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Message from President on MOL Founding Anniversary

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Koichi Muto

Koichi Muto

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 aOne-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 Yen.

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 Yen 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.

 

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