Japanese

Message from President on MOL Founding Anniversary

April 01, 2013

On the occasion of Mitsui O.S.K. Lines (MOL) 129th anniversary, we are pleased to bring you a message from our President, Koichi Muto.

"Signaling a Strong Recovery by Ensuring a Return to Profitability"

Today, I am pleased to join all of my MOL Group colleagues in celebrating the 129th founding anniversary of the MOL Group.

Today also marks the start of a new fiscal year. In fiscal 2013, we will launch business initiatives based on a One-Year Management Plan designed to return the MOL Group to a growth trajectory.

Since the beginning of 2013, the business environment has started to show positive signs in some quarters, including a rebound in the U.S. economy and a weakening of the yen. In the marine transport industry, while vessel deliveries are projected to plummet from 2014 onward, we do not foresee any end to a vessel supply glut in fiscal 2013 because a large number of vessels continues to be scheduled for delivery during the fiscal year. Combined with persistently high bunker prices, the business environment will warrant continued vigilance in fiscal 2013.

In January 2013, MOL executed bold business reforms. We put a system in place to reshape our business structure by transferring our dry bulkers to Singapore, a key hub of customers and information. The move to Singapore has restored cost competitiveness to the dry bulker fleet, which had been operating at a loss, laying a strong foundation for restoring profitability. Based upon this new foundation, we formulated the One-Year Management Plan for fiscal 2013 with a view to accumulating additional cash flow.

Business model transformation lies at the heart of the One-Year Management Plan. During the years of sharply rising market conditions in the shipping sector from 2003 to the Lehman Shock of September 2008, the MOL Group generated large earnings through a business model that anticipated a bullish shipping market. However, given the continuing vessel supply glut at present, we need to return to basics and reaffirm the MOL Group Corporate Principles by rebuilding our sales structure to carefully support customer needs. We will accelerate business expansion from our hub in Singapore through business reforms designed to capture growth primarily in emerging markets. At the same time, we will enhance the quality of service for our Japanese customers, who have stood behind the MOL Group over the years, with the aim of upgrading our services further.

The shipping market provides the same competitive conditions for all market participants. However, there is a large difference in the amount of returns that can be generated depending on effort. In any market environment, we must always aim to surpass the market standard by creating added value. To this end, it is imperative to demonstrate creativity and ingenuity. For example, we need to hone our sensitivity to understand disparities among sea areas, and short-term swings in the shipping market. We also need to improve efficiency of vessels' deployment by minimizing ballast voyages through the optimal combination of various voyages and cargo. Our top priorities for ensuring a return to profitability are to make determined sales efforts along with demonstrating creativity and ingenuity.

Cost cutting is a task that we can achieve through our own efforts, regardless of the external environment. We have so far achieved a measure of success through various ways, such as the extended use of slow steaming. In fiscal 2013, besides continuing the cost-cutting efforts we have implemented so far, we will reduce costs on an entirely different stage than before. We will fundamentally overhaul and reform operations that we have taken for granted until now. We will also measure and reevaluate all costs through an item-by-item inspection. This will encompass the voluntary return of certain salary amounts by senior management level employees, and cuts in executive officers' remuneration. Through these and other measures, we will cut costs by more than ¥30 billion.

In the marine transport sector, we cannot completely shield ourselves from market impacts due to the nature of the business. To ensure profitability in the current fiscal year, we must reduce our exposure to market risk in order to mitigate the risk of a downturn in earnings should market conditions deteriorate. While the desirable way to do this is to win cargo shipping contracts, we will use all options at our disposal to reduce free tonnages to an optimal size, including sales and redelivery of vessels.

Moreover, we will execute bold reforms of unprofitable operations and non-core assets, leaving no stone unturned. Measures will extend to withdrawing from businesses and disposing of assets.

On the other hand, we cannot afford to neglect the execution of growth strategies over the medium and long terms. To this end, the MOL Group is actively preparing for future growth in the fields of LNG carriers, offshore business, and containerships. However, it is imperative that we first restore profitability in order to return the MOL Group to a solid growth trajectory in the future. Unless we restore profitability, we cannot discuss our future ambitious convincingly. Guided by this thinking, we have decided to adopt a One-Year Management Plan for fiscal 2013 to sharpen our focus on the all-important task of restoring profitability.

To ensure that we return the MOL Group to the black, it is more critical than ever that we avoid committing any major mistakes. Every member of the MOL Group will strive to rigorously enforce safe operations and compliance as an ongoing top priority. In the previous fiscal year, we achieved the "4 zeroes" for preventing serious marine incidents, oil pollution, fatal accidents, and cargo damage. However, we also experienced a major incident, although this did not fall within the scope of the "4 zeroes." There is no finish line to ensuring safe operations. The only way to become "the world leader in safe operations" is to steadfastly endeavor every day to do what is necessary to ensure safety while constantly remaining vigilant.

In fiscal 2013, the true strength of MOL-and the MOL Group as a whole-will be put to the test in terms of whether we can restore profitability in a challenging business environment. Each one of us must take a crisis management approach in these trying times, while at the same time adopting a solid determination to move back into the black. It is an imperative that we ensure profitability at the very least. However, I believe that if we all work together as one, consolidated ordinary income of around ¥50 billion is well within reach.

Determined to make fiscal 2013 a year for attaining profitability and laying a strong foundation for sustainable growth, I have named the One-Year Management Plan as "RISE 2013." Let us all signal a strong recovery by reaching the goals of the plan.