Q1. You have said that the container freight level will improve in the second quarter and beyond. Am I correct in understanding that freight rate levels did not deviate substantially from the plan, considering ONE’s weaker-than-expected first-quarter financial results were due to handling volume that fell short of expectations?


A1. ONE assumed freight rates at the FY2017 level, and freight rates have been mostly in line with assumptions for both outbound and homebound cargoes.


Q2. What were the first-quarter results for generation of synergy effects at ONE, and what is your forecast for the first half and second half?


A2. Slightly less than half the synergy effects that appeared ahead of schedule are attributable to negotiations and contract renewals of variable costs, centered on terminal, railway, and truck costs. Although I cannot give specific percentages for the first and second halves since contract renewal is proceeding, we expect synergy effects to steadily and surely appear as we move into the second half.


Q1. The Consolidated Statement of Cash Flows (page 15 of Financial Highlights for 1st Quarter FY2018) shows “Proceeds from share issuances to non-controlling interests” of 50.0 billion yen. Please explain the details.


A1. In the process of external raising of capital for the investment in ONE, we consulted with financial institutions and chose the best funding method. It involves the Company establishing a subsidiary for the purpose of fundraising and borrowing the funds from the subsidiary. The subsidiary receives a capital contribution from a financial institution and issues preferred stock to the financial institution. This is how the funds are classified on the Balance Sheet and Statement of Cash Flows, and we have already completed the investment in ONE.


Q2. What is the probability of success with the 2.5 billion yen profitability improvement measures? I’d like to confirm whether the figure is already reliable to some degree or just a target. Also, market conditions for tankers are currently soft. If the financial results deteriorate in these circumstances, will there be further profitability improvement measures?


A2. With regard to the reasonableness of our 2.5 billion profitability improvement measures, a breakdown of the 2.5 billion is shown on page 6 of the Financial Highlights Brief Report. The probability of achieving the 0.9 billion yen improvement in the Dry Bulk Business is very high, since we are already implementing concrete measures. Although we face an extremely adverse earnings environment in the Car Carrier Business, we are approaching negotiations with customers with firm resolve. Furthermore we are systematically conducting efficient vessel allocation, cost cutting, and other measures. Accordingly, we think that the 2.5 billion yen profitability improvement measures are reasonable, achievable measures.
As to your question about further profitability measures in the event of a downturn in market conditions for tankers, we intend to implement additional measures if market conditions for tankers do not improve. At this time, the business environment in the Dry Bulk Segment is not bad, and we will cover any shortfall in the remaining other segments and in other businesses in the Energy Resource Transport Segment.