MOL President Muto's 2015 New Year Message
- Sail before the wind -

January 05, 2015

First of all, a very happy New Year to all of you at MOL Group companies.
According to the Chinese zodiac, 2015 is the year of the sheep, a character () that also represents a tree that has yet to bear fruit. In other words, a tree that is still growing.

We also are facing the future and sending out new branches toward it. We hope to make 2015 a year in which we nurture the plants that will bring us a plentiful harvest in the future.

Looking back at 2014

Our company celebrated its 130th anniversary last year, but our business results are projected to be considerably less than the outlook we forecasted at the beginning of the year. In truth, we were tossed about by rough waves throughout, and it became a very severe year.

Specifically, I regret to report that the containership division is showing a significant deficit for this fiscal term due to lower freight rates on Asia-South America East Coast routes, along with delays in the work to fully automate our U.S. terminal, despite increasing cargo volume, mainly on the East-West trade and considerable improvement in the business environment.

In the dry bulker division, a decrease in deliveries of newbuilding vessels, especially of Capesize bulkers, has tightened up the supply and demand balance, and the market itself should see a strong recovery, but for nearly a year, it has remained sluggish overall.

Capture favorable wind to increase propulsive power

There is a saying in the U.K. that "a smooth sea never made a skillful sailor." That means that we grow and improve by overcoming difficult situations. We also have faced rough seas unintentionally, but we should be able to put the lessons we learned during rough times into practice when we face the next challenge. We need to get out of the doldrums as quickly as we can and move forward in a counteroffensive.

The global economic environment is changing dramatically. We had already anticipated increased petroleum production from the U.S. shale oil revolution, but OPEC has not moved to reduce production, and oil prices have been plummeting since last fall.

Further, while the financial quantitative easing program ended as the U.S. economy gained strength, monetary easing measures were actively implemented in Japan and Europe. That led to an appreciation of the dollar against the yen that accelerated rapidly since September of last year.

For us, the depreciating yen and falling bunker prices, along with a decline in interest rates, are a strong following wind. So this year, we will pick up speed in the favorable wind of the cheaper yen and lower oil prices, increase our own power, and move ahead toward even greater achievements.

Solid growth by diversification

With our STEER FOR 2020 midterm management plan, we set a course toward solid growth in the next decade with three innovations in our business portfolio, business model, and business domain. Every type of vessel should not depend on a market recovery; instead, we must reconstruct business so we can post higher profits without depending on market conditions, and that's what we are aiming for. In reality, by offering our customers added value through services that meet their needs and take advantage of our strengths, we have gained many long-term contracts that will ensure stable profits in the future.

For example, in the LNG carrier and offshore business divisions, just over the last year we have signed long-term contracts for more than 10 vessels for shale gas transport to Japan and overseas projects. Through our participation in Yamal LNG project in Russia, we have launched an ambitious effort to operate ice class LNG carriers for the Northern Sea route, and our first LNG carrier built in China under our technical cooperation will be delivered soon. These accomplishments are the results of cooperation among the business, marine, and technical divisions, and I would like to extend my appreciation and recognition for the hard work and passion that people throughout our organization put into these projects. To provide diversified service, we must show our superior technological prowess and have the courage to put that power into play. We will continue to face tough challenges, and I would like to reconfirm our intention to meet and overcome each one.

Further, the tanker division grasped the changes in cargo movement and moved into the shuttle tanker business, where demand is increasing as the offshore business grows.

We expect these new projects and businesses to generate highly stable profits and contribute to expanding our business domain. By moving aggressively into such growth areas, we will further expand the base of our businesses that bring us stable income and profit. What I expect from you all is not to make do with what you have, but instead to try something new beyond existing business domains and conventional measures, and implement fundamental innovations. Division managers, you should have a global viewpoint and historical perspective and steer your divisions boldly into the future.

Containership business moves into a counteroffensive year

I think many of you may be worried about our containership business. And the fact is, in terms of competitiveness and earnings strength within the industry, we are somewhat behind. As far as the structural problem our containership division faced, we have already taken steps to reform the business, such as upgrading the fleet with the world's largest containership – 20,000TEU – to make us more cost competitive. With global economic expansion, containerized cargo trade is certain to keep growing so the containership business, including container terminals, represents a growth opportunity. The true value of the company is determined how we can add value that our customers will appreciate, and come up with ways to enhance cost competitiveness.

There is still a lot of room to improve profitability with advancement of operations and yield management. Management and employees in the containership division need to objectively analyze our cost competitiveness and our sales capabilities, and put every effort into restoring profitability as the key objective. This is the critical point. Now is the time to be tenacious, and move forward.

Toward sustainable growth

Last year and the year before, we continued to achieve the goal of "Four Zeroes" (zero serious marine accidents, zero oil pollution, zero fatal accidents, and zero serious cargo damage). I hope we will continue to work toward Four Zeroes, which will help us retain the trust of our customers when it comes to safety.
Further, we must never forget that our group activities are founded upon safe operation and the trust that our stakeholders put in our company, its management, and its global workforce, at sea and on shore. Last year, the Fair Trade Commission judged that a cartel existed in the car carrier business, and we all put in a lot of time exchanging ideas about how to prevent the recurrence of such misconduct. We must continue these efforts, and never allow this incident to fade from memory.

All our people-executives and employees alike-must always keep compliance foremost in mind as we continue our corporate activities, make sure that all our actions comply with social norms and the highest standards of corporate ethics. We must comply with the laws on competition in every nation where we do business, of course, but also, especially, we must never get involved in bribery of any kind, carefully safeguard all confidential information regarding our customers, company, and so on, and prevent any instance of discrimination or harassment.

It is very important that each of you-at all levels-work together. Polish your creativity and your business capabilities, strive to constantly improve our corporate culture, put all our strength and power together, and carry out the innovations so critical to our future success.

Now, let me close my New Year's remarks by swearing safe operation for all vessels of the MOL Group in 2015, and may the New Year be a magnificent one for you and your families.