen. Please Take note that in the previous forecast, the impact from the changes in external environments resulting from the U.S. tariff policies were not included. This time around, they are factored in in the forecast numbers. Because it was difficult as of May 8 to foresee the impact of these various changes, countries' tariff negotiations. Previously, these numbers were estimated to be 100 billion yen. As I said, it was difficult to foresee the impact of the tariff negotiations with the United States. We provided a maximum amount of the impact as external numbers. However, Now that three months have elapsed since then, we are now able to project the future market trends with a certain degree of accuracy. Therefore, we have decided to reflect these numbers and impacts in our new forecasts.

The latest figures for the impact of tariff measures and other factors on recurring profit for each segment, shown in the upper right corner of page 9, have been factored into this forecast. These figures include ¥19 billion for liner trade, ¥1 billion for logistics, ¥3 billion for automotive, and ¥1 billion for energy. As the impact on dry bulk is currently modest and not easy to measure individually, we have assumed the impact to be zero and have factored it into our market assumptions. Adding these figures together, the annual impact of U.S. tariff policy is estimated to be about minus 24 billion yen. However, this does not include the impact of additional port entry charges on non-U.S.-built car carriers that the USTR is considering. This is because the details of the application of additional port entry charges have not yet been finalized, and if they are applied, the impact on profit is expected to be limited by, for example, the introduction of surcharges. We will provide more detailed information by segment later, but please refer to page 12 for information on each level of profits, as well as the assumed exchange rates and bunker oil prices. Based on our target dividend payout ratio of 40%, And given the ongoing uncertainty surrounding current tariff policies in various countries, the outlook for the global economy as a result of these policies, and future cargo movement trends, we have not changed our initial forecasts for both interim and year-end dividends at this time, which are 115 yen per share for the interim and 120 yen for the final dividend for a total of 235 yen per share for the full year. As mentioned in a review of our first quarter results earlier, we are currently conducting a share buyback. This total annual dividend forecast is based on the number of shares excluding those purchased back as of July 31. Next, we will explain the full-year earnings forecast for each business segment, comparing them with our previous forecast. Please refer to page 14. The blue column in the center shows our revised full year forecast for fiscal year 2025. First, for the liner trade, we expect recurring profit to be 70 billion yen down 11 billion yen from our previous forecast we expect profits to decrease compared to the previous forecast, taking into account the impact of tariff policies in various countries and not anticipating the short-term freight rate increase on Asia-North American routes from the summer onwards as initially anticipated. Regarding air cargo transportation, the share exchange between Nippon Cargo Airlines and ANA Holdings was completed on August 1 of this year. Therefore, the results of NCA will not be included in our consolidated results. Next, regarding logistics, we expect air freight and ocean freight to remain strong. But due to the impact of tariff policies in the contract logistics business, we expect recurring profit to be 17 billion yen, a decrease of 1 billion yen compared to the previous forecast. Next, automotive. We expect recurring profit of 100 billion yen, up 4 billion yen, compared to the previous forecast. Although the tariff impact is expected to bring down profit by 3 billion yen, mainly in the Atlantic trades, the full-year results will improve, driven by the strong results in the first quarter. The recurring profit of dry bark is expected to be ¥10 billion, down ¥7 billion from the previous forecast. The main factors behind the decrease in profits were increased costs in the first quarter, the impact of foreign exchange fluctuations, and lower profitability for certain vessel types compared to our initial forecast. Next, for the energy business, we remain committed to our previous forecast for full year, recording a profit of 48 billion yen. We expect both VLCC and VLGC operations to remain at the same level as our initial forecast, and we expect the business to remain strong, supported by stable profits from the energy and offshore businesses. Going back one page, on page 13, we have the table of year-on-year comparison. Please refer to that table as well. So far, the explanation about the full year forecast. Finally, I would like to briefly touch upon the acquisition of healthcare logistics business, which we announced in July. Through an overseas group company of Youth and Logistics Global Management, established in April of this year, NYK Group has agreed to acquire all shares of Moviento International BV with the aim of acquiring the healthcare logistics business of Warden Group, European logistics company. and we agreed the agreement for the transfer of shares on August 1st. Pursuant to European legal procedures, the acquisition will be completed subject to approval by the relevant authorities in each country and the company will be wholly owned subsidiary of NYK Group. Overview and strategic significance of the acquired businesses as described in the materials. This is a business investment in line with the management plan, and we believe that by expanding the logistics business, which is expected to achieve stable growth across our entire business portfolio, it will contribute to reducing earnings volatility and expanding the scale of earnings as a whole group. In the Q&A session, if you have questions, Mr. Abano in charge of this deal will be happy to take up your questions. That concludes my explanation. In addition to the slides projected today, the materials published on our website also contain reference materials such as estimated values for key specifications for each business segment in the appendix. So please refer to them at your convenience. That concludes my presentation. Thank you.

Thank you. Now we would like to move on to the Q&A session. The first questioner, please. Thank you very much for the explanation. I have two questions. The first is about the automotive business The tariff impact, there is about 3 billion in impact factored in for the Atlantic route. So can you give us a breakdown of that? And the total number of transportation is going to come down by 1% year-on-year, 2% in second quarter, and that's 1% in the second half. So what is the total reduction for the North American route? Can you talk about that? My second question is about the healthcare logistics business acquisition. The 134 billion yen was the revenue size that you have disclosed for fiscal 2024. If you have any numbers that you can share with us with respect to the profit size that we appreciate. The multiple, I think, was it on par with the market prevalent level? Were you able to acquire that place? And when will they start to make contribution to your business? Thank you very much for the question. First, regarding automotive business, I would like to answer that question. For the North America route trade in the beginning of April, the Trump administration, they said that in addition to reciprocal tariff, automotive tariff was implemented by the administration. The impact from that mainly according to the cars that we transport. From Asia to Japan, those are the main cargo that we are transporting. And the impact for that trade for the April to June period was insignificant, actually. But then on the other hand, from Europe to North America, in this atlantic route from far east to europe and then to north america that is the main route that we use but those vessels that went to europe coming back to far east as part of that trade some of the vessels will bring the European cars to North America and then come back to Japan via North America. That is one of the transportation routes that we use. For that part, from April to June period, there was a little bit of impact, a slight impact there, but As far as some European manufacturers are concerned, they have reduced the exports to North America. That is already happening. So that was an area that would be an impact. So that accounts for the bulk of the $3 billion reduction in terms of revenue. I tried to answer your question. Thank you very much. I understood very well. And then the healthcare logistics business will be explained by Mr. Banno. Thank you very much for the question. Regarding the profit level of this company, we have an agreement in place with the seller, and that is not to be disclosed. So I cannot answer that part of the question. Regarding the multiples for the acquisition, EBITDA multiples, again, this number cannot be clearly stated. But over the last several years, these health care logistics businesses, they have been acquired by some other companies in Europe mainly. So I think there's a range there. So within that range, we have been able to come to an agreement with the lower part of that range, according to our recognition. As for the schedule, actually the announcement, was about the put option agreement that we concluded. So we have made an announcement that we have come to an agreement for the put option agreement. And that was the European side of our processes, exerting the option rights. And then after that, the SBA share purchase agreement was to be concluded. But to be honest, to give you the conclusion first, after the announcement, last Friday, The SPA agreement was already concluded as of Friday last week. It was quite speedy to a level that we are also surprised by the speediness. And after that, not only the antitrust, but also a lot of prestigious remains were Because this is an M&A agreement and we have to do a lot of clearance with the relevant authorities. And I think that is going to take several months to complete. So finally, I think this closing is expected to be sometime in the end, towards the end of the fiscal year. That's it. Thank you. Thank you very much for your detailed explanation.