MOL President Muto's 2012 New Year Message, 4th Jan 2012

News Release Mitsui O.S.K. Lines, Ltd. (Head Office) January 6, 2012

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MOL
President Muto’s 2012 New Year Message
"Do Not Quarrel with Providence, or Blame Others"
 
A Happy New Year to everyone
in the MOL Group. 
 
Looking Back on
2011
 
2011 has been a year of
momentous events. We have witnessed the Jasmine Revolution, the floods in
Thailand, and the sovereign debt crisis in Europe; but for those of us in Japan,
the Great East Japan Earthquake of March 11 was the most shocking and painful
event. We mourn those who were lost in this terrible disaster, and our thoughts
remain with those who have suffered and lost so much. Immediately after the
earthquake, we set up a task force and support headquarters, headed by myself,
and set about checking the safety of Group employees and vessels, while
implementing a raft of support initiatives in the affected areas drawing on the
combined efforts of the MOL Group worldwide. The word kizuna ("bond") became a
rallying cry that has resounded in the hearts of many Japanese this past year,
and I myself have felt firsthand the powerful underlying strength and unity in
the employees of the MOL Group. I would like to express my respect and
admiration to all of you once again for your actions.
 
While the disaster did
affect our business, our performance was also influenced further by a very
difficult business environment, including the strong yen, high fuel prices,
downward pressure on the market due to oversupply of shipping capacity, and a
decline in demand caused by the economic downturn. The first half of fiscal 2011
marked the biggest loss that MOL has ever reported. Our forecast for the second
half was that we would recover the losses of the first half as business
conditions improved in the dry bulker market and automobile exports recovered.
Nevertheless, the management environment surrounding MOL remains unpredictable
and clouded by imminent oversupply of vessels as more new ships reach
completion, and slumping business sentiment. These factors are expected to
impact containership operations, especially, where conditions are extremely
harsh with the impending completion of a large number of ultra large
containerships, and the prolonged slump in the economies of Europe and the
U.S.A. 
 
Large-scale completion of
new vessels is expected to continue this year, so we should prepare ourselves
for a prolonged harsh business environment, and approach it with due care. After
2013, however, the number of new vessels completed is expected to level off,
providing some light at the end of the tunnel. Over the medium to long term too,
we predict that the excessive production capacity of shipyards in China, 2/3 of
which is privately operated, will be brought into balance by the market
mechanism, and we expect the oversupply of ships to be
relieved.
 
Becoming the Company
of Choice Among Customers
 
In our current situation,
the first and most important thing we must do to ensure our survival as a
company and to differentiate ourselves from our competitors is return to
fundamental principles and continue being a company that is preferred and
trusted by its customers. To this end, I think we need to further strengthen the
following four key areas that form sources of trust. 
 
The first key area is safe
operation. There is no disputing that customers always evaluate a candidate
company's operational safety level when selecting a shipping company. Under GEAR
UP! MOL we are carrying out our Phase 4 initiatives to "become the world leader
in safe operation." We have made steady progress in promoting visibility of safe
operations and objectively assessing our performance in all aspects of our safe
operation systems. As a result the level of safety at MOL has definitely
improved over the past four years. It is also our job to provide safe
transportation services at a competitive price while effectively reducing our
impact on the environment.
 
The second key area is our
financial position. Even though we are operating in adverse conditions, our
financial position is the most sound among all the world's shipping companies,
as our credit rating shows. Meanwhile, as the weak market conditions and the
financial uncertainty in Europe have combined to bring even some relatively
major shipping companies to a point of financial crisis, customers
are searching for stable business partners and
MOL's relative competitiveness is increasing. Under the current conditions, with
customer's selection of shipping companies set to become even more stringent,
MOL appears to be in an advantageous position. However, it is vital that we
strive to improve our balance sheet and cash flow in the short term through
persistent efforts to trim costs and other measures. Such efforts are
indispensable for us to maintain and grow this strength as we go forward.

 
The third key area is the
quality of transport services that we provide. Our car carriers constantly
review and renew their protocols for damage prevention to ensure that cargo is
delivered without so much as a tiny scratch. In our Liner Division, too, we
regularly disclose our on-time arrival performance to our customers. As we move
forward, we need to provide higher quality services for carefully and securely
transporting customer cargo, and ensure that customers really feel the
difference. 
 
The fourth and final key
area is our sales power. While we must tackle the above factors at a high level,
it is our individual business capabilities that will dictate whether we will be
designated as the service provider to meet the needs of our globally expanding
customers. Business transactions are always decided by the relationships of
trust between people in the end. I urge each of you to build strong
relationships with our customers so that our strengths in safe operation,
financial position, and high quality services will have a chance to shine
through in our business results. 
 
"Do Not Quarrel with
Providence, or Blame Others"
In the immortal words of
Confucius "One must not quarrel with providence or blame others, but improve
through learning." Applying this wisdom to our situation today, I believe
Confucius would tell us not to despise the markets, or blame others for our
difficulties, but to pour our effort into doing what we can on our own to
improve. 
 
Hardship offers excellent
opportunities for encouraging our own growth. In hard times such as these, we
have much to do. As the proverb goes: "You must sow before you can reap." Now is
the time for us to sow seed if we are to reap a harvest in the future and make a
leap to the next stage in our development. It is during hard times such as these
that we should be making diligent efforts and seeking ways to improve. Then, we
will be able to reap rich future benefits and expand our business. Nothing will
come of blaming people or circumstances. In that sense, although we are in an
extremely difficult business environment, since last year we have indeed been
sowing a variety of seeds. 
 
In our effort to capture
global marine transport needs, last year we started our VLGC business for LPG at
Singapore-based Phoenix Tankers Pte. Ltd., which is in the central location for
this business, and established MOL Bulk Shipping (Thailand) Co., Ltd. to
strengthen the car carrier business in Asia as the automobile industry has
concentrated operations in Thailand. In another move, MOLCIS, our group company
for iron ore transportation services in Singapore, has increased its business
scale. These changes will bring our business close to our customers, making it
easier to respond to their needs, as we continue to globalize through our
overseas group companies. 
 
Business alliances with
partners are another kind of important seed that we sowed last year. We
established Euro Marine Logistics N.V. together with Hoegh Autoliners A/S to
transport automobiles within the European zone, assembled the largest pool of
VLCCs in the world with A.P. Møller - Mærsk A/S and two other companies, and in
containership operations we entered into a comprehensive alliance in European
trade with the Grand Alliance. Meanwhile, in our LNG business, we launched a new
cooperative agreement in China, setting up a joint venture with China Shipping
(Group) Company to enter the market for LNG transport to China. We also started
domestic LNG transportation in Indonesia by teaming up with a local partner.
Going forward I believe it will be important for us to seek any opportunities
for partnership with all kinds of partners, and work with them to improve the
efficiency of operations through benefits of scale. 
 
In our slow steaming
initiative, last year most of our vessels made more diligent efforts to apply
slow steaming. This practice not only reduces fuel consumption, but is also
expected to help mitigate the impact of oversupply in vessels. Moreover, it is
in line with the worldwide trend towards reducing the impact of industry on the
environment. As such, slow steaming should become the global standard for the
shipping industry in the future. 
 
In the overall Japanese
marine transport industry, the system of taxation by tonnage has been expanded
and strengthened as part of efforts to strengthen economic security in Japan.
Chairman Ashida, president of the Japanese Shipowners' Association, and others
concerned called for work done by the Japanese marine transport industry
following the earthquake in March to be properly recognized, along with the
important role of Japanese marine transport companies in securing economic
stability for the country. As a result, conditions for Japanese shipping
companies to compete with overseas shipping companies are to be greatly
improved. This development is of immense value to MOL, and to the industry as a
whole. I would like to thank all those involved once again.

 
2012 is the year of the
dragon under the Chinese calendar. Traditionally, dragons are associated with an
increase in good fortune. On this theme, I'd like to make this year one for
"turning the tables." This will also be the final year of GEAR UP! MOL, and
therefore a year for formulating the next midterm management plan to take effect
from fiscal 2013. I plan to take time at Compass meetings and other places to
discuss our future challenges and opportunities thoroughly and deeply, to plant
real seeds, and together draft an action plan to prepare for the future.
Although we are in a harsh environmental change, let us show the wisdom, courage, and
capacity for action that will enable us to produce changes that will create
tomorrow. 
 
In closing, I would like to
wish all MOL employees and their families throughout the world health and good
fortune for the New Year. Let us promise to keep every MOL Group vessel safe in
2012 through our own efforts. 
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