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April 01, 2019

Message from President and CEO on MOL Foundation Day Aiming to make the MOL Group a collection of businesses that have a clear advantage and boast the highest competitiveness

On the occasion of Mitsui O.S.K. Lines' 135th anniversary, we are pleased to bring you a message from our President & CEO, Junichiro Ikeda.

All MOL Group members, as you know, today we begin Fiscal Year 2019 and mark the 135th anniversary of our founding.
For the last fiscal year, ordinary profit is expected to exceed our initial outlook, thanks to wide-ranging efforts to improve profits under "Rolling Plan 2018." First of all, I would like to express my appreciation for you, all MOL Group members, and for your hard work over the last fiscal year, and let's look back at results.

Specific Results of Rolling Plan 2018

Over the past two years, we have emphasized our visions for the MOL Group ten years from now, which was set forth in the Rolling Plan. We saw steady progress in divisional and company-wide measures aimed at realizing the three visions-provide stress-free services; develop the environment and emission-free businesses into one of our future core competences; and make the MOL Group a collection of businesses that have a clear advantage, boasting the highest competitiveness in their respective fields. In particular, during fiscal year 2018, we made targeted investments in growth fields, proactively developed business operations in the power ship project, which draws upon our FSRU expertise and knowledge and in the project aimed at total logistics for chemical transport. With the ocean shipping business as a stable earnings, we saw some good examples of winning business by anticipating the issues our customers face and developing solutions. In the field that still requires business reforms, we have set a course for the future. During the year, we steadily launched strategic preparations in each business field as we move into the future, and we look forward to meeting new challenges.

Direction of Rolling Plan 2019- Aiming to make the MOL Group a collection of businesses that have a clear advantage and boast the highest competitiveness

Now I will talk about the direction of Rolling Plan 2019, which starts today. After reviewing the meaning and relationship of the three core pillars we have set forth, we decided to position "Aiming to make the MOL Group a collection of businesses that have a clear advantage and boast the highest competitiveness" as the vision for the MOL Group ten years from now. Those three pillars as management strategies to realize the vision are "provide stress-free services from a customer perspective," "promote environmental strategies and develop the emission-free business into one of our future core operations," and newly added "invest management resources in fields where we have the greatest strength, with our offshore business."
By adding the element of "from a customer's perspective" to stress-free services, and taking various strategic measures to address environmental issues, we will further enhance our relative competitiveness. Following those two pillars, we will push ahead with five group-wide priorities (marine technical skills, ICT strategy, technology development, environment and emission-free businesses, and work style reforms) as mid-term actions. The key words for this fiscal year are "LNG fuel," "Use and application of data toward autonomous sailing (promotion of Senpaku ISHIN NEXT)," and "workplace reforms."

The newly added pillar on focusing our management resources on fields where we have the greatest strength, particularly the offshore business, means ensuring we have what it takes to be the preferred solution provider for customers and partners; in other words, greater strength and proficiency than our competitors. That reflects our approach of objectively analyzing our competitiveness and aggressively investing management resources in projects that can help further develop our strengths. We have participated in several offshore business projects, so we can recognize our relative competitiveness in some of these fields. This ties in with our vision of "making the MOL Group a collection of businesses that have a clear advantage, boasting the highest competitiveness," by prioritizing investment in areas where we can develop our strengths, and reach our long-term goal of developing the MOL Group into "an excellent and resilient organization."

In addition, we set focus themes for FY2019. One is to establish a group-wide safety and quality management system with the objective of reflecting seriously on the incidents that occurred at the end of last year and restoring the trust we lost as a result. Safety is our core culture. Every one of us must boost our awareness of safety and the need to take responsibility for our own actions and operations. Under the leadership of the Chief Safety Officer appointed on April 1, and with an additional focus on compliance, we will move ahead with group-wide efforts on safe operation. At the same time, I will hold a series of discussions with you on this critical topic.

Second is developing a strategic response to stricter regulations on SOx emissions effective in January 2020. We have a daunting list of things to do-complete the technological verification of compliant fuel oils, properly time the changeover from current fuels, secure a supply of compliant fuel and negotiate with business partners and customers, to name just a few. This is a big challenge for the ocean shipping industry, but I think this is a good opportunity to differentiate our businesses at the same time. We will come up with counterplans ahead other companies, soundly implement our plan to switch to compliant fuel, and operate our vessels safely, without interruption, even after the regulations take effect. This seems like simple common sense, but realizing our plans hinges on the formulation of efficient operation plans by those in charge of vessel operations and excellent negotiation skills on the part of account representatives, as well as marine technology and engine expertise. I look forward to seeing all group companies work together as one team, demonstrating to customers our capability to address difficult tasks and solve problems, while contributing to society.

Next, I will introduce a new organizational structure, starting this month, to support the promotion of "Rolling Plan 2019." First of all, we newly established the Environmental Management Committee as a company-wide approach. It will serve as a control tower for MOL Group's environmental strategies as we respond to the constantly growing requirements to address environmental issues, social and political shifts, and customer needs. We have also newly appointed an executive responsible for promotion of sustainability. With our eyes set on the tasks we need to realize a sustainable society, we will promote initiatives on contributing to SDGs through our businesses.

We also established the Marine Technical Management Division, which clusters ship management functions for every ship type except LNG carriers. The new division considers ways to use our vessel assets safely and economically over the long term, from the viewpoints of ship management. Speaking of business divisions, we renamed Dry Bulk Carrier Division (A) to Iron Ore and Coal Carrier Division, and split off Dry Bulk Carrier Division (B) into Wood Chip Carrier Division and Bulk Carrier Division, making it easier for customers and business partners to understand our services Steaming Coal Carrier Division was renamed to Steaming Coal & Energy Project Division to meet customers' needs for not only steaming coal transport but also its associated businesses. Regarding other divisions, we reviewed our internal structures when we introduced the team system last year, and restructured the teams.

I want to emphasize "being flexible in the face of changes" and "setting directions by full participation-based discussion" to promote Rolling Plan 2019 on a group-wide scale. I have repeatedly mentioned we must flexibly meet changes. However, all of us can raise our hands, express our own ideas, be open to others' opinions, and determine our direction based on inclusive discussions. I believe this is the corporate culture we must develop in response to a society that grows more diverse every day. Please put aside reserve or conjecture, and let's vitalize communication not in vertical lines of teams, but among members inside and outside our teams, as well as upward and downward.

Toward Further Growth

As I said at the beginning, we marked the 135th anniversary of our founding today. Our predecessor Osaka Shosen Kaisha (OSK Line) was founded in 1884, later rose from the ashes of World War II, and 55 years ago today, merged with Mitsui Line. On this date 20 years ago, we marked another milestone when we merged with Navix Line. As you already know, throughout our history we have repeatedly been tossed up and down by economic, social, and environmental changes. But I want to confirm once again that our social responsibility-contributing to the growth of industries around the world and bringing greater affluence to people's lives through ocean transport-has not changed since our founding, and it has been inherited in an unbroken line to this day.
We are currently seeing a trend toward economic deceleration, and the ocean shipping market still faces many uncertain factors. By no means we can say that we are in a strong position in our field. We set sail in FY2019 while anticipating rough seas, but we can see our course clearly. The will we have inherited from our predecessors, and our accumulated efforts and achievements, must become the impetus for further growth. We are expecting ONE to recover from its initial teething problems and return to profitability. I ask everyone to take specific actions with a sense of speed and urgency, based on the visions set out in Rolling Plan 2019. I want this to be a full and fruitful year in which we gather all of our group strength. Let's do our best together.

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