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Major Q & A

【Containership】
Q1: For the second quarter, you are forecasting ordinary income of 4.9 billion yen for Containership Business, slightly lower than the 6.1 billion yen for the first quarter. Please explain why you expect the second quarter to decline versus the first despite the second quarter being high season.

A1: Reviewing the first quarter, Asia-North America Eastbound short-term freight rate market conditions were weaker than our original forecast, while market conditions were strong for Asia-Europe Eastbound freight rates. These balanced each other out, and we achieved ordinary income of 6.1 billion yen, nearly on target with our forecast.
While market conditions for Asia-Europe Eastbound freight rates were stronger than expected in the first quarter, the market conditions are expected to normalize during the second quarter and ordinary income decline in comparison to the first quarter. Additionally, the benefit of Containership Business structural reforms made in the previous year and provision for allowance was expected to be greater in the first quarter than the second. Specifically, we forecast second-quarter ordinary income of 4.9 billion yen and first-half ordinary income of 11.0 billion yen. 


Q2: The containership industry is being further realigned. How will this new wave of realignment impact the industry?

A2: For the past two years, realignment in the containership industry has progressed at a previously unimaginable pace. COSCO Shipping of China announced in July its acquisition of OOCL of Hong Kong. This had been talked about a number of times a few years ago, so it was not a surprise. Both companies are in the same Ocean Alliance, so we believe this acquisition is unlikely to lead to a realignment of alliances and will not have a major impact. 


Q3: You said that Containership Business structural reforms and provision for allowance would contribute an improvement of 20.2 billion yen in the current fiscal year. Can you explain how this figure is broken down in terms of first and second halves as well as quarterly?

A3: The contributions are about even between the first and second halves. The contribution in the first quarter will be a little more than in the second quarter. 


【Dry Bulk】
Q1: Looking at recent trends in dry bulk market conditions, there appears to be a lack of strength, and in fact conditions may be worsening. What are your reasons for not revising downward your forecasts for the second quarter onward?

A1: Looking at overall trends for the first quarter, the BDI declined from about 1,200 at the start of the quarter to about 800 at the end of it. Currently, the index has recovered to the mid-900s. In terms of cargo volume, China imports of iron ore have increased about 10% over the same period of last year, and overall the volumes are strong. However, even as market conditions have begun to improve somewhat, the trading volumes of scrap iron have leveled off, signaling a tight ceiling for further rate increases. 


【Offshore Energy Development】
Q1: Regarding the previously announced FPSO for an oil and gas field, offshore of Ghana, please explain whether or not you plan to increase these kinds of projects in the future. 

A1: In the medium-term management plan announced in April, we identified the energy value chain business as one strategic area of future growth. The FPSO project is an upstream project, and in the future we will also develop downstream projects such as gas storage and regasification and small-batch transport, as well as the LNG fuel business. We will actively pursue these and other types of projects to expand our businesses. 


【Others】
Q1: When discussing the factors behind the change in ordinary income compared with the previous year, you said that the impact of structural reforms and provision for allowance together contributed to an improvement of 9.2 billion yen. Please specify the contribution of each. 

A1: About two-thirds of the 9.2 billion yen was from provision for allowance, the remaining one-third was from other factors. 


Q2: You will not pay a dividend this year. Under what conditions do you plan to restart dividends?

A2: Currently, we are focusing all our energies on our priorities of executing each initiative under the new medium-term management plan while improving our financial position and stabilizing our business foundation. Once we have achieved those priorities, we will be ready to enter a new stage. 


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