April 03, 2023
We are pleased to bring you a message from Mitsui O.S.K. Lines, Ltd. (MOL) President & CEO Takeshi Hashimoto.
As we enter fiscal year 2023, which marks the 139th anniversary of MOL's founding, I would like to look back on a successful FY2022 and look ahead as we set the stage for long-term success and the achievement of our Group Vision.
Thanks to a strong shipping market, which continues from FY2021, and the effects of a depreciating yen, our financial results for the last fiscal year are expected to mark a record high for the second consecutive year. ONE's profit contribution was significant following FY2021, but containership freight rates, which had steadily soared, have plummeted since the middle of last year and the benefits of extraordinary demand for containership transport disappeared in the second half of the year. On the other hand, the car carrier and tanker businesses were the driving forces behind the second half results, and achieved favorable results for the full year. I think each of our businesses contributed to our anticipated profits, enabling us take advantage of a strong shipping market to fuel group-wide growth. I would like to thank everyone in the MOL Group, executives and employees alike, for their efforts during the last fiscal year.
On March 31, we announced a new management plan, BLUE ACTION 2035, which succeeds Rolling Plan 2022. We began a rolling plan in FY2017 under which we revised our strategy annually to respond to the rapidly changing business environment, and we have been improving our financial position and carrying forward reforms of our business portfolio. We achieved our initial target for ordinary profit, 150 billion-200 billion yen, for FY2027, ahead of schedule, in FY2021, and backed by the group's global growth in Rolling Plan 2022, we have implemented portfolio, regional, and environmental strategies, and promoted initiatives to strengthen our digital transformation (DX) and organizational capabilities, which form a critical management base that underpins the implementation of these strategies. We also announced the MOL Sustainability Plan (MSP) last year to strengthen our commitment to sustainability issues. All of these are important initiatives with an eye toward our vision for the company in the future, and I believe last year was one in which we were able to steadily achieve milestones leading to BLUE ACTION 2035. I personally feel very confident about the results of Rolling Plan 2022.
BLUE ACTION 2035, which will start this fiscal year, is our first medium- to long-term management plan in six years. During the last two years, our financial position has rapidly improved and stakeholders' expectations of our group have changed significantly. Our group will continue to pursue reforms in all aspects and move forward to realize the Group Vision on a new stage. In BLUE ACTION 2035, we will further develop the concepts and initiatives of the Rolling Plan 2022, and show a significant move toward the realization of the Group Vision with a goal of for 2035. Now I would like to share with you some of the main points.
BLUE ACTION 2035 combines Rolling Plan 2022 and the MOL Sustainability Plan, based on the group's business activities, and more powerfully expresses our commitment to sustainability management. Sustainability management is based on a long-term strategy, and aims to realize sustainable growth that is acceptable in terms of social issues and environmental aspects. We will address sustainability issues by working on BLUE ACTION 2035 in line with the spirit of the Corporate Mission and MOL CHARTS, in turn, will enhance corporate value and ultimately lead to the realization of our Group Vision.
This time, we defined the ideal business structure for 2035 as a specific corporate image in the Group Vision, and then proposed and launched reforms of our business portfolio to realize that ideal structure. This means the business portfolio reforms will increase the proportion of businesses in which we can expect stable earnings and rebalance the composition of our business to ensure group-wide profitability even during market downturns in the highly volatile shipping business. In recent years, we have been strengthening investments in businesses that have a lower correlation with the shipping market, such as offshore, wind power, real property, and ferry and cruise businesses. And, in BLUE ACTION 2035, we will also continue proactive investments in such non-shipping businesses. Of course, we will not reach the profit level our shareholders expect if we are too focused on "stable profit" businesses, so it is important to balance this type of business "market driven businesses, in which we can expect robust returns in booming markets. We set the ratio of "market driven" businesses to "stable profit" businesses at 40:60 on an asset basis in 2035, and will appropriately manage the scale of investment in each of them, aiming to achieve our profit target.
BLUE ACTION 2035 inherits the three strategies of the Rolling Plan 2022. In the portfolio strategy, which implements the business portfolio reforms mentioned earlier, we set return on assets (ROA) targets for each business to improve capital efficiency and properly manage the business portfolio. The plan also includes the promotion of M&A necessary to advance business management and portfolio reforms in anticipation of the future adoption of International Financial Reporting Standards (IFRS). In the regional strategy, it is important to develop and operate businesses in more specific regions in line with the global economy's changing center of gravity. As I will discuss later, we will expand and strengthen our regional organizations and their support systems. Our environmental strategy focuses on proactively pursuing environmental investments to steadily achieve the medium- and long-term targets set forth in Environmental Vision 2.2.
We will develop five visions-environment, safety, human capital (HC), DX, and governance, to realize the group's sustainable growth. The HC and DX visions, with an eye to the future, are particularly important for our group as we plan critical reforms, and we established and announced these visions last month. The HC vision sets out three basic principles of diversity, co-running/co-creation, and rewarding to draw out the strengths of every executive and employee of the group and support business reforms. The DX vision outlines a path toward transformation from both business and cultural perspectives through the power of digital technology and co-creation.
For the environment, we will proactively invest and strengthen various measures to achieve our target of greenhouse gas (GHG) reduction under Environmental Vision 2.2. Safety has always been our top priority, and considering rapid advances in technology, we need to consider initiatives in this area by backcasting from the future. In addition, we need a safety vision for the entire group that takes into account our expanding business domains. We plan to compile our approach to safety and announce the safety vision by the end of this fiscal year. When it comes to governance, we will pursue overall advancement such as strengthening corporate governance, advancing business management, and strengthening intelligence related to business risks.
Today, the new organization and structure starts in earnest. As I mentioned in my New Year message, I would like to underscore two points.
One is a structure to pursue regional strategies. The group organization will be divided into three parallel organizations: the corporate organization, the business organization, and the regional organization. The system will promote coordination, cooperation, and collaboration among organizations, while allowing them to serve as a check on each other. We have delegated authority to them and expanded regional organizations to pursue swift, proactive development of new projects. At the same time, we introduced a chief officer system aimed at addressing group-wide management issues and strengthening group governance, and developed a structure to support the strategies of the regional organizations. While we have the system and structure in place, I don't think the actual operation will be easy. It is of utmost importance to develop, implement, and continually enhance communication among organizations to ensure truly cooperative efforts to achieve the objective. This is a point that requires particular emphasis.
Next is a structure that supports the pursuit of our portfolio strategy and the expansion of the non-shipping business. We brought together businesses that are stronger in B-to-C fields and established the Headquarters of Wellbeing & Lifestyle Business. Last fiscal year, we decided to make major investments in the real property and cruise businesses, and will continue to proactively pursue growth. We are seeing a value shift among people when it comes to their perception of wealth, driving a change from product consumption to service and experience consumption. We will precisely grasp the needs of society and take on the challenge of offering new value. Let's make the wellbeing & lifestyle business a field that excites and energizes the entire group.
As I mentioned, this fiscal year will be a period when we commit to a new management plan under a new management system. As business domains and the scale and functions of organizations expand, we will see many cases where things do not go as planned, such as collaboration and cooperation among organizations. I hope that each of you will uphold the mission, vision, and values of the MOL Group and overcome every challenge with a sense of pride and ownership as a member of the MOL Group.
Since our founding, the MOL Group has been committed to the social responsibility of promoting the growth of local industries and enriching people's lives through ocean transport, and our aspirations and spirit remain unchanged today. The premise of our social responsibility is safe operation and top-quality service, and we hereby confirm that this will remain the most important theme in the future.
I will do everything in my power to challenge myself along with all of you and make this a fruitful year as we give our very best effort to ensuring our long-term success.