April 1, 2002



President Suzuki's Foundation Day Message
to MOL Group Employees


On the occasion of Mitsui O.S.K. Lines (MOL) 118th anniversary, we are pleased to bring you a message from our President, Kunio Suzuki.



On April 1, we marked the 118th anniversary of our company. I would like to take this opportunity to talk about the direction we should take in the future. Today, the MOL Group includes 16,000 employees all over the world, in addition to 7,000 crewmembers aboard Group-operated vessels. I would like to remind all our directors and managers that they have the responsibility for taking the initiative to meet the expectations of this large, diverse group.

We recently revised our business forecast, and we face a very difficult business environment. Consolidated ordinary income for fiscal 2001 is forecast at \35 billion, which is much lower than the goals set out in our mid-term management plan, MOL next. Although the sluggish dry and tankers markets are partly responsible for our poor prospects, the biggest factor is the declining performance of the liner business. Restructuring of the liner business is the key to completing the MOL next plan and ensuring the company's continued growth.

Now I would like to review the basic policies of MOL next, which grew out of the seven-year MOL's Creative and Aggressive Redesigning (MOCAR) Projects. MOL next aimed at strengthening our corporate structure, sales/ marketing, and financial capabilities as well as fostering growth and expansion through strengthened competitiveness.

When we set our target of the 1st year of the MOL next, we expected that all of these figures could be accomplished when certain conditions were met. But while exchange rates and fuel costs are moved in our favor, the decline of the liner market and the drop in freight rates were much larger than we expected. On the whole, conditions are much worse than we expected.

But we cannot blame all of our problems on changes in the business environment. Were we diligent enough in determining our plans for the liner business? Have we responded appropriately to changes in the business environment? Have we thoroughly considered the tasks we need to accomplish in the future? I want to ask those in charge of the liner business to take whatever steps necessary to respond to these difficult circumstances. It has been three years since we inaugurated the VLC program, and I hope to see the liner business return to profitability on its own soon, without thinking of relying on the profits of other divisions.

However, it is clear that our liner business has drastically strengthened its international competitiveness, compared to 1998 and before. Many other liner operators around the world also find themselves in the red, like MOL. And while some of our competitors may not survive this difficult period, and while we are much stronger than other shipping companies because of our diversification of our business fields, I believe our future is bright if we can continue to improve our competitiveness. To everyone in our liner business, I want to say, now is the time to overcome our problems - the sooner the better.

The results of non-liner divisions have been slightly higher than MOL next goals, although the dry and tanker markets declined rapidly during the second half of the year.

Overall results for FY2001 is expected to be lower than the MOL next goal and lower than the previous year. Nevertheless, ordinary income is expected to be almost the same as FY1999 - the second best in our history.

That indicates the success of the MOCAR Projects and MOL next. It is clear that these action plans have taken us in the right direction - now we must continue to build a stronger MOL with customer-first services and cost reductions that will ensure ongoing competitiveness.

Now, let's measure the progress we have made on MOL next. First of all, let's look at our efforts to expand sales in growing areas. Although MOL next set a goal of signing contracts for 10 new LNG carriers over three years, we signed eight contracts last year alone, and are continuing our sales efforts. We expect FY2005 profit for the LNG business to be double that of FY2001. In addition, the profit for the methanol business is projected to double its current profit by FY2004. What's more, these businesses depend mainly on long-term contracts, and estimates are based on already contracted ships.

Cost control is another key issue in MOL next. During the past year, we reduced costs by almost 3 billion yen more than our initial target of 8.5 billion yen. We're expecting to reduce costs even further this year. And while our initial plan called for 15 billion yen in cost reductions over three years, we will raise the target to nearly 30 billion yen, which will make our company even stronger.

I know I can count on MOL Group employees around the world to keep up their efforts to reach this goal.

We have also made it a priority to reduce our interest-bearing debt. MOL had nearly 1 trillion yen in interest-bearing debt when we merged with Navix Lines in 1999. This is expected to drop to about 660 billion yen at the end of the last fiscal year, and will reach 600 billion yen by March 31, 2004, assuming an exchange rate of 110yen-$1. We will continue to this effort to strengthen our financial structure.

And we will make ongoing advances in our management restructuring program, centering on the Board of Directors, to ensure a system of corporate governance that meets the needs of the times. We must work to develop a flat organization that encourages the participation of all employees.

I look forward to working with you as we make every effort to reach the goals set out in MOL next, and I am confident that we can achieve our objectives.