(Containership Business)

Q. How do you forecast freight rates and earnings for the fiscal second half?

A. We expect the freight rate on Transpacific trade to be down by some 3 percentage points from the Q2 that stood at 102, and on Asia-Europe trade, also to be down by some 10 percentage points on average from that of 78.   
     The current rate level prevailing on Asia-Europe trade is lower than the above rate forecast for the second half, but we expect the rate level will once be favorably “reset” in November, given positive signs for a November rate increase.
     Also for Transpacific trade there are good signs for a mid-November rate increase. If an increase is put into effect, it will likely add to our earnings.


Q. How do you forecast the 2015 market?

A. Tonnage supply will grow by 6% to 7%, but we are not sure if demand will increase to the same extent. And here’s one thing I’d like to note. Over the recent years it has been commented that there is tonnage oversupply in total. In reality, however, laid-up vessels do not count for much more than 1%, and 99% of the vessels are working today at more than 90% capacity utilization. So we do not think there is substantial tonnage oversupply.
 At the same time, we are worried that the Ukrainian situation, the Islamic State, and Ebola hemorrhagic fever may affect market sentiment.


Q. What can you do to turn your Containership business to the black?

A. Next year, we will place in service five 14,000-TEU vessels and another five in 2018. At a very proper time we placed an order for these vessels. They have the latest fuel economy performance. In such a sense, we have all preparations completed for having “advantageous arms” available.
At the same time, we should remember that an important thing in Containership business is winning customer confidence, carrying out meticulous, careful marketing, and continuous cost-cutting efforts. None of these efforts are new, but we are determined to keep making such efforts for turning our Containership business profitable.


(Dry Bulk Business)

Q. How do you forecast the 2015 Dry Bulk market?

A. We see few favorable factors that will positively affect the 2015 dry bulk market. While there will be an increase in imports of iron ore from China and India, we will see a fairly large number of newly-built vessels entering service worldwide. We expect therefore that the market will be affected by more negative factors than positive factors.


Q. How tolerant are charter contract-free vessels to market exposure? Will you reduce or increase the number of market exposure?

A. Many of our medium-to small-size vessels operate free from charter contracts and are likely to become unprofitable in unfavorable market conditions. Compared with our competitors, we think we have a relatively high percentage of long-term contracts. Anyway, we will continue to work to have more long-term contracts, while gradually disposing of older vessels to reduce the number of “free vessels” as much as possible for stable business operations.

(Car Carrier Business)

Q. You will have 10 large-size vessels being shortly placed in service. Are they meant to replace existing vessels? How do you expect them to contribute to profitability improvement?

A. We plan to operate them in replacement of existing vessels. A larger vessel will naturally have a lower unit cost per car, and here is the effect of profitability improvement.
 Also, the larger vessels due to be shortly launched have new, more fuel-efficient engines. A larger size and a new engine together will serve to considerably reduce the unit transportation cost.


Q. How will you use these new, larger-size vessels?

A. On a global basis we will decide to place them basically in service on such routes as require larger vessels.
    The new vessels have a hull form capable of loading construction, agricultural or other heavy or tall machinery that is larger than conventional-size cargo trucks or other machinery. So we will work to have them dedicated to transporting large-size cargoes in addition to traditional passenger cars for profitability improvement.


(Offshore Resource Development and Heavy Lifter Business)

Q. The oil price has sharply fallen over the recent days. Will the drop affect your offshore resource development business?

A. For the moment, the lower oil price is not adversely affecting our offshore development business at least in terms of real demand for our service.
A drop down to 80-85 dollars is very close to a “decisive” level. If the drop goes no further it will permit the crude oil currently produced worldwide to be more or less payable. If there ever appear any moves to give up developing offshore oil or put a lid on an operating oil well they will be very limited moves. However, if the oil price drops another 10 or 15 dollars, then it will likely cause people to “shelve” or postpone U.S. shale oil production or costly ultra-deepwater resources development.


(Full-Year Ordinary Income Forecast)

Q. You keep full-year ordinary income forecast unchanged. Are the changes that have recently occurred in foreign exchange rates and fuel oil prices reflected in the preconditions applied to such “unchanged” forecast? 
A. We drew up our earnings plan on new preconditions (bunker oil price being 590 dollars and the yen value being 105 against the dollar). Such new preconditions are reflected in our “unchanged” ordinary income forecast referred to above.


(Cost Saving)

Q. What are the principal items that serve to additionally cut costs on a full-year basis?

A. Additional Cost Saving items are principally Containership business. We intend to increase by \4.8 billion the Cost Saving target of \7.7 billion set for the business at the beginning of the fiscal year to \12.8 billion. Although we term such efforts “Cost Saving,” for profitability improvement or revenue increases they really include, in addition to more efficient vessel allocation, increasing the number of reefer containers and resale of container equipment.


(Investment Cash Flow)

Q. Can we understand that your Investment Cash Flow will continue to be \50-60 billion per year?

A. We will keep investing basically in accordance with our published vessel investment plan. We no longer have any plan to invest a massive amount in vessels as we did before the collapse of Lehman Bros. Therefore, as we repeatedly say, our annual investment will naturally get down to no more than \50 billion, staying within the amount of depreciation.
     Also for purposes of replacing assets we will continue our strategy to sell off inefficiently utilized assets. It will serve to contain investment cash flow.


(Next Medium-Term Business Management Plan)

Q. Tell us what kind of business environment you anticipate for each of your businesses and how you plan to manage your business for the next five years that shall be covered by your next Medium-Term Business Management Plan

A. It is too early to give you any details of our next Medium-Term Business Management Plan. So permit me to speak in general terms. We do not foresee any tighter demand-supply situation prevailing in the marine transportation market over the five years starting in 2015. It does not mean that we are entirely pessimistic as we may expect the market to temporarily rise upwards on any types of vessels. We assume, however, that during the first half of the next five-year period, specifically during 2015, 2016, and 2017, we still will be going through a tough market environment.
    So we are working to improve profitability by placing in service car carriers, large-size container vessels, and fuel-efficient Capesize vessels, each of which is expected to generate economic effects.
    Speaking on the positive side, we will work to win more new contracts for LNG carriers. We are now finalizing our plan to enter new business areas including FPSO we have yet to embark on.