Ladies and Gentlemen,


Thank you very much for joining us today for this analyst meeting regarding our 2nd Quarter Fiscal Year 2014 (July 2014–Sept 2014) consolidated financial status. I will now give just a quick explanation.


A-1. Financial Results for 2nd Quarter Fiscal Year 2014

For the fiscal first half covering 1st Quarter and 2nd Quarter we booked sales of 659.8 billion yen, operating income of 24.9 billion yen, ordinary income of 25.9 billion yen, and net income of 21.2 billion yen. For the period , average yen-dollar exchange rate  stood at 102.52 yen, and that of bunker oil, 611 U.S. dollars per metric ton.


For year-on-year basis, our revenues increased by 53.2 billion yen, operating income by 5.1 billion yen , ordinary income by 5.9 billion yen , and net income by 6.5 billion yen.
The yen dropped 4.49 yen from the year-ago period while bunker oil price fell 17 U.S. dollars per metric ton. These two factors greatly contributed to our increased ordinary income.


Now, let us take a look at earnings per sector.
We had very good performance in Containership business as combined with logistics business. For 2nd Quarter we booked ordinary income of 7.3 billion yen, with 9.5 billion for the 1st half, which is a year-on-year increase of 7.9 billion yen.
Contrastingly, in our Bulk Shipping Business 2nd Quarter, ordinary income for first half fell 4.4 billion yen from the year-ago period to 17.5 billion yen.
In Offshore Energy E&P Support & Heavy Lifter, our ordinary income turned to the black for 2nd Quarter, ending in negative 0.6 billion yen for the first half, a 1.3 billion yen improvement year-on-year.
Overall, for the first half we booked ordinary income of 25.9 billion yen.


How did the weaker yen and the lower bunker oil price push up our ordinary income? In the first half, the yen dropped 4.49 yen against the dollar from the year-ago period and increased our ordinary income by 2.7 billion yen, while the bunker oil price that fell 17 U.S. dollars per metric ton contributed 1.0 billion yen. In total, these two factors combined improved our ordinary income for the first half by 3.7 billion yen.


Now let us look at our Major Financial Indices.
At the end of the first half, our Shareholder's Equity stood at 421.0 billion yen, an increase of 32.2 billion yen from the end of March 2014.
Cash and Deposits decreased by some 20.0 billion yen. We are now working to bring the amount back to an appropriate level.
We made efforts for decreasing Interest-bearing Debts and successfully brought them down to 581.2 billion at the end of September, a reduction of 62.6 billion in a half-year period.
The reduction substantially helped DER to drop by 28% to 138% and net DER to 87%, a ratio lower than 100%.
Our Equity ratio improved by 2.9% to 33.8%.


A-2. Key Points of 1st Half Fiscal Year 2014

Now let’s analyze the 5.9 billion year-on-year improvement in our ordinary income, a key point of our first-half earnings.
Major contributors to the improvement were favorable changes in exchange rates and bunker oil prices. As I explained earlier, together the changes increased our ordinary income by 3.7 billion yen year-on-year. Freight rates moved favorably for Containerships while remaining sluggish for Bulk Shipping Business, especially Dry-bulk vessels. In total, freight rate changes served to improve our ordinary income by 0.6 billion yen.


A-3. Estimate for Full Fiscal Year 2014

In our full-year forecast we are keeping most of the earnings items unchanged except net income, which was revised upwards to 21.5 billion yen.
Revenues, operating income and ordinary income are kept unchanged because it is rather difficult to accurately forecast these items at the present moment due to various uncertain factors.

Two of such uncertain factors are foreign exchange rates and bunker oil prices that are linked to sharply falling crude oil prices. At this moment we cannot tell how these two factors will be moving in the near future.
Relating to containership business, we are planning to restore freight rates for Asia-Europe routes in November which have declined since September. But at this moment it is unclear if we will be able to do so.
For North- South routes we also cannot tell yet when we will be able to restore freight rates.
For Dry Bulk business, we saw the BDI rising at last in October, principally driven by Cape-size market. However, it is difficult at present to determine whether this rising tendency will continue, seeing that it fell yesterday after having risen for several consecutive days. For this reason, we are keeping operating income and ordinary income unchanged for the moment. Once we feel more or less sure we will then revise forecasts, but I feel any revision is a bit too early at present.  


A-4. Key Points of Fiscal Year 2014

Next, let me mention some key points of our full-year earnings forecast. The yen rate against the dollar will drop 4 yen from the year-ago period improving our ordinary income by 4.0 billion yen. Bunker oil price per ton will cost 25 U.S. dollars less contributing another 3.1 billion yen, while freight rates will fall due principally to the sluggish Bulk Shipping Business market, reducing our ordinary income by 11.8 billion yen year-on-year.
However, as I said earlier, any forecast is difficult to make at this moment because of various uncertain factors.  So I request you to be aware that my forecast is not free from uncertainty.


A-5. Progress of Cost Saving Plan

Cost reduction is what we can achieve by our self-help efforts, so we are moving ahead in this area diligently. 
Our cost saving target as of this April was 13.1 billion yen, but we are working to cut  costs down by 17.0 billion yen on a full-year basis in excess of the original target.
Particularly in containership segment we expect to achieve additional cost reduction in the second half.
By the end of the first half we have realized 37% of the targeted cost reduction. We have several items that are to be carried out intensively in the second half.


B-1. Containership Business

As I explained moments ago, Containership Business performed very well in the first half, improving in terms of both revenues and income. The business performed particularly well in East-West routes.
What factor will be decisive for our future Containership business? We expect that the business on Transpacific routes will keep strong with some possibility to exceed our forecast, while not being free from substantial uncertainty on Asia-Europe trades because of the continued turmoil prevailing in European economies and the intensifying competition due to successive launching of large-size vessels.
Another thing I’d like to repeat is that we will continue working hard for cost reduction.
Over the years we have kept investing in equipment so that we can go on winning little by little profitable cargo, particularly reefer cargo. Capitalizing on such investments we intend to continue improving profitability.


B-2. Dry bulk business

In Dry Bulk segment we posted increased revenues year-on-year, due in part to the weaker yen, but we suffered a decrease in ordinary income. The freight rate market remained sluggish until September on all types of vessels below Capesize, so it was quite difficult for us to increase income.
However, our large Capesize vessels operate under long-term contracts whereby tonnage supply is designed to meet cargo volumes. So, we are not much affected by prevailing freight rates and could post a profit. Our Thermal Coal vessels as well as our  Woodchip and Pulp vessels under long-term contracts also earned a profit in a steady, stable manner. We can also say that our medium-to-small size vessels, so-called General Bulk carriers, worked successfully as well.
Thus, for the first half, Dry Bulk segment was modestly in the black, earning less profit than the year-ago period because of the generally sluggish market.


B-3. Car Carrier business

In the fiscal first half, our car carriers transported 4% fewer cars than in the year-ago period, posting less revenues and profit.
We are slightly short of large-size car carriers capable of carrying 6,000 to 6,500 cars. So, in the current period we were required to inefficiently transport large lots of cars dividing them among several small-size vessels. In our view, such operations led to declined profit.


In order to positively address such a situation, the company announced that we will refurbish 10 car carriers, of the largest class currently available in Japan, that will be  capable of carrying 7,500 cars. They will enter service early next year, helping us to more efficiently allocate and operate vessels. Additionally as there will be an increase in capacity for high and heavy cargo, such as construction machinery, farm machines, etc., 
we hope these vessels will greatly contribute to an improvement in profitability.


Referring to key points of our future financial data, I wrote, “Marine transportation of built-up cars will continue to be firm and strong worldwide.” However, such a view does not apply to all parts of the world. Demand for marine transportation of automobiles varies from one region to another. Actually in some regions signals are emerging that indicate weakening demand. In the future, we expect somewhat weaker demand in South America, part of Africa and Russia.


B-4. LNG Carriers and Oil Tanker Business

Next, I will explain about our LNG carriers, Oil Tanker and Energy-related segment.
All LNG carriers are steadily earning stable profit supported by medium-to long-term contracts.
Oil tankers, whose fleet has been substantially decreasing in recent years, generated a slight deficit in the first half because of a sluggish market.
In October, the market condition substantially improved, particularly in favor of larger VLCCs. Judging from the demand-supply situation, the VLCC market is expected to keep operating on Worldscale 50 to 55. Therefore, I expect our oil tanker business will probably become profitable in the second half.


B-5. Offshore Resource Development and Heavy Lifter Business

Lastly, I’ll explain about Offshore Resource development and Heavy Lifter business.
In Offshore Resource development business, we have offshore support vessels and drill ships with all vessels operating profitably.
Of our fleet, problematical Heavy Lifter business booked increased revenues for the first half, with a resulting substantially reduced deficit. The market is on a mild recovery trend. Included in our fleet are several high-specification vessels. We see an increasing number of contracts for so-called project cargoes, particularly offshore business-related cargoes that can be handled only by high-specification vessels. Thus, this segment has come very close to a beak-even point. Yet, it remains still uncertain whether the segment will continue to improve in and after the next year.


This ends my explanations today and I thank you for your kind attention.