Message from the CEO on MOL Foundation Day
- Reinventing the MOL Group for Today and the Next Decade -

April 03, 2017

On the occasion of Mitsui O.S.K. Lines' 133rd anniversary, we are pleased to bring you a message from our President & CEO, Junichiro Ikeda.

My fellow MOL Group members, we celebrate the 133rd anniversary of Mitsui O.S.K. Lines' foundation. Over the past fiscal year, we have worked as one to execute the Business Structural Reforms laid out in the single-year management plan and improve our profitability. I'm pleased to report that we are forecasting a return to profitability at the ordinary income level. So first of all, let me thank you for your efforts over the past year.

In March, we took delivery of the 20,000-TEU MOL Triumph, one of the world's largest containerships. Six vessels in this class will be phased into the Asia-Europe routes. Featuring cutting-edge efficiency and eco-friendliness, the MOL Triumph and its sister ships will serve as core vessels in the new integrated containership company that will begin operation in April next year. The integration of the containership operations of Japan's three largest shipping companies is a project of monumental significance. We definitely need all hands on deck to pursue this project, treating it as our very own core business. We must spare no effort to make the project profitable. Please do your very best as "One MOL" to maintain and expand our company's business, and improve its profitability, with your sights set on the launch of the new company. Every effort you make will provide a stronger starting point for the new company, as well as contribute to our profitability in the current fiscal year. This is a crucial moment. Don't let it slip by.

Strengthening Our Current Business First

In the business environment surrounding the shipping industry, although the market, bunker prices, and foreign exchange are holding relatively steady, the market is at risk of unexpected volatility. Changes in the trade structure, which we recognize as slow trade, and moves toward protectionism are also major concerns. However, we are well positioned to deliver profits this fiscal year and beyond, through execution of our newly-established management plan. The key will be to harness the cost competitiveness of our fleet, a foundation we have laid through our Business Structural Reforms.

As you know, the MOL Group is currently strengthening its business activities under the watchwords "One MOL." In terms of our organization, last year we set up the Dry Bulk Business Unit and Energy Transport Business Unit. Enhanced marketing activities are now being undertaken across business division lines and are producing results. On April 1, we launched the new Product Transport Business Unit. The aim is to deliver more convenient services to customers. To this end, the Liner Division, Car Carrier Division, Port Projects & Logistics Business Division, and Ferry and Domestic Sea-Transportation Group are working in close coordination as one business unit. In heavyweight transport, customers can already count on one-stop services under our group's unified brand "MOL Project & Heavy Cargo (PHC)," and their response has been overwhelmingly positive. Four FLEXIE series car carriers, which will be delivered from this year through the next year, will adopt an innovative liftable deck structure. This is the result of joint research with MOL Techno-Trade, Ltd. in response to diversifying modes of vehicle transport. These moves exemplify our business efforts as "One MOL."

On the same day, April 1, we set up the One MOL Business Strategy Execution Office in the Corporate Planning Division. I will chair the One MOL Business Strategy Committee. The office has three core missions: first, identify current and potential customer needs; second, formulate global strategic approaches to different nations and regions; and third, business intelligence. We intend to fulfill those three missions in an integrated manner, thereby adding new depth to our business activities. The new committee will strive to grasp various levels of needs in new depth, from the management priorities of our client companies to enhanced convenience through information and communication technology (ICT), in addition to the business units' conventional activities. We will pursue strategic business activities, or corporate-based marketing, as it were, in a systematic manner.

And in a step to strengthen global businesses, we appointed executive officers for Asia, the Middle East, and Oceania, and Europe, Africa, and the Americas, respectively. We are excited about the prospects for developing new businesses unique to each region by working with speed and flexibility to seize new business opportunities spotted by our chief executive representatives and chief country representatives.

In addition, the Bunker Business Office will oversee fuel procurement policy, focusing on environmental regulations, and will push ahead with our LNG-fueled vessels and LNG fuel supply businesses, which will lead to reduced greenhouse gas emissions. The Group Business Division was renamed the New Business Creation and Group Business Division. This reflects its determination to go beyond the management of group companies to become a driving force for new ventures including the strategic environment and emission-free businesses, and to devote more energy to group management centered on ferry and real estate business. MOL Ferry Co., Ltd. will launch two newly built ferries on the Oarai/Tomakomai route this May and August. We introduced much stronger safety specifications based on the lessons learned from an accidental fire aboard the Sunflower Daisetsu in July 2015. We have successfully transformed the ferry business into one of our group's core businesses through efforts to boost revenue. Moreover, as Japan's logistics industry comes under pressure from serious labor shortages, the ferry business will provide an alternative mode of transportation that will be essential to customers and society as a whole.

Safety lies at the heart of these new initiatives. We must build trust not only by ensuring safe operation and transport as a matter of course, but also by providing our customers with a sense of security and peace of mind. I believe that the trust of our customers is the most important factor setting us apart from our competitors. That is why our top priority must be to recruit, develop, and retain marine officers who are directly responsible for vessel safety. Furthermore, we will swiftly adopt the most advanced ICT and other technologies, and supplement human skills with artificial intelligence (AI) capabilities. We will also put eco-friendly vessels into service at the earliest opportunity, focusing on research related to autonomously operated vessels, spurred by the ISHIN NEXT – MOL SMART SHIP PROJECT.

Our Vision for MOL in the Next Decade

Over the past year, we have held a series of discussions on our management plan for the current fiscal year onward. We have articulated our vision for the MOL Group in the next decade and set a course for management to realize this vision. Previously, we spent a great deal of time establishing a midterm plan every three years, along with numerical targets and action plans. But this time, we concentrated on drawing up a management policy and the policies of business divisions from a long-term viewpoint.

Our existing businesses face major upheaval in the business environment. In this climate, we must recognize that our conventional approach to investment, based at times on a tendency to focus on balancing investments among our existing businesses, is no longer viable. From now on, we must work to reshape our business portfolio. This will be done by carefully selecting business domains and projects where we have competitive advantages, and preferentially allocating our capital and human resources to each of these areas. The goal is to make each MOL business boast the highest competitiveness in the respective industries. Our customers' needs are becoming more and more diversified and sophisticated. To be selected as their best partner will require more than just price competitiveness. It will require deep insight into customer concerns and the ability to provide solutions other companies cannot match. Differentiation will be absolutely essential. We will be unable to rise above the competition unless we become a truly strong and resilient enterprise. Conversely, if we succeed in differentiating the MOL Group from rivals and establishing strong competitiveness, we will find that the current business environment will present unique opportunities to expand our business.

I expect all of you to take this opportunity to push ahead with specific business strategies toward realizing our vision. We must firmly establish the aforementioned marketing activities based on "One MOL" as a permanent approach within the MOL Group.

The management principles I have discussed so far will be presented to all MOL Group members in order to share a common direction for the future. We have also appointed a Corporate Communication Officer (CCO). The CCO will increase our group's corporate brand value by ensuring that consistent messages are delivered to our various stakeholders, and will enhance the quality of management by energizing our internal communication.

Realizing a Truly "Strong and Resilient MOL Group"

"Promotion of diversity" and "workstyle reform" will both help to build and harness a diverse, talented and motivated workforce, thereby shaping a vibrant, dynamic organization. I will take charge of the Improvement of Work Efficiency Committee this April to push this initiative. I want every one of you to play an active role in the reform process. I believe your participation will generate ideas, approaches, and innovations unlike any we have ever seen.

Today, before a comprehensive change starting in April, I have explained the course we are setting, and shared my thoughts about what I want to ask of each organization, executive, and employee. Personally, I will serve as the "top salesperson" of the business. Internally, I will continue working to promote group-wide reforms. Together, we must work to become a truly "strong and resilient MOL Group" - one that will be admired and chosen first by customers in any business environment.