MOL President Ashida's 2009 New Year Message
January 05, 2009
"MOL New Deal"
Let's keep challenging with unwavering confidence for future opportunities
A Happy New Year to everyone in the MOL Group companies.
Yes, we "Can Do."
In the United States, the Barack Obama administration starts this year. As you know, he won a long, hotly contested election race under the campaign slogan "Change - Yes We Can." He will be inaugurated as the 44th President of the United States with tremendous expectations from the American people. I also, since I became MOL President, have been challenging with determined passion to grasp the change of circumstances properly and to realize big "Change" together with all of you under our slogan "Can Do".
Looking back to 2004 when I became MOL President, MOL Group's business scale was relatively small, and its financial condition was rather fragile. But, thanks to the favorable shipping market continued until the middle of last year, MOL Group could achieve over 1 trillion yen (about USD 10 billion*1) of the aggregated profit during the four and a half years.
I'm sure that, coupled with our active fleet expansion based on our apt forecast of the shipping market uptrend from 2003 and our constant and persistent effort to meet the market's needs, we could fully take a chance of the said favorable market. Now, our consolidated shareholders' equity has reached 750 billion yen (about USD 7.5 billion*1) and the gearing ratio*2 has been improved to 0.8 times. Thus, we have significantly reinforced our financial strength and successfully achieved the big "Change".
*1 Converted from the Japanese yen amounts at the rate of 100 yen/dollar
*2 Gearing Ratio: Interest-bearing debt divided by shareholders' equity
Boom is welcome. Recession is more welcome.
These days, however, the world economic climate has been changing drastically. Considering the magnitude of economic downturn since the onset of the recent financial crisis, there must be little chance of a V-shape recovery in the short term. In the shipping market as well, although the dry bulk market may rebound to some extent, we need to be ready for the difficult time for about two years before the recovery of healthy market level.
Under such a business circumstance, this is a good time to remember a wise saying of Mr. Konosuke Matsushita, the founder of Panasonic Group: "Boom is welcome. Recession is more welcome." This can be construed as follows: For the shipping industry, recession can be positively understood as a process to adjust current and future over-tonnage situation. And, for a respective company, recession makes its weakness apparent, which is invisible under normal circumstance, and leads to the next rapid progress if proper efforts rendered to overcome such weakness. Looking around the current circumstances, I realise that this is an exactly apt remark containing full of meaning.
Demand and supply of tonnage to be adjusted in the proper direction
Let me explain this a little further. It seems that there has been a series of news which sounds unfavorable for the shipping industry like that 'the rapid slowdown of world economy and the serious depression in the developed countries have a negative impact on the seaborne trade'. However, if we think calmly, the news is not all bad. Looking at demand and supply of tonnage, the over-tonnage anticipated in the near future may be prevented from happening, considering such news like that 'Chinese and Korean shipbuilding facilities which had been planning for rapid expansion are now squeezed by the financial crisis and credit crunch' and that 'many of the vessels on order have been and will be cancelled before their delivery'. If the market had dropped one or two years later, the massive volume of new vessels would have been delivered. It is not too much to say that this is an act of providence.
In addition, the scrap of aged vessels, which has been used longer than their original plan under that very strong market, will be accelerated due to the recent market deterioration. These movements will reasonably and favorably contribute to adjust demand and supply balance of world tonnage. What's more, we will have more possibility in reducing overall costs especially in maintenance and repairs, bunkers and lubricants, the price of which went up sharply due to the hike of material and crude oil prices for some years. We can also expect other issues such as shortage of seafarers and repair docks to be eased in line with the adjustment of shipping market.
"MOL New Deal"
Regarding the measures we should take now, I would like to introduce and carry out them after U.S President Franklin D. Roosevelt's New Deal program, which helped to overcome the Great Depression started from 1929. As "MOL New Deal", we should boldly and flexibly move forward various measures on short-term, mid-term and long-term basis, without being bound by the fixed ideas and accustomed way.
As to our short-term strategy, the mission "Sakaro" (a scull to move backward)* is put into effect. That means, in line with the recent decrease in seaborne trade volume, we have already taken various actions such as cancellation of expensive charterages, scrapping of aged vessels, lay-up of excess vessels, and redelivery of excess chartered vessels. At the same time, we endeavor to reduce costs and to control risks even harder. As to our mid-term and long-term strategy, in order to prepare for future increase of demand in seaborne trade, we will fulfill our fleet plan to enhance and expand our competitive tonnage. This basic strategy remains unchanged.
- * Sakaro:
- Military commander Kajiwara no Kagetoki advised building double-ended ships that could sail both forward and backward, when Minamoto no Yoshitsune was planning to invade Yashima in the Gempei War between the Minamoto and the Taira clans during the Heian Era (784-1184).
In addition, I would like to work on other opportunities, which are more difficult to materialize in boom times, such as taking a chance of M&A. Let's combine our wits and take up various ideas to change a pinch into a chance. A wise saying by Han Yu goes, "Push the raging wave back in the direction it came from". This means that "to reverse the situation in our favor by pushing back the waves which have leaned on us". Let's push back the adverse wave of today's severe business circumstances by implementing this "MOL New Deal" steadily.
Please let me mention again that the severe business climate in two years' time is expected. However, at the same time, it is a chance for new challenge and will be a timing to examine business capabilities of each organization and individual in the MOL Group. Difference in such capabilities leads to the winner and the loser of survival game among corporations in the market place.
It is said that vineyards produce better grapes in poorer soil. The roots must extend more deeply into the poorer soil to make grapes ripen well by getting nutrients and minerals from the groundwater. I would like to lead MOL Group by planting its roots deeply and solidly under this poor market to bring good wine of excellent profit.
Our corporate principles are unchanged
There are some things that should not be changed even as the business climate changes. First of all, it is MOL Group's corporate principles. And, our pursuit of long-term growth strategies is also unchanged. Further, the safe operation is our core principle that shall never be compromised.
We could complete the last year without any serious incidents thanks to the constant efforts of our seafarers, ship management companies and everyone else involved. Above all, I would like to express my deepest appreciation to all the personnel aboard for their untiring efforts day and night.
And, I would like to ask our shore-based staff to always go back to the basics in order to enhance the safe operation thoroughly further. Let MOL Group united firmly to extend this record of zero serious incidents further.
I am sure that, in the mid-to-long term, the global trade and needs for ocean shipping keep expanding in line with the growth of world population and globalization. Therefore, if we carry out "MOL New Deal" seriously and steadily to change a pinch into a chance, we will definitely get a chance to make significant progress again. Even if the circumstances don't look good, there must be a hidden sign of big chances for the future. Let's keep challenging towards the future with unwavering confidence and contribute to the better future of the world as the leading company of world shipping industry.
Lastly, I pray for the safe operation of all MOL Group vessels and I hope 2009 will be a healthy and prosperous year for all of you and your families.