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April 01, 2011

President Koichi Muto's Speech on the Anniversary of MOL's Founding

On the occasion of Mitsui O.S.K. Lines (MOL) 127th anniversary, we are pleased to bring you a message from our President, Koichi Muto.

"Those who act swiftly survive in an era of change"

For everyone in the MOL Group, today marks the 127th anniversary of our company's founding. Steeped in a long history which now spans three centuries, we have overcome many obstacles and hardships on our journey to becoming the world's foremost general maritime shipping group. During the time our company has existed, Japan has endured many tragedies. However, last month's "Tohoku district - off the Pacific Ocean Earthquake" must be numbered among the very worst. Some are calling this Japan's most catastrophic disaster since the Second World War. Our prayers go out to all those who lost their lives in this earthquake, and our deepest sympathies are with those who have lost families and friends, and those who even now are suffering in the harshest of conditions following the devastating destruction caused by the tsunami. The MOL Group will continue to assist in whatever way it can in bringing aid and relief to the survivors and helping the affected region to recover from this tragic event.

Today's efforts can change us 10 years from now

Firstly, there is something that I would like everyone to consider. A decade may seem a relatively short period of time for a major change, but how many of you could have imagined the present shape of the MOL Group 10 years ago in 2001? Although we held high aspirations and set challenging goals 10 years ago, I think what we have actually achieved far exceeds what we could have imagined then. During the last 10 years, our fleet has grown from 640 vessels with a total deadweight tonnage of 36 million tons, to a forecast 920 vessels with a deadweight tonnage of 62 million tons. Our consolidated revenues have grown from 887.9 billion yen in fiscal year 2000 to a forecasted 1,530 billion yen for fiscal year 2010. Our ordinary income has grown from 53.0 billion yen to a forecasted 120.0 billion yen. Moreover, within this 10 year period, in fiscal year 2007 we recorded revenues and ordinary income of 1,945.6 billion yen and 302.2 billion yen, respectively. This achievement was due in part to external factors. However, I believe these achievements were in no small measure due to the way we chased the vision and targets we set ourselves in 2001. Today, we are once again standing at the threshold of a challenging and exciting new period in the shipping industry, and we have been gifted the opportunity to achieve further major transformations and advancements for the MOL Group over the next ten years. So, on this special anniversary day, with an eye towards the future, I would like to discuss what kinds of efforts we must make in the year ahead.

Anticipating change in the second year of GEAR UP! MOL

Today also marks the start of the second year of the mid-term management plan "GEAR UP! MOL." For fiscal year 2010, the first year of the plan, we forecast favorable operating results and achieved a consolidated ordinary income of about 120.0 billion yen, which exceeded the target set for the first year of GEAR UP! MOL. We also achieved the plan's initial goals of recovering from the economic crisis and the acceleration of business development in growing markets. However, although we can take some satisfaction from this performance, a closer look reveals a more mixed picture. While the Containerships division and the Car Carriers division both made an outstanding recovery from fiscal year 2009, when those divisions along with the Tankers division ended in deficit, the Tankers division continued to struggle amidst intense competition. This situation shows that our "centipede management"(*1) can work well and bring good results by holding a strategic balance of multiple types of maritime shipping businesses, enabling the strong performers to prop up the weaker performers. However, as we look forward to fiscal year 2011, there remain points of concern in each of our businesses. These includes the huge number of new vessel deliveries due to take place, the piracy problem in the region of Somalia, and the unrest in the Middle East which is likely to push up oil prices. How all these events play out in is unknown. However, what we can do is position ourselves to more strongly deflect the negative consequences and adequately prepare ourselves for any coming difficulties.

On a more positive note, the IMF forecasts high global economic growth of 4.4% for 2011. Economic growth of the emerging economies is forecast to be a remarkable 6.5%. As espoused in GEAR UP! MOL, our opportunity for growth lies solidly in the global market, particularly in the emerging economies.

In order for MOL to realize the potential that exists in these growth opportunities, mixed as they are with uncertainties, it is essential we identify and quickly respond to any indications of change. I believe it is only those who make swift and sure judgments, and adapt quickly in response to changing conditions, who will succeed in this environment of intense competition. The shape of trade can change dramatically overnight, and the maritime shipping business environment continues to grow evermore volatile. It is important we do not flinch in such a difficult business environment. Rather we must take whatever necessary steps to fortify our defensive capabilities by improving and refining our risk management, strengthen our spirit of resolve, and respond boldly to change and new challenges. For us to remain competitive at all times, we need our management is fully utilize their skills and experience in shaping our responses to changes.

*1 centipede management:
Expanding business in multi ocean shipping segments can be likened to a centipede with many legs

Optimization of our global structure

To grasp growth opportunities in the growing global market, we must remain unrelenting in our efforts to create a company structure that is optimally suited for this purpose. Already, the MOL Group's revenue from trade outside of Japan's inbound and outbound trade exceeds 50% of total revenues. However, in GEAR UP! MOL, the plan is to lift this figure to 65% by the end of fiscal year 2012. This fiscal year, we will GEAR UP our structure in order to further expand our trade network in the growth markets of the emerging economies. Some of the measures we must take to compete in the markets of the emerging economies will no doubt require endurance and perseverance to overcome multiple challenges. Without a doubt, our efforts to develop an organizational structure which enables us to anticipate change and respond to these markets will have a profound effect on the shape of the MOL Group in 10 years from now. Measures to achieve these structural changes are already underway in our Containerships division. The thrust of these changes is that we choose optimal locations to construct business sites that best suit the trade; that we secure and nurture excellent personnel at such sites; and that we get these people to actively engage in their business with a global mindset.

The crews of our vessels are of course a critical part of our operations, as well as been a vital factor in our efforts to ensure and enhance safe operation. However, in fiscal year 2011, it is possible that we will see a recruiting environment where there is likely to be a shortfall in the availability of seafarers possessing exceptional experience and quality, mainly due to the large number of new vessels that will be delivered globally. To preempt this situation, MOL is taking positive steps to secure and develop seafarers of outstanding potential from countries worldwide. For example, we are providing extensive training to crews using our company-managed training vessels. The young and talented seafarers partaking in this training have been recruited from countries worldwide, such as the Philippines, India, and Europe. By ensuring we secure an adequate supply of skilled crew hands and provide them with opportunities to hone and develop new skills, we can be assured of having a distinct advantage over other operators. However, we should never forget that safety is the responsibility of all of us and we must push forward towards our goal of being the company that sets world safety standards in our industry. In this way we can gain the trust of our customers and become the shipping company of choice.

Act, and think while running

Even in uncertain times such as these, when it is difficult to predict what will happen, we must always remain poised to take full advantage of opportunities as they arise. Thinking and planning is an important part of building our business, but only thinking and planning achieves nothing in itself, action is needed. We must act, move nimbly and quickly, and plan our next step whilst on the move. We are now operating in a business environment where the saying "he who hesitates is lost" is entirely appropriate. In order to boost our corporate value globally, it is imperative that everyone takes the initiative and acts, based on our overall strategy and goals, to put plans into practice. GEAR UP! MOL provides the direction and goals for each division, setting a framework within which they can proceed with concrete actions. We must respond to change quickly and surely; confirm the directions we are moving in through timely "Compass meetings"(*2); and eliminate uncertainties about our future directions so that effective and confident actions can be taken at all times. Let us work together so that this time next year, on the day of our foundation anniversary, we can each state without hesitation, myself included, what we have done to boost the corporate value of the MOL Group. But rather than reveling in our achievements, we must then take the next step, and the next, and then the next, as we push the company to ever greater heights. Please join me in the challenge of making the MOL Group a group that leads the Shipping Industry, a group that may be unrecognizable in 10 years from the Group that exists today, but a group unparalleled in quality, expertise, and safety.
Finally, I would like to wish for the safe operation of the entire MOL Group fleet, and the health and happiness of all our employees and their families worldwide, who are all members of the MOL Team. Let us move forward together.

*2 Compass meetings:
A meeting organized to facilitate direct communication between the president and employees, division by division

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