(Containerships)

Q.   When you prepared your yearly projection, how did you set your freight rate prediction comparing 1st Half with 2nd Half, almost flat, or somewhat increasing for 2nd Half?       A.   Our loading factor has now increased as we approach seasonal peak and freight rates for Asia-Europe, Asia-North America, or Asia-South America services have been rising. Considering such trends, we have already included some freight rate hike in our prospects. Although we have not yet counted on further rate restoration after September peak in our forecasts, we will of course try to properly achieve additional improvements as present freight rate level is still not sufficient for our sustainable operation.       Q.   Taking Containership freight rate for Asia-Europe trade, you have shown in these slides a drop for 1st Quarter by 54%, and 45% for 1st Half, for year-on-year comparison, which does not seem to indicate that you are expecting so much rate improvement between 1Q and 2Q. Since you have forecasted tremendous improvement from 1st Half to 2nd Half to shrink loss for 2nd Half to 20 billion yen, does your plan depend all that much on freight rate jump in 2nd Half?       A.   I understand that your question is how we can improve our Ordinary Income for Containership Business by 18 billion yen from forecasted loss for 1st Half of minus 38 billion yen to minus 20 billion for 2nd Half.     Freight rates are in the process of being restored for all service routes from the beginning of July. We are planning further freight rate restoration toward peak season as of August. Taking these trends into consideration, we have counted about 10 billion yen in improvement relying on freight rate restoration to be effective for 2nd Half. For the remaining 8 billion yen, around 5-6 billion yen is from rationalization for seasonality, and also alliance-based streamlining, etc.       Q.   Even if freight rates do recover to some extent, will vessels now idling or laid-up possibly come back into service so that freight rates will fall again?       A.   We have many concerns about that point. Cargo movement itself will probably be recovering, but on the other hand, newly-built vessels on the supply side are coming into the market. As prevailing market conditions will possibly cease after 3-5 years, we must be very cautious to make sure we do not take a wrong approach.     If present business circumstances under which we keep incurring losses continue, because financial conditions are becoming extremely severe nowadays, I suppose some containership operators in the world might have to totally give up their services. Operators have already been driven into a situation like hanging off the cliff, which means we can no longer survive without freight rates going up.       Q.   In the table in Slide P.18 about your earning improvement and cost reduction plan, you have changed some figures for the items of ’Rationalization of Ship Deployment’ and ’Revising Charterage, Early Termination’; please advise breakdown of the changes.       A.   We are now planning further rationalization of services and its expected effect has already been included in these prospects, amounting to about 5.0 billion yen. Considering operation costs that have been piling up even slightly over our estimation, we believe we can achieve 11.0 billion yen. The reason why we decreased figures for ’Revising Charterage’ is that we had not succeeded to fulfill our original target; therefore it was revised to reflect our most reliable data at present.       Q.   Would you please tell us about the number of your containership fleet now laid up and maximum number you prospect during this fiscal year.       A.   At present a total of 3 are laid-up. We have another 5-6 ships idling, but the number will somewhat fluctuate along with process of rationalization of service routes. When it is in our sight that we will not operate a vessel for a while, we will then soon lay it up.

(Dry Bulk)

Q.   Please advise whether you have changed free portion in your dry bulk fleet from the end of April when you advised you squeezed the fleet somewhat compared with a few years ago.       A.   I understand around 35 ships among 160, or about 20% in total, are now operated as ’free.’ We tried to decrease free portion as much as possible while market situation was significantly weakened at the beginning of this year, and even sold some vessels, which is one of the reasons our free portion has declined.       Q.   Taking forecasts about dry bulk freight market for this 2nd Half, although other shipping companies view it as almost flat compared to the 1st Half, or higher, your view for the 2nd Half is lower than the 1st Half. How did you arrive at this pre-condition?       A.   Our market assumption was set based on ’Pacific Round’, but that of other carriers seems to have been done on 4-T/C average, which has continuously been higher than ’Pacific Round’ these days. Our estimation for this 2nd Half is 40,000 U.S. dollars a day, which would be about 45,000 dollars if based on 4-T/C average. So ours does not look substantially different from others, but still our view of the market is surely prudent.     We see fundamentals of the market themselves maintaining fairly well, at least until this December. However, as 2nd Half of our Fiscal year includes January-March 2010 which we think is very difficult to forecast, we see our forecast being very prudent.     Mathematically, as of today (28 July 2009) the forward rate for Cape-size is 46,000 U.S. dollars a day for the period of October-December 2009 based on 4-T/C average, and 37,000 dollars for January-March 2010. In that sense, thinking of average rate between these two as 41,500 dollars, we set our premises.

(Car Carriers)

Q.   Although your prospect will again return to the black in 2nd half, will it end in the black for the full year ?     How much cargo volume do you expect for car carriers in the full year, especially in 2nd half for year-on-year basis?       A.   With regard to cargo volume, 60% minus in 1st Quarter and 50% minus in 2nd Quarter, so 1st half will approximate 55% minus for year-on-year basis.     On the other hand, considering tendency that global inventory adjustments by auto-makers seem to have bottomed out and from now most of the auto-makers will export cars at same number as cars being sold, cargo volume will recover to 40% minus in 3rd Quarter.     In 4th Quarter we expect cargo volume will increase 20-25% plus compared with last year because cargo upturn trend in 3rd Quarter will continue in 4th Quarter, although it dropped drastically in 4th Quarter last year.     Consequently, we expect it will recover to 80% compared with last year in 2nd Half.     To our regret, figure is red in 1st Half, but we will take all possible action for earnings     improvement in order to achieve profit for full year by recovery in 2nd Half.

(Energy Transportation)

Q.   Please advise current free portion in your fleet for Energy Transportation Business.       A.   First for LNG carriers, we are presently concerned with a total of 47 vessels including those     that are co-owned, and among them, a portion worth 2 full vessels is operated on spot-basis.     Until now we have kept them operating without idling for any long term, etc.     Regarding tankers, our total fleet consists of 34 ships composed of 8 VLCCs, 7 product carriers of LR II type, 5 LPG & Ammonia carriers and 14 AFRAMAX operated by our Singapore subsidiary. Among them, AFRAMAX and LR II are exposed in spot market.

(In General)

Q.   About Cost Reduction, as total amount has increased from 45 billion to 58 billion yen this time, how is the plan going in the 1st Quarter ? We understand that the plan was roughly on basis 40% in 1st half and 60% in 2nd half.       A.   Although all cost reduction actions are carried out on Quarterly basis, 18 billion was already finished out of the original plan of 45 billion, so about 15 billion would have finished in the 1st Quarter.       Q.   We heard that amount for investment this year is about 80-90 billion yen at the time of original prospect in April. Please let us know of any change of prospect, or reduction of investment.       A.   We have squeezed to about 77 billion for this fiscal year at present and we are planning to squeeze a further 10 billion, so for 2010 and 2011 we think that we can probably control the total to be under 70 billion or less.       Q.   With regard to cash management, you may be planning to borrow by debt finance and to pay as scheduled. If so, how is it going? Is there no problem with banks in spite of your earnings being down?       A.   Although we did not necessarily expect deterioration in advance, considering it could happen we increased long-term finance from the end of last year, and in this June we issued a 30 billion corporate bond. In addition we borrow money from banks sufficiently enough in advance so that we consequently do not think there's a problem with finance, at least in this fiscal year.       Q.   Since we understand that your expectation for operating cash flow was 61.0 billion yen when making your original prospect as of April, how did you review the amount for lower earnings prospect this time? And how much debt with interest do you expect at the end of this fiscal year, although original prospect as of April was 459.0 billion.       A.   With regard to operating cash flow and debt with interest at the end of this fiscal year, prospect for cash flow is 25.0 billion plus on basis of latest revised prospect, and regret to say prospect for debt with interest is 495.0 billion.

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