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April 01, 2016

Message from the CEO on MOL Foundation Day
One MOL, One Goal - Unite as 'One' to Overcome Difficult Times -

On the occasion of Mitsui O.S.K. Lines' 132nd anniversary, we are pleased to bring you a message from our President & CEO, Junichiro Ikeda.

One MOL, One Goal
Unite as 'One' to Overcome Difficult Times

Today, I am honored to join all of my MOL Group colleagues in celebrating the 132nd anniversary of the MOL Group's founding. We launched the midterm management plan "STEER FOR 2020" in April 2014, and set a course toward solid growth through three innovative changes. While we have no doubts regarding the appropriateness of the steps outlined in the plan, we have since witnessed sweeping changes in the business environment underpinning those innovations. Namely, China's economic growth stagnated, while plummeting prices for crude oil, iron ore, and other resources took their toll on the economies of resource-dependent emerging nations. This in turn led to a slowdown in sales of materials and equipment due to delays in resource development. At the same time, the energy mix changed in step with rising environmental awareness. In other words, the end of the energy-driven economy put us in our current situation. We also realize that it will take time to resolve the fleet oversupply issue, as many high-priced newbuildings are still on order, undelivered, while scrap prices remain low.

The business environment surrounding the ocean shipping industry is extremely difficult. In particular, markets for our main fleets-dry bulkers and containerships-show no sign of recovery. To successfully adapt to the new business climate, enhance the quality of our businesses, and return to a sustainable growth path for the next 100 years, we need to fully implement business structure reforms and steadily execute the action plans to restore our business performance, including those we are carefully reviewing internally. The profitability of the tanker and ferry divisions, which had stagnated, has shown a sharp recovery thanks to the hard work of those involved. These divisions are now making significant contributions to our group's consolidated business performance. I am confident that every other division can do the same.

Today, let me start with two items I want to emphasize as we move ahead with our business structure reforms.

First of all, we must strengthen our business, and develop deeper, broader trust in our customer relationships. We cannot complete our series of business structure reforms simply by scrapping high cost vessels, streamlining our organization, and scaling down our business to a realistic level. Nor will fully executing these reforms automatically bring about a V-shaped recovery. Our business environment is in the midst of major changes. These reforms are not just an extension of the past. Our strategies must now assume a vastly different business environment than what we experienced before. Whether the company will be able to stay on a growth path by leveraging these business structure reforms depends on how we can strengthen our business in the short term, and in the medium and long term, to create business models in response to an evolving business environment.

Naturally, we must work with our existing customers to expand business by leveraging our strengths. But we must also take a proactive approach, especially with overseas customers. For example, under the watchwords "One MOL," we must forge stronger ties, expand trade and strengthen long-term relationships with overseas customers. We recently hosted receptions for customers in India and Singapore at which Japanese and national staff cross-divisionally united as a "One MOL" team, to promote the group's collective strength. Our objective is to become the logistics partner that customers think of first. We will bring together the specialties of each business division, meet detailed customer needs, and encourage every member of our group to meet face-to-face with customers at every level. I know we can become that kind of a corporate group. To realize One MOL, One Goal, I am also making it a high priority to play the role of the group's top salesman.

As we work to strengthen our business, we can't rely solely on idealistic approaches like willpower and individual legwork. We must revamp our organizations and systems to get the job done.

Today, April 1, a new management system takes effect, with new executive officers and division and office general managers. From this year on, we will synchronize the beginning of the business plan with the simultaneous launch of new organizational changes and systems. I think this will make it easier than ever to get moving toward our targets.

At the Tokyo Head Office, we launched two new business units. The Dry Bulker Business Unit is a cross-functional organization aimed at further energizing our activities. Its main missions include reliably advancing business structure reforms to optimize the fleet portfolio and making more efficient use of management resources. The new Energy Transport Business Unit, meanwhile, aims to precisely meet the needs of a diverse lineup of customers in energy-related industries and develop our business activities on a global scale that transcends divisional frameworks.

At the same time, the Asian region continues to grow in importance to our company. Last year, in order to enhance intra-regional ties and convey the group's comprehensive strength and brand power with One MOL, we introduced the Chief Executive Representative system in three regions of the world. And now in Asia, the Middle East, and Oceania, we have designated key strategic countries and appointed Chief Country Representatives who report directly to the Chief Executive Representatives of their respective regions. As the face of the MOL Group, they will promote and support various activities in their countries, bridging the lines between divisions. I am especially hopeful that the business divisions will make effective use of this system.

The second topic I want to emphasize centers on awareness of our company's strengths and where we are No.1. Businesses that already have advantageous business models and key differentiators should keep working to expand and become No.1. Of course, we must objectively assess whether our current business models will maintain our competitiveness five to 10 years from now, as the business environment continues to change. In the present phase, which requires reform, I especially hope that our managers will lead according to their vision, with a focus on strategy and innovation. I plan to ask the relevant executives and division general managers to outline their divisional strategies and visions, which focus on the next five to 10 years.

Division general managers, please be sure to share your strategies and visions within the organization. And younger people, try to inspire those around you with new ideas and an eagerness to take action. Have faith in your managers and colleagues, and unite as a team to overcome our current difficulties.

In addition to the points I mentioned above, we must keep pace with our competitors in taking advantage of IT and other new technologies, such as artificial intelligence (AI), while responding effectively to environmental issues. We established the IT Strategy Committee and Technology, Innovation and Environment Committee as expert panels to address those two themes. I am personally involved with those committees and look forward to deepening discussions about the ideal image of the MOL Group, and working to realize it as quickly as possible.

In addition, as I take a broad view of our group companies, it is clear that many of them have shown steady growth, recovered from poor business performance in the past, or gotten themselves on track for strong growth. By making effective use of group companies' assets, both tangible and intangible, we are in a better position than ever to take an aggressive approach to business development. For example, we have several group companies in Japan offering warehousing, customs clearance, and truck transport services, targeting both export and import cargoes. Reorganizing our domestic logistics businesses, while adding the extra dimension of ferry service, will create added value and allows us to offer one-stop services to our customers. Aside from the logistics business, it is indispensable for us to sow the seeds of growth, which will shape the future, both in our existing group businesses and other new business fields.

The biggest tasks we face during FY2016 are, first, to rebuild the foundation needed to complete our business structure reforms and win through global competition. Second, we must address fleet oversupply and scale down our market exposure. Third, we need to rationalize unprofitable routes. Fourth, we will focus on responding to our customers' transport needs. We absolutely must achieve our financial targets for this fiscal year by accomplishing these tasks, enhancing our cost competitiveness, and improving profits through our existing business activities. Under today's drastically changing business environment, we must make these tasks our top priorities, and address them swiftly and carefully.

I mentioned when I took over as president that our company has faced heavy seas time and time again over the past decades, such as the rapid appreciation of the yen, resource price bubbles and busts, the financial crisis stemming from the Lehman Shock, skyrocketing bunker prices, and ongoing losses. Despite these challenges, our company has continued to grow to where it is today through the united effort and accumulated ingenuity and creativity of everyone in the MOL Group, from top management to front-line employees. As we move ahead, we all must pay utmost attention to compliance, commit ourselves to safe operation and dependable service that our customers can count on, and deepen the trust that our predecessors have built up over the course of our company's history.

FY2016 is only one of 133 years for our company. But if everyone, executives and employees alike, is ready to meet the challenges of the next 100 years, this year will mark a turning point in our history. Let's pull together and win!

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