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MOL President Muto's 2011 New Year Message

January 04, 2011

"GEAR UP to top speed!"

Off to a flying start

To everyone in the MOL Group, I wish you a very Happy New Year.
With six months having passed since I was appointed President in June, this is the first New Year for me as President. I will begin by looking back over the year gone by. In April, our company started the mid-term management plan GEAR UP! MOL. At the time we were formulating the plan, the economy was still in an uncertain state following the Lehman Shock. Quite frankly, I felt that without tremendous effort, it would be a struggle to achieve the planned targets. However, as it has turned out, we now project consolidated ordinary income for fiscal 2010, the first year of the plan, to be much higher than the planned target of ¥100 billion, set by GEAR UP! MOL. Just as if we were running a 100-meter sprint (or perhaps a 110-meter hurdle would be more like it), we managed to spring from a crouching position into a flying start. Of course we must not become complacent, but the smooth start of GEAR UP! MOL is truly pleasing. A powerful positive factor driving this performance was the contribution from containerships, which improved considerably from an ordinary loss of ¥56.8 billion for the full year of fiscal 2009 to an ordinary income of ¥25.9 billion for the first half of fiscal 2010. We enjoyed a tail wind in the forms of the freight rate level and the cargo trade returning to levels close to those prior to the Lehman Shock in the first half of fiscal 2008. However, back in the first half of fiscal 2008, containerships, including logistics, booked an ordinary loss of ¥1.3 billion. Bunker prices are now lower than what they were back then, but more importantly, the turnaround of containerships was also due to the result of a culmination of various cost-cutting efforts, including streamlining the organization, as well as the positive outcomes of our self-help efforts that included our bold decisions to implement slow steaming and enhance yield management. I therefore wish to particularly praise the many efforts of liner group. Those of you in businesses other than containerships are also working hard to improve our operating performance through cost cutting and other activities. On the other hand, there are some businesses that have not been able to grasp the opportunity of improvements in operating performance such as the tanker business sector, but I confidently expect them to catch up from this point forward. This year, I wish to see a further increase in the momentum of the entire MOL Group so that we can gear up to top speed.

Don't let our sense of crisis put us in a rut

However, there are many hurdles to clear on a track where we should keep running while gearing up to a faster pace. In the global economy, we are seeing the paths of the developed countries and the emerging countries diverging. While the emerging countries are growing with strong momentum leading to further growth in the distribution of goods, Europe, North America and Japan, which make up 60% of world GDP, continue to be burdened by destabilizing factors. This year, we expect many new ships to be delivered to the market, and it is difficult to feel relaxed about the maritime shipping market conditions when you consider the future supply and demand balance for ships. Cargo volume dropped significantly following the Lehman Shock, but the MOL Group as a whole used the sense of crisis as an impetus to formulate and execute measures that allowed our company to largely ride out the damage. These measures have undoubtedly served as a strong backing for our current performance. But now it is time for each and every one of us to recheck each of our initiatives to make sure our determination in action is not affected by an entrenched crisis consciousness that has accompanied our improved operating performance. We must be ready to accurately interpret signs of momentous change in the business environment to make the right decision and swiftly respond to such an event. A position of complacency with regard to safety and security in the current circumstances could easily turn into the hot bed of a future crisis. If we let our sense of crisis become part of our routine behavior, I think the end result will be a weakening of each person's ability to foresee change. The difference of a moment when responding to environmental change could determine the future survival of a business. This is the reason that this year we are placing particular emphasis on "adding unique value through business intelligence" adopted in GEAR UP! MOL. By the Chinese zodiac, 2011 is the year of the hare. So let us prick up long ears like a hare and collect and analyze as much valuable information as possible so that we can detect signs of change and respond like the hare with swift decision-making and nimble action.

Provision of cost-competitive, safety-assured transportation

Other areas that we need to avoid feeling complacent with the current circumstances are safety operations, customer responsiveness and cost cutting. The collision and sinking last year of BRIGHT CENTURY was an extremely regretful accident for us as a company that upholds operations safety as a corporate principle. For us, this is a matter for serious reflection, which must serve as an important lesson for the future. We must make steady progress toward achieving a safety operations system framework of the highest global standard. It is important that we ensure transparency in the internal control processes that cover safety operations, and realize the "4 Zeroes" approach, namely, zero serious marine incidents, zero oil pollution, zero fatal accidents, and zero cargo damage, in order to solidly earn trust from our customers. With regard to customer responsiveness in our sales activities, it is also important that we not become complacent with the current circumstances, but forever continue our efforts to earn trust from customers across the globe, not only by accurately grasping the customer's needs and responding to every fine detail with a "spirit of attentiveness" that only a company with a wealth of knowledge and longstanding experience can, but also by achieving differentiation by responding to the environment. However, no matter how much trust that customers have in you, if the cost is too high for customers, they won't use the service. We must keep providing safety-assured transportation services founded on cost competitiveness. Reflecting on our role as a maritime shipping company, let us move forward working together to win the trust of customers around the world.

Conducting exhaustive discussion and moving forward by following PDCA

It is unclear what the environment surrounding maritime shipping will be this year. But if we act with too much prudence in all matters, it will not be possible to achieve growth. In order to continue as the world's foremost maritime shipping group, while maintaining a sense of crisis and based on sound analysis, the mission for management is to evaluate risks and make decisions that will lead to results. In order to implement a higher quality of management, I wish to see everyone engage in exhaustive discussions at opportunities such as the Compass meetings so that we can put our heads together and check our compass to the best of our ability while sharing the course to proceed. Already while president, 18 Compass meetings have been held. The last of the "First Session" Compass meetings that were held by each division and office of the sales and administrative departments was just held in December last year. While the "First Session" meetings confirmed and shared management tasks, the "Second Session" meetings that begin this year focus on how the management tasks are being implemented and follow up on the results. In terms of the PDCA (Plan Do Check Action) cycle, the "Second Session" of the Compass meetings focuses on the C and the A. By the nature of this system, please be prepared for the hurdles to be continually set higher and higher with regard to the response that is expected. Likewise, I wish to see exhaustive discussions amongst all employees of the MOL Group so that employees in the same division, office, group and team each share the same compass. While confirming that the needle is pointing accurately by properly carrying out PDCA, let us move forward with swift and certain action.

Let this be the year where everyone in the MOL Group gears up to top speed so that at the end of this year, everyone has gained a sense of accomplishment.

Finally, I wish for the safety of the entire MOL Group fleet, and for the health and happiness of everyone and everyone's families belonging to the Group around the world.