【Forecasts for FY2021】
Q-1：My question regards the extraordinary profit/loss forecast for the current fiscal year. Would you say that the disposal of ships not economically viable, not benefiting from the current market conditions, will be largely completed during this fiscal year? Also, how much will the net extraordinary profit/loss be?
A-1：Regarding structural reforms, we believe we can complete almost all those effective ones that can be done now. Also, in the full-year forecasts, ordinary income is 390.0 billion yen, and net income attributable to owners of parent is 370.0 billion yen, a difference of about 20.0 billion yen. We hope you will recognize that about half of this difference is equivalent to the net extraordinary loss.
Q-2：What level of improvement effect you can expect from the structural reforms in the next fiscal year?
A-2：Regarding the structural reforms planned for the current period and their effects on our ordinary results for the next fiscal year, the accuracy of various assumptions is not clear yet. Using only certain reliable figures, we estimate at this point that the effects will improve the ordinary results by about 4.0 or 5.0 billion yen.
Q-3：Would you say that your consolidated business portfolio has been reorganized? Is there anything different about your approach to business restructuring?
A-3：With regard to our business portfolio, we are currently working on the disposal of unprofitable businesses, and the effects are incorporated into the profitability for the current fiscal year.
Q-4：Is structural reform not needed concerning unprofitable containerships?
A-4：For containerships, the necessary allowance for loss related to chartering contracts has been and will continue to be recorded in consultation with the accountant. This method itself will not change. One thing that has changed is that as the market for containerships has improved, the charter market has also expanded significantly. We anticipate that the allowance amount going forward will decrease as the charter market conditions, one of the assumptions, change. However, we are not planning structural reforms for unprofitable containerships.
【”K” Line’s shareholders return and dividend from ONE】
Q-1：Please explain the significance of the year-end dividend of 300 yen per share.
A-1：With our non-consolidated retained earnings now in the black, next year we plan to present a more detailed capital policy with a more integrated approach, together with a new business plan that is currently being drafted. As the first step, we took into account our current balance sheet, the investment cash flow required this year, and the funds required for structural reforms. The resulting dividends we can pay to shareholders is 300 yen per share.
Q-2：Has ONE’s dividend policy been finalized already? Or is there still room for adjustment? Would you please explain your approach? Also, will you be deciding both ONE’s dividend payout ratio and how much cash to return to shareholders on a stock basis?
A-2：Rather than having a fixed dividend payout ratio, the three parent companies as shareholders discussed and then implemented the payout during the period. The decision was made from the perspective of capital efficiency during a time when business performance has been changing more than expected. Going forward, ONE continues to refine its business policy and plan. Together with the three shareholder companies, it will consider the level of cash and deposits required, considering its resilience to market conditions. In addition, after establishing the necessary funds for investment, financial discipline, and capital policy, all of us will determine how to approach additional dividends in the future. The discussion concerning ONE’s dividend policy is just about to begin. We will work with the other parties as we want to have it clarified in some form by the end of this year. While considering capital efficiency as part of the capital policy, what level of retained earnings will be secured for ONE, or will it be returned to shareholders? This is exactly the topic we will discuss in more detail, including how to find a balance with future investment.
Q-3：Assuming dividend payout by ONE, what is the likely business result period on which payout will be based? Also, if you have any idea, please tell us what level of retained earnings “K” Line is aiming to maintain on non-consolidated basis.
A-3：The dividend payout by ONE is an interim dividend and was decided based on the results for the first half. Regarding the level of our non-consolidated retained earnings, first of all, it must be positive. From the next fiscal year onward, we will emphasize not only the level of non-consolidated retained earnings but also operating cash flow. Therefore, we are aiming for a capital policy that balances investment in growth strategies, financial structure enhancement, and shareholder returns based on the results of these two. We do not think the policy will necessarily be directly linked to non-consolidated retained earnings.
【Formulation of “K” Line’s new management plan and ONE’s business plan】
Q-1：Is maritime shipping an area that will be considered for growth measures under the new management plan being drafted? Or will the target be a non-shipping business such as logistics? What is your sense of the direction?
A-1：Though it is currently under consideration, we think the shipping business will still need growth measures.
Q-2：When will ONE’s business plan be released?
A-2：The business plan for ONE is now in the final adjustment phase, so we think it will be announced in some form by the end of the year at the earliest.
【Containership Business】
Q-1：What do you think the container freight rates will be in the second half?
A-1：ONE’s freight rates for the second half have been estimated. We were assuming that the short-term freight rates would enter an adjustment phase in October and would gradually decline. However, there is no sign that short-term freight rates have actually fallen sharply in October, so we will pay even more attention to short-term market rate trends going forward. Even in early November, short-term freight rates have been maintained while the October rate market conditions persist.
Q-2：Is ONE in a situation where the proportion of long-term contracts is increasing, or the number of multi-year contracts is growing? Are there signs suggesting that the market is likely to become more stable in the medium to long term than it was in the past?
A-2：For long-term freight rates, contract renewals have begun, but no clear rate results have been reported yet. Market conditions for short-term freight rates have remained strong, and there is no prospect of normalizing the current supply chain disruption. Since negotiations are being carried out on the assumption that this will continue, contract rates will basically be going up for long-term contract negotiations as well. More customers have been requesting multi-year contracts this year, compared to the average year. This is because the supply and demand situation is tight due to the current supply chain disruptions and other events. Amid such circumstances, customers want to reliably secure space. Therefore, we are pursuing negotiations while listening to the customer’s needs, depending on the conditions. We basically want to keep the usual proportion of long-term contracts or increase it by a certain amount.
