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January 04, 2016

MOL CEO Ikeda's 2016 New Year Message
- Innovation to Meet the Challenge of Change -

The following "2016 New Year Message" was addressed to all officers and employees
by CEO Junichiro Ikeda.

Happy New Year to all our group members! I would like to take this opportunity to reflect on our progress, outline the challenges we face, and look ahead to how we will succeed in writing a new chapter in our group's history.

Looking back at my first half-year as CEO

As you know, I became CEO of MOL just six months ago. After completing a round of courtesy calls on our customers, I then embarked on a three-month series of meetings with every division and office at our Tokyo Head Office. Known as "HOT dialogues," these meetings took place over lunch and were designed for "Honest, Open, and Two-way" communication. The idea behind this series of 23 meetings was to get all the participants involved in brainstorming to address the challenges facing our company and arrive at creative solutions that will keep us moving together in the same direction. During these frank dialogues, I came to fully appreciate the depth of your engagement in your work, not to mention your awareness, enthusiasm, and commitment. I also became more acutely aware of the need for executives, myself included, to take a proactive approach in conveying our own passion to succeed while setting forth clear expectations. I am about to enter the second round of HOT dialogues, and I look forward to these sessions becoming regular, ongoing events.

Our corporate climate is changing for the better. We are beginning to see the results of our previous efforts. "MOL CHART" was introduced last April to express our group-wide values, and I am happy to witness its steady embrace by people at every level of our group. I can see firsthand the progress we have made through these innovative efforts to build awareness and teamwork. But I also see the need to keep building awareness until these and similar ideas become second nature to every executive and employee. "Cross-functional teams," "one MOL team," and other central concepts should be automatic reflexes whenever we start putting a plan into operation.

We need "resilience and flexibility"

Our business climate remains severe. Fleet oversupply is still an issue, and we see few prospects for recovery with the Chinese economy slowing down and markets stuck at historically low levels for both containerships and dry bulkers. The drop in crude oil prices does provide a tailwind with the twin benefits of reducing bunker costs and spurring the tanker market. However, low crude prices also raise concerns of a slowdown in resource development, which could negatively impact our new LNG carrier and offshore business projects. In addition, we cannot realistically expect favorable conditions will go on forever in the tanker market.

We must not be content to rely on methods that worked in the past. I said this upon becoming CEO last June because past experience does not guarantee our future success. You have heard much about making the MOL Group "an excellent and resilient organization," and that is exactly what we need to do. For every division, this is the time to make full use of your business intelligence. You need to collect information through your own personal networks and old-fashioned legwork, build a hypothesis, set benchmarks, talk with everyone involved, develop a strategy with a sense of urgency, then make quick decisions and get right to work carrying out your strategy. But you have to remember that you cannot adapt to a changing business environment if you are locked into your division's previous mission and mindset. You have to look at things afresh from the viewpoint of MOL's cross-divisional framework. Instead of focusing solely on your division's interests, the greater imperative is contributing to our group-wide success.

Assure customers of our reliability

I want 2016 to mark a turning point. We must recommit ourselves to safe operation. It has now been a decade since four serious marine incidents took place. To ensure these incidents do not fade from our memory, we started cleanup activities at Kashima-nada beach in Ibaraki Prefecture. With the watchwords "Never Forget 2006," we stand united in taking a wide variety of steps to enhance safety. But major incidents and lost time incidents (LTIs) still occur. Have we all truly learned enough from our past experience? How does our corporate culture benefit from such lessons? Do our processes ensure safe operation? I ask you to critically reflect on your own personal experience. Re-examine your team and everything you do in a detached, objective manner.

Last July, a fire struck the ferry Sunflower Daisetsu off Tomakomai, Hokkaido. This tragic accident claimed the life of one of our crewmembers. This grieves us deeply, and makes me realize that we can never do enough to ensure the safety of our vessels. No matter what type of vessels your division operates, we must all think seriously about the effectiveness of the safety measures in place and whether these really guarantee reliability to our customers.

Safety is not just for seagoing employees. All of us, on land and at sea, must put safety and reliability first. I encourage those in corporate divisions to take every opportunity to go onboard our vessels, such as on safety campaign visits. Executives and employees alike must learn more about on-site operations, discover more about our vessels, and develop a genuine appreciation for them. I think this is the first step in creating a corporate culture that provides peace of mind for our customers.

Reach for the top!

During our HOT dialogue meetings and other discussion forums, I have challenged executives with fundamental questions like "What is your division's strength?" "What is the source of your competitiveness?" and "What does your division do better than anyone else?" Competition for our customers' business will become even more intense if the slump in ocean shipping continues. Competitiveness is a combination of sales strength, cost competitiveness, and skill in proposing solutions to customers. I call on each of you to help boost our competitive strength and meet our customers' expectations. Furthermore, I want to make it clear that if a business does not have this kind of strength, we will need to question its reason for being. Recognize your strengths, believe in yourself and believe in your colleagues. We must be willing to sweat together as we work to win the trust of our customers.

Watchwords: "One Target, One MOL"

The inspiring story of the Japan national union rugby team in last year's World Cup is fresh in our minds. Coached by a foreigner, the team was a dynamic mix of both Japanese and foreign players. They showed incredible teamwork, upset powerful South Africa, and won three of four preliminary matches. Their success suggests how the MOL Group can leverage similar teamwork to develop our business on a global scale.

"One Target, One MOL" are watchwords for the future. Nowhere is this more apparent than in India, which I visited in November. Without fail, the employees I met in Mumbai and Delhi displayed this mindset. Our group is multi-faceted (containerships, logistics, car carriers, iron ore carriers, tankers, LNG carriers, IT, mariners…), but each of us should convey a single MOL brand in all our customer contacts. This holds true in other emerging markets, too. When I took over as a CEO, I said, "MOL is more than a cluster of vertically divided business segments. MOL is one global team." I want to underscore this once again.

Innovation to meet the challenge of change

We launched the midterm management plan STEER FOR 2020 in April 2014, setting our course toward 2020. Since then, we have stepped up investment in our LNG carrier and offshore businesses where we can expect high growth and long-term stable profits. We are already seeing the results of efforts to transform our business portfolio and business model, two of the three innovative changes outlined in the plan. Our containership and dry bulkship operations continue to be battered by difficult market conditions, but ocean shipping companies are used to weathering rough seas. Despite the storm, we must never lose sight of customer needs. In this same business climate, shipping companies all over the world are fighting for their very survival. Instead of letting the market define us or limit our success, we are moving aggressively to make the most of our competitive advantages. I want to make 2016 a year of innovative change as we write a new chapter in MOL Group history.

In closing, let me extend my fervent hope for the safety of all MOL Group-operated vessels, as well as my sincere wishes for the health and happiness of all MOL Group employees and their families.

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