Nippon Yusen Kabushik New

Thank you very much for waiting, and thank you for taking part in spite of your busy schedule. We will start NYK Line financial results briefing for FY25. I will be the moderator for today. My name is Iyanase from IR Group. Allow me to introduce the speakers today. First of all, President, Representative, Director, and CEO, Mr. Takayasoga. And then, Senior Managing Executive Officer and CFO, Mr. Takuji Banno. And also, Managing Executive Officer, Chief Executive of Executive Liner Logistics Headquarters, Mr. Tomotaka Aso. We will first of all have Mr. Soga explain their earnings result for FY25, followed by Q&A session, and I then will give a notice to all when we start the Q&A. Today's presentation materials are uploaded within our website. Please also be noted that all the session today, including Q&A, will be provided through on-demand streaming. With that, we will start the session. Mr. Soga, please.

Thank you for the kind introduction. My name is Sohga, President of NYK. Thank you very much for taking your time to attend this earnings announcement session today. I would first like to provide highlights from the full-year fiscal 2025 results and cover salient points from the forecast for full-year fiscal 2026 and medium-term management plan progress and then provide the overview of the fiscal 2025 full-year results and fiscal 2026 full-year forecasts and offer some details on mainly quantitative aspects of the medium-term management plan progress. Then I will turn it over to Mr. Asso, Managing Executive Officer, who was responsible for the review of O&E 2030 together with O&E team to cover the main points from the brushing up of the plan. Presentation materials will be shown on the screen in front of you. If you have downloaded materials from our website, please refer to those materials. I would like to start with the briefing highlights. Please refer to slide four. As regards fiscal 2025 results, despite the impacts from tariff policies and the heightened tension in the Middle East, supported by stable profits from automotive business and energy business, The company achieved recurring profits of 211.1 billion yen and profit attributable to owners or parent of 211.7 billion yen. As a result, in line with the targeted payout ratio of 40%, year-end dividend is increased by 5 yen per share, raising the full-year dividend to 230 yen per share, including a commemorative dividend of 25 yen for 140th anniversary of the founding of the company. As for the fiscal 2026 forecast, we assume the tension in the Middle East to continue through Q1 fiscal 2026, In addition, owing to the surge in banker costs, our forecast for recurring profit is 185 billion yen and for profit attributable to owners or parents, 195 billion yen. Our assumption is that Middle East situation will normalize in the second quarter, but temporary earnings decline is expected primarily in automotive business and liner trade business in Q1 with the ongoing closure of straight-four modes. In addition, increase in one-time expenses from the large-scale acquisition are expected to weigh on results. However, we firmly believe that the growth investment accompanied with such one-time costs will significantly contribute to the profits in the future. With respect to the progress of medium-term management plan, There are three points. Investments progressed steadily. Total investments over the four-year period increased from the initial 1.2 trillion yen to 1.6 trillion yen. Better-than-expected improvement in operating cash flow generated management-directed allocation, which has been allocated to 280 billion yen of additional share repurchase in addition to the original plan, 160 billion yen of dividends, as well as additional investments of 420 billion yen. Out of the management-directed allocation, 110 billion yen remains unallocated under the most recent forecast. ROIC and return on equity are expected to average 8.1% and 9.9% respectively over the four-year period of the current medium-term management plan from fiscal 2023 at levels that meet the plan's initial targets, including the forecast for fiscal 2026. I would now like to provide some more details on the full year fiscal 2025 financial results. Please turn to slide nine. In a nutshell, Fiscal 2025 started with tariff issues that had many potential negative earnings risks implications, but the full-year financial numbers were not strongly impacted. We were able to end the year at levels exceeding 200 billion yen for both recurring profit and profit attributable to owners of the parent. The impact of the attacks on Iran by the United States and Israel, which broke out at the end of February this year, was felt only in the final month of the fiscal year in March and was limited geographically to the Persian Gulf region, not much affecting our full-year results. The blue column in the middle of the table on the screen shows the fiscal 2025 actual results. Revenues were down 165 billion yen at 2 trillion 423.6 billion yen. Recurring profit was 279.7 billion yen down year-on-year at 211.1 billion yen. Profit attributable to owners of parents was down 265.9 billion yen at 211.7 billion yen at each level. Revenues and profits declined year on year. However, as shown at the very right column, in comparison to the full-year forecast we announced in February this year, revenues were higher by 33.6 billion yen, recurring profit was higher by 16 billion yen, and profit attributable to owners apparent was higher than the forecast by 1.6 billion yen. Of the 279.7 billion yen decline in recurring profit, around 90% of the decline was due to liner and logistics business, including O&E. In other businesses, namely bulk shipping business such as automotive, dry bulk, and energy businesses, The decline in profit was somewhat limited, hugely contributing to company total recurring profit and profit attributable to owners or parent of above 200 billion yen. As we noted last year, we believe that this is a testament to the solidly stronger earnings capabilities of these businesses. Please turn to slide 10. Once again, the middle blue column shows the actual results from fiscal 2025 by segment on this slide. As for the recurring profits from liner and logistics business comprising liner trade, air cargo transportation, and logistics, liner trade recurring profit declined by 224.5 billion yen to 49.7 billion yen. Air cargo transportation was down 18.9 billion yen at 2.1 billion yen year-on-year on a full-year basis because only the results prior to the completion of transfer of NCA to ANA holdings is included. Logistics recurring profit was down 11 billion at 10.2 billion yen. In regard to liner trade, in addition to the increasing shipping capacity following the delivery of new vessels, there were impacts from tariff policies and Middle East situations. Freight market continued to be volatile and declined from the previous year's level. For your information, O&E equity method profit was 19 billion yen. In logistics, only air freight business reported profit level higher than the previous year. whereas ocean freight business saw decline in profitability on account of market volatility despite handling volume staying firm. In contract logistics business, due to uncertainties from the impacts of tariff policies, cargo volume with some major customers decreased, resulting in lower earnings level. Recurring profit from automotive business was down 15.4 billion yen year-on-year at 97.9 billion yen. Dry bulk business recurring profit was down 8.5 billion year-on-year at 9.5 billion yen. Energy business recurring profit increased by 8.2 billion yen year-on-year to 54.4 billion yen. In automotive business, the number of units transported remained broadly in line with the previous fiscal year. However, profit levels slightly decreased year-on-year due to lower revenues resulting from the yen's year-on-year appreciation and higher costs including cargo handling costs due to inflation. In dry bulk business, although market conditions for each vessel type improved year-on-year, reflecting factors such as stronger yen and lower profitability in small-sized bulk carriers and bulk-shaped bulk carriers, profit levels decreased year-on-year. In energy business, LNG results remained steady, supported by medium- to long-term contracts. VLCC sole market conditions improved year-on-year, driven by increased cargo demand in the Atlantic region and from the impact of the Middle East situation. In VLCC business, there were changes in trade patterns. Observed due to the impact of tariff policies and heightened tensions in the Middle East, long-distance transportation increased, which tightened supply and demand conditions, resulting in a year-on-year improvement in market conditions. In offshore business, one-off profits were recorded due to the start of operations of the new FBSO. As a result, energy business reported increased profit. Now, if you could go back to slide 6, to reiterate, company total recurring profit was down 279.7 billion yen year-on-year at 211.1 billion yen. After extraordinary profits and losses and taxes, profit attributable to owners or parent was 211.7 billion yen. Based on these results, the year-end dividend was changed from the previous forecast and will be 115 yen per share, which is an increase of 5 yen per share. In addition to the interim dividend of 115 yen, which is already paid, the year-end dividend will be 230 yen per share. At the end of last fiscal year, additional shares were repurchased. The repurchase at the scheduled total cost of 150 billion yen was completed on April 30 this year, and all the shares repurchased will be retired on May 29. Please refer to slide 11. As shown in the left table, Most of the decline in recurring profit of 279.7 billion yen year-on-year is due to market effects and changes in handling volumes, majority of which is due to decline in profit in liner trade business, including O&E. So those are the full year results from fiscal 2025. Now I would like to turn to the full year forecast for this fiscal year, fiscal 2026. Please turn to slide 12. Full year forecast for fiscal 26 for revenues stand at 2 trillion 605 billion yen, 185 billion yen up, recurring profit 26 billion yen down year on year at 185 billion yen, and Profit attributable to owners or parent is down 16.7 billion yen at 195 billion yen. Based on these forecasts, And in line with the targeted payout ratio of 40% and the minimum dividend of 200 yen per share, which is the basic policy set out in the previous fiscal year, for the moment, planned interim dividend and year-end dividend are both 100 yen, making planned annual dividend amount 200 yen. Regarding share repurchase, as before, we will consider its implementation, taking into account business performance as well as investment opportunities and business environment. Now turning to the assumptions for the full-year forecast for fiscal 2026, we expect the closure of the Strait of Hormuz to continue throughout Q1 fiscal 2026. On the other hand, with respect to Suez Canal, we expect the rerouting via Cape of Good Hope to continue throughout fiscal 2026. In May last year, when we announced the full-year forecast for fiscal 2025, Since tariff policies' impact will differ from each vessel type and there were too many variables to consider as assumptions, we believed it would be misleading to compile numbers with a set of assumptions. Thus, we indicated performance forecasts excluding tariff impacts and made additional notes on the estimated range of the amount of exposure to all conceivable tariff impact risks for each segment. In this regard, this time the consideration of assumptions was simpler than last fiscal year, boiling down to two issues of how long the straight of hormones will remain closed and as a consequence, how much the banker price will be. That is a rough summary of the assumptions.

So with this in mind, please refer to slide 16. Allow me to go over the full year forecast by business segment. The blue column on the right shows the forecast figures for FY2026. First of all, regarding liner trade, we expect ordinary profit to be 49 billion, a decline by 700 million yen compared to previous year. Regarding container ships, as mentioned earlier, we assume the use of Cape of Good Hope route due to Suez Canal bypass will continue throughout the year. With that said, the increased fuel cost due to this tense situation in Middle East, as well as the service suspension to Persian Gulf, also needs to be taken in mind, and so we anticipate a slight decline in profit compared to previous year. Next, logistics. We expect 0 billion yen. on ordinary profit, a decline by 10.2 billion. We anticipate increasing handling volume for both sea and air cargo in the forwarding side, but then, within the logistics, there was a very large acquisition, and so therefore, recording a one-time expense, including goodwill amortization, will make the profit decline compared to the previous year. I would like to explain about this further on later. Next, automotive. We forecast ¥84 billion, a decrease of 13.9 compared to previous year. Based on the assumption of straight or home moves will be blocked during the first quarter, we expect a slight decrease in cargo volume to the Persian Gulf and increase in costs. For dry bulk, we forecast 14 billion yen, which is an increase of 4.5 billion compared to previous year. We expect market conditions to remain good across all vessel types driven by robust cargo movements, and we expect increase in profit compared to previous year. For energy, we forecast 48 billion yen of ordinary profit which is a decline by 6.4 billion as for market conditions both vlcc and vlgc will be impacted to the middle east situation and therefore will exceed a previous year's level lng carriers are expected to perform strongly driven by stable revenue from medium to long-term contracts as well as completion of new vessels Each FPSO in the offshore business will operate smoothly. However, the new FPSO recorded last year will not be present this year. And so therefore, the profit level expected to be lower than last year. Next, slide 17. Here we show the analysis of change in the ordinary recurring profit. Exchange rate was 155 yen versus dollar for the full year, which is approximately 5 yen weaker than the previous year. This resulted in increased revenue. For fuel price, we expect there is going to be $202 increase per metric tons on average for the full year compared to the previous year, which contributes to the decrease this time in revenue. So those are some of the factors behind the change. So this concludes the explanation for the 2026 performance forecast. Next, I would like to brief view the progress of medium-term management plan, especially focusing on the quantitative aspects. Please refer to slide 19. Here we have key financial indicators. The forecast for 2026 is shown in blue and the second column from the right. One of our goals that we've set was to pursue an appropriate equity ratio. which is around 50%, including charter fee liabilities. And this is something that we expect to achieve by the end of 2026. On the other hand, if the forecast figures are achieved as mentioned, ROIC and ROE for FY26 are expected to fall below the target values. However, as earlier mentioned, the entire four-year period of the current medium-term plan from FY23 to 26 would also mean that we expect ROIC to be 8.1%, ROE to be 9.9%, which means we will be able to achieve the four-year round target levels. Next, please refer to slide 20. And here we show the business investment policy. What we have on the top part, the four quadrant diagram, is what we were referring to when medium term plan was announced and the total investment for four years was set at 1.2 trillion. And the table below shows the progress as well as the latest plan. And we had planned to increase the total investment to 1.6 trillion yen. The increase will be applied to where the demand is increasing, for example, energy fleet, as well as strengthening of the alternative fuel vessels, including LNG. And so we expect that these decisions will be made based on the current as well as the future business environment. Next, please refer to slide 21. Here we show our cash allocation. as well as the update on management allocation. And so based on the increased operating cash flow, we have allocated cash between investment and shareholder return, including increased share buybacks, increased regular dividends, as well as increased investment. We will be able to explain this more in detail on the next page. So with that, this brings to slide 22. Compared to the plan announced at the Tainan midterm plan, operating cash flow has exceeded by 830 billion yen. The total, if we include the four-year management allocation would be 970 billion yen. And to this, we will be allocating an additional 440 billion yen in shareholder return through additional share buybacks, as well as additional dividends. As well as, like I mentioned earlier, there will be another investment cash flow, approximately to 420 billion yen. And so that totals to 860 billion yen. That will be the amount that we'd be able to allocate through the 970 billion yen mentioned earlier. And so therefore, we currently estimate the remaining, I don't know if I should say this remaining, but the remaining management allocation for FY26 to be 110 billion yen. Now this 110 billion yen, how this should be allocated has not been finalized, but we plan to carefully consider while closely monitoring the future business environment as well as the investment environment. Next slide 23. We have also summarized the trends in shareholder returns policy. In regards to share buybacks, ever since FY23, we have implemented a total of 480 billion yen, which is an increase of 280 billion yen from the original plan, and all these have been cancelled now. And so, therefore, our total share has declined by 20% at 400 million. And so therefore, in EPS, this has increased approximately 25%. And we have talked about value increase per share, and this is something that we have been properly working on. Regarding the dividend from FY25, we have raised the dividend payout ratio to 40%. The minimum dividend per share has been increased to 200 yen. And so therefore, including the projected dividend for FY26, the total dividend for four years would be increased by 160 billion yen, totaling to 390 billion yen. So this is the final part of my explanation. Please refer to slide 24. I mentioned during my explanation of FY26 performance forecast, but this is about temporary expenses related to the large-scale acquisition. For the European healthcare business, Walden Group's healthcare logistic business, I would like to explain the current situation as well as our EBITDA outlook. The acquisition has been completed in December last year, and so therefore we have promptly started the post-merger integration or PMI. Thus far, the PMI is progressing smoothly as expected. As we have described at the bottom of the slide, we have designated approximately one and a half year, 18 months as a concentration period for PMI. And so this will be the time when we will proceed with organization restructuring, integrated operation to create synergy effects with the existing use of logistics European business. While this process will incur temporary costs associated with restructuring and amortization of goodwill, we plan to gradually increase EBITDA as shown at the top through the growth of acquired business as well as synergy effect. The healthcare logistics business will be able to respond to the high sophisticated needs by the customers. And so therefore, it is an area where there is high entry barrier And so we expect this market is where we can have high hopes, is also expected to expand. And we will continue to strengthen this business as one of our focus areas. And this concludes my presentation. Thank you. And next, for Liner Logistics Business Division, Mr. Aso, Managing Executive Officer, will be able to explain the progress made in refining O&E's medium-term management plan. This is about O&E 2030, announced back in 2024. With that, Mr. Aso, please.

Thank you. This is Aso speaking. Thank you for the introduction. As Mr. Aso mentioned, Medium-Term Plan for ONE 2030 was developed two years ago, and since it has been two years since then, including the targets we have reviewed, together with the progress of the management plan, I would like to share with you the refined plan. Please refer to slide 32. One 2030 progress to date is shown here. Investment and financials main items are shown in this table. I will pick up only the salient points. As for profit plan shown at the top, Fiscal 2030 target remains 3.8 billion dollars. This remains unchanged, and we would like to increase profit to this level by the final year, fiscal 2030. Next, investment scale. By fiscal 2030, in seven year total, 24 is the starting year. In seven years total, 35 billion was the target. The total amount remains unchanged. However, so far, for vessels and container box vessels, these are container shipping main business, and $15 billion of investment has already been decided. Shipowner business and container terminal business, in order to expand business for M&A, $3 billion has already been In the middle, regarding investment, as for the necessary financing, a debt-to-equity ratio for investments is shown, and as originally planned, debt of six to four of investment of four, six to four target ratio, was continued for the past two years. And the total amount of investment already decided also uses this six to four debt to equity ratio. And we are proceeding as planned. As for equity ratio, as for the optimum level of equity ratio, we will take into account external business environment change and expected business performance and are continuing to discuss amongst the management team. Please turn to page 33. This slide shows the past three years PL and balance sheet measure indicators are shown. In the capital structure, I believe optimization of capital structure is the right phrase. This has been the issue for O&E 2030 as the interest-bearing debt increases, equity ratio continues to decline. Using the financial leverage, various numbers are changing, as shown here. Next, as for external environment and how as to how we see the external environment on page 34. The first is about a global environment. This goes without saying, but since last year, in various countries, there have been trade policies implemented by various countries, and tensions are rising in the past few years in the Middle East. Because of these situations, demand-supply balance forecast has become more difficult. The second point is port congestion. with respect to this issue recently in Asia and also mainly in Europe. Almost constantly, delay is occurring due to port congestion, which has become a headache for operators. And the third point is the demand for container shipping globally. The changes are cyclical, but in the medium to long term, We believe that the trend is that of an expansionary trend. New build vessels completions are expected to increase towards 2028. On the other hand, older containers are not yet scrapped and operated in quite large number. Those over the age of 20 account for more than 20% of overall number of vessels. Depending on the demand supply situation, I believe these will be gradually be replaced. Next slide, 35.

So here we have six items. When we build the initial plan, we structured it this way. In other words, what would be our target indicators? This is something that we set two years ago. As we look ahead, we decided to review at this point of time. And some of the changes that we've made, I think I can point out to two areas. First is the contents of what we invest in. And so, for example, on the top right, we say here investment scale is $35 billion. The total figure has not changed, except what will be given the investment has been changed. We don't have the breakdown here. However, compared to the original plan, it is not just about using the new but then we're also going to be using used fleets. And for terminal side, we're also trying to make sure that we be able to continue investing to build a competitive fleet and provide sustainable services as we expand the allocation investment in second-hand vessels and terminals as well. And also for the dividend payout, here we say dividend payout ratio 40% at the bottom right. Originally, it was 30%. And so this has been revised to 40%. This reflects some of the recent performance. And so that is why we have decided to revise the figure to 40%. Finally, slide 36. Here we show one's balance sheet. We compare FY23, FY25, and on the right-hand side, we don't have the figures, but as we head towards FY23, we try to show what is the capital structure we aim to achieve. As I have explained earlier, we have talked about how we mean to make our investment, how we mean to finance ourselves, and we'd like to make sure we'd be able to achieve optimal financial leverage. And so this is how we expect for the structure of balance sheet to be, assets as well as liabilities. So this is the overall direction that we're trying to achieve. So 1.20.30, that completes my explanation. Thank you very much.

Thank you very much for those presentations. That concludes the presentation part. Now we would like to entertain questions. First question, please. Thank you for taking my question. I have two questions. The first on page 12 about share repurchase. The background of the budget was what was explained earlier, management-directed allocation and how this will be used in this fiscal year or not used in this fiscal year. Is that the background based on the management-directed allocation because of increasing operating cash flow management-directed allocation was generated, but it was mentioned the previous time that financial cash flow increased, which remains unused. If you could elaborate on these, please. The second question is about the impact from the Middle East situation. In recurring profit, you've explained that there was a negative impact. How much impact was there negatively to recurring profit? market conditions are improving and the energy cost is also increasing. And how will that be offsetting each other? And if the Middle East tension situation is prolonged, what will be the impact? Thank you very much for your questions. As for the first question related to the share repurchase, 110 billion yen of management-directed allocation, how that relates, I would like to ask Mr. Banosie to respond. Thank you for that question. As shown on page 12, as for share repurchase, as of now, there is nothing that is decided. But in the future, it will be considered flexibly. And what will be the funding source for that? As you've rightly mentioned, management-directed allocation. As for the management-directed allocation itself, in fiscal 26, for the moment, operating cash flow and investment cash flow, when we look at the balance of this, we believe that there will be about 110 billion yen management-directed allocation. But this is not certain until we actually see the results. So how it will be assigned or allocated to share, repurchase, etc., that will be determined going forward. As for financial financing cash flow, as regards investment, we would like to use a certain leverage in financing, and that is what we are currently in the process of doing. For share repurchase, we for the moment do not anticipate any financing from outside for that purpose. So that is all regarding share repurchase. Turning to your second question related to Middle East situation. Actually, the Strait of Hormuz right now is closed and the direct impact that we are feeling from that is a liner trade business including container ships and car carriers dedicated to cars. VLCC or LNG tankers are also affected. But as for VLCC, the supply source is being diversified, including initiatives by the government of Japan. So other than the threat of hormones, as shipping companies, we are dedicating our efforts and market itself is rising significantly. So for VLCC, financially, we do not expect any major impact. On the contrary, we believe that there will be positive impact financially. As for cargo, car carriers and container shipping will be affected. As for container shipping, I would like to ask Mr. Asso to respond later, but for car carriers... beyond the Strait of Hormuz, the destination beyond Strait of Hormuz, we are not able to deliver cards. And that means simply that cargo volume will decline. That is a negative impact. And up to the end of June, we expect that situation to persist. And that is the assumption that we are including in our calculation as a negative impact. On the other hand, there are some other efforts that we are making. In the Gulf area, consignee customers are delivering goods to Gulf areas and They are requesting that delivery be made as soon as possible since we hear that purchase intentions remain strong. Ships cannot go in, but locally in the market, there is a demand for cars to be delivered, so we are trying to develop alternative logistics routes. This respect cannot be translated into numbers in the plans. But there are declines, but we also believe that there are positive effects that will be offsetting the decline. As for container shipping, I would like to ask Mr. Asso to respond. Thank you for the question regarding container shipping business. NYK's assumptions. are that until the end of Q1, until June, we will be suspending services destined for the Middle East, and that is included in our assumptions. And with that, there will be two impacts on RPL. Service is suspended. So without such suspension of service from the Middle East route, we should have been able to enjoy profit, which is no longer the case. That is for one. And the second significant impact is rise in bunker cost. From March, there has been significant surge in bunker cost as for bunker oil. surcharge is included or is taken into account by ONA. But with the sudden surge, usually we calculate surcharge based on the actual price over the past few months. But because of the sudden surge, there is time lag and we cannot catch up. So the Middle East service suspension and rapid surge in bunker cost, we have not been able to make recovery. at this point in time and so that is a negative impact. But there will be timing difference in the second quarter onward. This bunker cost surcharge rise will already be taken into consideration. So this will be pushing up the profits from July. We expect to lift suspension of the service and will expect a normalization of services to Middle East, although we also cannot expect that there will be full normalization immediately, but our assumption is that from July, Middle East service will be normalized. So in the first quarter, there are negative impacts, but in the second quarter, because of the fuel surges, et cetera, there will be positives in all, We cannot expect a sudden recovery to recover everything at once, so regarding O and E, this is considered a negative factor for its profitability. As for the general development, that is what we are assuming, but as for actual expenses, how much expenses do we expect to incur, I would like to ask Mr. Banno, CFO, to offer additional comments. In the materials, we did not explicitly state how much impact there will be that we expect, but as Mr. Aso explained, regarding O and E, because of a banker cost, Some can be recovered, but we cannot recover everything, and that is a significant impact. And other than that, our other businesses, such as automotive business, dry bulk business, in these businesses, banker price is rising, and some is recovered with a buff, but our exchange rate assumption or exchange rate is such that yen depreciation is significant, especially due to the Strait of Hormuz situation. And the weaker yen is offsetting much of that impact, and that is included in the current calculation. And to be more specific, how much is it going to be in total? I think that is the gist of the question, including O and E. A little less than 20 billion yen, I think, is the duration that is included in the estimated budget this time. Thank you. I have a follow-up question on container business. Looking at the freight right now, it is rising, and peak surcharge may also be included. What are the assumptions when you developed the profit plan? Thank you for that additional question. Lately, as you have described, the situation has been such that the spot rate has been rising continuously. Shanghai container indicator is close to $2,000. And this is also taken into account to a degree, to a certain degree in O&E plan. As for peak season surcharge or emergency fuel surcharge, this imposition of such surcharge, this was announced in March. And to an extent, this is also taken into account. Despite all of these being taken into account, it is and not the case that we are able to recover all of the costs. So the issues that you've mentioned are already taken into account. Thank you very much. Next question, please.

Thank you. Allow me to ask my question now. I have two questions I'd like to raise. My first question is about your dry bulk business. Your market expectation, I think, has improved. That is the sense I get. So you have a plan to increase your profit. You're trying to obtain the advantage of the market, or maybe there's going to be some change in the operation. That's what I'd like to know. That's my first question. Second question is about your logistics of business. So goodwill, amortization. is going to deteriorate your PL. But from next fiscal year, what is going to be the level of profit you'd be expecting? So for example, it's 10 billion previously. In the previous year, do you think you'd be able to come back to this level soon? Or will it take a little more time before you'd be able to come back to this level, if you'd be able to give a little more flavor here? Thank you for your question. So to answer your first question in regards to the dry bulk business, I'd like to start off. So this is something that I did mention when I mentioned about the premise. So when we look at each of the vessel, so for FY26, the market condition is going to become better for all. With that said, during FY25, there were some areas that did not exactly go well for us. So it really is about the exposure. In other words, there were some vessels that we were not able to use to its maximum. So even with the market condition turning better, we do need to think about the optimal exposure in operating the vessels. For example, Panamax, or it could be Handy. And for that, I think this is an area where we want to enhance the optimal exposure. In other words, it might be downsizing the exposure. But then, for example, for cape size, these are the size that we know we still need more. And so that's an area where we might want to increase our exposure. So it really depends on each operation. And that's something that we have baked in in our next plan. Your second question, in other words, for our future expectation for the logistics business, that's something I would like to ask Mr. Aso, Managing Executive Officer, to answer. Yes, I thank you for your question. So for this fiscal year, in other words, FY26, in the full year, we expect this is going to be a break even, zero billion yen recurring profit. And that again, as we explained earlier, some of our previous deals, and of course that's not everything, but then there were a lot of large size deals that we experienced last year. And so there was large goodwill amortization and also restructuring cost. that is going to a toll. And if we exclude that for FY26, we expect that the profit level that could be created would be exactly the same level as we had been able to do in FY25. For the volume, air cargo as well as marine, especially for air cargo, air freight, semiconductor or e-commerce would be the mainstay. And we're able to maintain the same level level of volume for contract logistics. There are some variables, but basically we expect the volume to be pretty similar to what we found last year. Now, it is also true that there are some areas that we still need to see, for example, some of the extension of the impact coming from inflation or any negative impact to the economy. That is something that we still are finding. It is still lingering, and that may change our future outlook. So the Walden Healthcare, the business, this is something that we introduced on slide 24. So such acquisition that enables synergy to our existing business is something that we'd be also aiming to do. So Walden Group's healthcare logistics business, if we just look at this on a standalone basis, After amortization and goodwill, we're expecting that we should be able to turn profitable after by 2028. And so that would be something that would be adding to our overall logistics. Thank you. In other words, for the logistics, it is going to be from next year and onwards where you'd be able to see an improvement. But then because of Walden Group acquisition, it is going to take a little more before you'd be able to come back to 10 billion yen level. Right. So next fiscal year, we still need to see how the figures would go. I cannot really say about the future, but of course, there still is a possibility we may be able to come back to our previous level. We still do expect there's going to be some integration cost for next fiscal year. And for over 20 years, we expect this amortization impact will linger. So there will be some impact. But compared to FY26, we should be able to see a better level, profit level. So it doesn't mean we never expect our profit level to come back to FY25 level. Understood. Thank you very much.

Next question, please. When called upon, please unmute and please proceed to your question. Thank you for taking my question. Can you hear me? Yes, we can. I also have two questions related to the previous question on logistics segment. Once again, in this fiscal year, 10 billion yen decline in profit, and Goodwill, I think, is also 10 billion. So that explains this decline in profit completely. But what is the Walden profitability? And using logistics organic growth rate, what is the growth rate? What are your views on this? Fiscal 26 ups and downs, could you elaborate on these further? And on page 19, you have shown cash flow numbers. Investment cash flow for fiscal 25 was not as large as expected. In fiscal 26, I think there was a time lag effect from fiscal 25. 760 billion yen cash out for fiscal 26. Is this an extraordinary factor or will cash out level be the same beyond fiscal 27? Thank you for those questions. As for the first question about logistics, in July, we will have presentation sessions specifically on logistics business. What's the plan? We haven't made an announcement yet, but our group plans to host a presentation session on logistics business where we hope to be able to provide more details. We will separately provide information. That is our plan. So as exactly as you have pointed out, there is a Walden, but at use and logistics, what was the expected organic growth? What was the growth strategy of use and logistics? We expected those questions. And we would like to address these questions at this scheduled presentation session, which is expected in the early part of July. And before that, if there is additional comment, if there is anything that you can offer, Mr. Aso, please. Thank you. As for Walden profitability, the details other than EBITDA, the numbers, the finalized figures that we are not able to discuss, unfortunately, today. But what I can say is that in December last year, this deal was closed. And since then, we are... looking at this business closely, was there any surprise before we decided on this acquisition? Is there any negative findings? That has not been the case at all. On the contrary, Our President explained PMI is proceeding smoothly. It has been close to six months after the closing of the deal. We are proceeding at pace that we have expected, including restructuring of the organization. As indicated earlier, we hope that there will be positive impact out of this opposition as for organic IFF for forwarding business, especially starting from Asia, departing from Asia. We have a strong business in using logistics where we hope to capture the growth in logistics. In the past, we also conducted M&A in the United States and also in the UK and European continent, including for e-commerce and healthcare. These past mandates, we believe, will contribute to increase in logistics volumes, although subject to economic conditions of each country, but we are hopeful that there will be growth, and we would like to provide some more details at the upcoming presentation session. So that is the best response that we are able to provide for your first question. Does that mean that Walden profitability and organic growth rate it sounds as though you expect to have add-on profit. And I don't think that is entirely consumed by restructuring PMI cost. So are you making conservative estimates? It is not necessarily the case that we are making conservative estimates. Other than Walden, There are also areas that are affected by market conditions more than we expected, especially forwarding business. Given these situations, maybe we are a little on the conservative side. But as Mr. Aso commented earlier, we have made investments in various forms in addition to Walden and automated warehouse, a very large warehouse in the UK is one of them. And there have been several investments. And we believe that there are many sources of future profitability inclusive of these. What we expect But in the beginning, there is still one-off expenses and we have to persevere for the initial one to two years. And that is what we would like to elaborate on in the upcoming presentation session. Turning to your second question, certainly, as you have seen, regarding investment cash flow, there are some fluctuations and you might suspect that there are some extraordinary factors, but that is not the case. I would like to ask Mr. Banno, CFO, to respond to that question. Thank you very much. And you're quite right. As shown in slide 19, previous forecast is shown at the time of February, 670 billion yen. was the expected cash out, but this decreased by 300 billion yen in just a few months' time. And this is because of timing difference. Some of them were shifted to fiscal 26. On the other hand, in fiscal 25, there were some extraordinary factors. The initial cash flow, outflow, inflow, There are offsetting factors between outflow and inflow, so we are showing net cash flow numbers, but there were some number of inflows. NCA closing, because of that closing, we had some cash inflows. So it might appear as though the cash is smaller than it actually is. But beyond fiscal 26, if it exceeds 700 billion yen, that is not the level that we expect to maintain. It has been raised to that level because of some extraordinary factors. But how high will that be? It will be determined based on the overall balance, including operating cash flow. And we are in the middle of developing the next medium-term management plan. And to what extent there will be allocation to growth investment, that is also under consideration right now. and we would like to provide information in the future, but we do not expect the cash flow level to remain at 700 billion yen level for the next several years. Thank you.

I know there are some who are still raising hand, but we would like to end the session because time has come. We will make sure that if you'd be able to communicate with the IR group, we'd be able to provide you with a response to any questions you may have. With that, we will close the earnings result session. With that, thank you very much for your participation.