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.