To our shareholders and investors
The business environment proved extraordinarily difficult for Mitsui O.S.K. Lines (MOL) in the fiscal year ended March 31, 2016 (fiscal 2015). Economic growth continued to slow in China, while most other emerging economies stalled on falling prices of crude oil, iron ore and other resources. Sales of materials and equipment flagged due to the postponement of resource development projects, while heightened environmental awareness spurred changes in the global energy mix. These and other factors created a major shift in the external environment, an inflection that could signal the end of natural-resource and energy-driven economies.
The shipping industry continues to confront a glut of vessels due to depressed prices for scrap metal and the high number of newbuildings still slated for delivery. As a result, market conditions for both dry bulkers and containerships remained at historic lows. We do not expect the operating environment to fully recover in the short-term. Recognizing the need to confront this challenge, we have decided to implement structural reforms in both segments and recorded the associated costs in fiscal 2015. We will press ahead with the disposal of high-cost vessels and accelerate the transformation of our fleet. We want to attain optimal scale, given these changes, and regain our resilience against market fluctuations.
In fiscal 2014, MOL embarked on its midterm management plan STEER FOR 2020. The business strategies we are taking to transform our group center on “three innovations.” We’ve made considerable progress on the first two: “innovation of business portfolio” and “innovation of business model.” This was achieved by accumulating long-term, stable profits, beginning with LNG carriers and offshore businesses, while greatly increasing our fleet’s market tolerability and competitiveness through recent structural reforms. We will also devote greater attention to the third innovation "innovation of business domain" as we proactively expand the ferry, logistics and container terminal businesses.
This year, fiscal 2016, marks the last year of the current midterm management plan. Although there is no change in our strategy to implement the ”three innovations” moving ahead, we are currently in a position where we have no choice but to significantly revise our profit and financial targets. Additionally, we need to work hard to complete the aforementioned structural reforms as our top priority. Thus, we have formulated a single-year management plan and are executing it steadfastly for successful implementation.
To return to a growth trajectory and outperform our competitors globally, we must take steps beyond optimizing our fleet for the new market environment. We also need to strengthen our sales capabilities to ensure a robust foundation for future growth. As a marine transport company, MOL’s business encompasses not only dry bulkers and containerships but also LNG carriers, tankers, car carriers, ferries and domestic transport. To precisely meet the needs of our customers, we bring together each segment’s unique strengths. When someone thinks logistics, we want MOL to be the first company that comes to mind.
MOL has been navigating the oceans for over 130 years. During this time, MOL has grown into the world’s largest full-line marine transport group by anticipating the needs of its customers and the demands of the future, while overcoming various challenges along the way. To fully make the MOL Group both “excellent and resilient,” strengths described in our Long-Term Vision, we will continue to work diligently to maintain the trust of all our stakeholders.
We especially appreciate your understanding in light of the sweeping changes in the business environment. We will need your continued support as MOL progresses through this transformative stage. Thank you.
April 28, 2016
President, Chief Executive Officer
Mitsui O.S.K. Lines, Ltd.