Mitsui O.S.K. Lines Ltd.
Annual Report 2019

Plain-text annual report

Navigating the Future MOL REPORT 2019 | Year ended March 31, 2019 | This report is printed on Forest Stewardship Council® (FSC)-certified paper made of wood from responsibly managed forests. It was also printed using vegetable oil inks. Printed in Japan MOL GROUP CORPORATE PRINCIPLES As a multi-modal transport group, we will: 1 Actively contribute to global economic growth and development, anticipating the needs of our customers and the challenges of this new era 2 Strive to maximize corporate value through creativity, operating efficiency, and promotion of ethical and transparent management 3 Nurture and protect the natural environment by maintaining the highest standards of operational safety and navigation MOL CHART MOL CHART represents the values that are to be shared by all members of the MOL Group worldwide. These values shall be common guidelines to pursue the best course of action for the highest quality of output for our stakeholders and to achieve MOL’s corporate goal. Challenge Honesty Accountability Reliability Teamwork Innovate through insight Do the right thing Commit to acting with a sense of ownership Gain the trust of customers Build a strong team Our Foundation 2 MOL’s History: “Spirit of Challenge and Innovation” 4 Value Creation Model For Our Sustainable Growth 6 Message from the CEO 12 Overview of the Management Plan “Rolling Plan 2019” 18 Message from the CFO 20 Special Feature MOL Opens Up a New Sea Route for LNG Trade —Joining the Yamal LNG Project 26 Addressing Sustainability Issues 26 Overview of MOL’s Sustainability Issues (Materiality) 28 Value-Added Transport Services 32 Marine and Global Environmental Conservation 36 Innovation for Development in Marine Technology 38 Human Resource Cultivation and Community Development 42 Dialogue between the Outside Directors 46 Board of Directors, Audit & Supervisory Board Members, and Executive Officers 49 Corporate Governance Contents Underlined words in this report are explained in the Glossary on page 78. Business Strategy & Review 54 At a Glance 56 Market Position (Fleet Size) 57 Market Data 58 Overview of Operations by Segment Data Section 70 Financial and Non-Financial Highlights 72 Key Indicators 74 The MOL Group 76 The MOL Group’s Global Network 77 Information Disclosure and External Recognition 78 Glossary 79 Shareholder Information MOL’s Communication Tools MOL produces the following publications as a means of promoting communication with stakeholders. The latest versions of all reports can be found on our website. https://www.mol.co.jp/en/ir/ Market Data マーケット･データ June 2019 2019年6⽉ Market Data MOL Report Investor Guidebook Forward-Looking Statements This report contains forward-looking statements concerning MOL’s future plans, strategies, and performance. These statements represent assumptions and beliefs based on information currently available* and are not historical facts. Furthermore, forward-looking statements are subject to a number of risks and uncertainties that include, but are not limited to, economic conditions, worldwide competition in the shipping industry, customer demand, foreign currency exchange rates, price of bunker, tax laws, and other regulations. MOL therefore cautions readers that actual results may differ materially from these predictions. * As of June 30, 2019 unless otherwise specified 1 MOL’s History: “Spirit of Challenge and Innovation” Throughout its more than 130 years of history, MOL has grown into one of the world’s largest full-line marine transport groups by constantly anticipating the needs of its customers and future demand, while overcoming various challenges along the way. What has enabled this is MOL’s “spirit of challenge and innovation.” MOL will continue to nurture this spirit as it heads into the next 130 years. 2017 Delivery of the MOL FSRU Challenger, the first FSRU owned and operated by an Asian shipping company. 1961 Delivery of the KINKASAN MARU, the world’s first automated ship that maneuvers the main engine from the bridge and centrally monitors and controls the machineries from the engine control room. 1964 Mitsui O.S.K. Lines, Ltd. (MOL) is established through the merger of O.S.K. Line and Mitsui Steamship. 1968 Full containership services commence. 1965 MOL launches Japan’s first specialized car car- rier, the OPPAMA MARU. 1884 Osaka Shosen Kaisha (O.S.K. Line) is founded. 1890 O.S.K. Line launches its first overseas route service between Osaka and Busan. 1909 O.S.K. Line launches its first long-distance ocean service between Hong Kong and Tacoma. 1942 1930 High-speed cargo ship, the KINAI MARU, is constructed and begins rapid transport service on the New York route, thereby dramatically shorten- ing the required shipping days. Mitsui & Co., Ltd. spins off its shipping department to create Mitsui Steamship Co., Ltd. 1939 Cargo–passenger ships, the ARGENTINA MARU and the BRASIL MARU, enter service on the South America route. These vessels represent the state of the art in Japanese shipbuilding at the time. Self-Reinvention to Adapt to External Changes 1884 1945 1946 1983 Japan’s first specialized methanol tanker, the KOHZAN MARU, enters service. 1984 MOL’s first in-house managed LNG carrier, the SENSHU MARU, enters service. 1989 Navix Line, Ltd. is estab- lished through the merger of Japan Line, Ltd. and Yamashita-Shinnihon Steamship Co., Ltd. 1989 Japan’s first full-fledged cruise ship, the FUJI MARU, enters service, ushering in the era of leisure cruises in Japan. 1999 Formed as a group of small-sized ship owners coming together in order to survive as a business, MOL advances and expands into overseas routes. MOL grows into a world-leading full-line marine transport group amid the postwar recovery and rapid economic expansion of Japan. The founding of MOL can be traced back to Osaka Shosen Kaisha (O.S.K. Line), which was established in 1884 by ship owners in the Seto Inland Sea area and their in-kind contributions of 93 vessels. At that time, the sakoku (closed country) era of Japan had come to an end, and the Meiji Restoration was already underway. Accordingly, the need for marine transport on both domestic and overseas routes rose dra- matically. The Company had actively expanded into coastal shipping routes by the 1890s and successfully launched its first long-distance ocean service around 1910. In these ways, the Company has grown as a foundation underpinning the development of foreign trade in Japan. Many Japanese merchant shipping fleets were destroyed during World War II. Amid Japan’s successful recovery from the devastation of war, MOL became an integral part of the development of the Japanese economy through its marine transport services. While doing so, the Company grew into a full-line marine transport group that possesses a wide range of ves- sels. The Company worked to promptly respond to the need for specialized and large-sized vessels and repeatedly took on challenges from a techno- logical standpoint, including launching the world’s first automated vessel that centrally controls the main engine from the engine control room and Japan’s first specialized car carrier. This approach enabled MOL to create new value and opened up the opportunities for business field expansion. 1995 Formation of world’s first containership alliance (a strategic international tie-up). 1996 Tokyo Marine Co., Ltd. (currently, MOL Chemical Tankers Pte. Ltd.) becomes a consolidated subsidiary of MOL. 1999 New Mitsui O.S.K. Lines is established through the merger of MOL and Navix Line. 2004 Daibiru Corporation becomes a consolidated subsidiary of MOL. 2007 Delivery of world’s largest iron ore carrier at the time, the BRASIL MARU. 2010 MOL’s first participation in the FPSO business. 2012 Delivery of world’s first hybrid car carrier, the EMERALD ACE. 2016 Delivery of world’s first large ethane carrier, the ETHANE CRYSTAL. 2019 An agreement to participate in the LNG–to–Powership business is reached. 2018 April Operations begin at Ocean Network Express Pte. Ltd., a company formed through the integration of three Japanese shipping companies’ containership businesses. 2018 March Delivery of the VLADIMIR RUSANOV as the first vessel for the Yamal LNG project, the world’s first project that uses ice-breaking LNG carriers with Arc7 specifications. Special Feature P20 2000 2008 2009 MOL actively invests in natural resources and energy transport fields in anticipation of economic development and the rising demand for natural resources in China. MOL implements its bold Business Structural Reforms in response to the rapidly changing business environment. Further, MOL transitions into a marine transport group that fits the needs of the new era. After the 1999 merger with Navix Line, which was particularly strong in transporting natural resources and energy, MOL aggressively invested in these fields, predicting China’s economic development and increased demand for natural resources. The Company continued to scale up its fleet of dry bulkers including iron ore and coal carriers and tankers, which transport commodi- ties such as crude oil and petroleum products. Reaping the benefits of these upfront investments, profit in fiscal 2007 reached a record high, thanks to the unprecedented boom in marine transport that was driven by the rapid expansion of imports in China. Against the backdrop of a global economic slowdown and the oversupply of vessels, the shipping market stumbled and has continued to struggle with ongoing stagnation. To respond to the increasingly difficult business environment, MOL implemented the Business Structural Reforms, which targeted the dry bulker business and carried out the integration of the containership businesses of three Japanese shipping companies. Additionally, the Company invested preferentially in its areas of strength, including the LNG carrier and offshore businesses, while working to expand into the new fields of environmental and emission-free businesses to meet the needs of the new era. In these ways, MOL will continue to pursue challenge and innovation as a global leader in marine transport. 2 3 Our FoundationMITSUI O.S.K. LINES MOL REPORT 2019MITSUI O.S.K. LINES MOL REPORT 2019Value Creation Model Through a two-pronged approach that involves the management plan, called “Rolling Plan,” and initiatives toward the sustainability issues, the MOL Group aims to realize its 10-year vision to “Become a Group of Business Units with No. 1 Competitiveness in Respective Areas.” At the same time, by providing unique, high-quality transport services, the Group is working to resolve social issues and increase corporate value as an indispensable lifeline that supports people’s daily lives and industries. Customers and Society Marine and Global Environmental Conservation Innovation for Development in Marine Technology Value-Added Transport Services Human Resource Cultivation and Community Development Governance and Compliance to Support Businesses MOL’s Sustainability Issues (Materiality) P26 Contributing to the Sustainable Development Goals (SDGs) through addressing social issues to minimize our negative impact on society and maximize our social value Value-Added Transport Services P28 Realizing High-Quality Transport Services That Support People’s Daily Lives and Industries • Offer safe and stable transportation • Provide highly economical solution to customers through large-volume and bulk transport services • Provide high-quality transportat services that meet customer needs • Contribute to establishment of energy infrastructure in emerging countries PDCA Cycle Based on Changes in the External Environment Management Plan “Rolling Plan 2019” P12 1. Concentrated investment of management resources in the business fields where MOL has strengths, which will mainly be offshore businesses 2. Provision of “stress-free services,” which MOL will offer from the customer’s perspective 3. Promotion of environmental strategies and development of the emission-free business into a core business 10-Year Vision Become a Group of Business Units with No. 1 Competitiveness in Respective Areas Continue to accumulate highly stable profits while ensuring other variable profits Marine and Global Environmental Conservation Innovation for Development in Marine Technology P32 P36 Human Resource Cultivation and Community Development P38 Governance and Compliance to Support Businesses P49 Marine Technical Skills Safe Operation ICT Technological Development Human Resources Governance 4 5 MOL’s Business Foundation Our FoundationMITSUI O.S.K. LINES MOL REPORT 2019MITSUI O.S.K. LINES MOL REPORT 2019 Message from the CEO We will sustainably increase our corporate value by realizing our 10-year vision to “Become a Group of Business Units with No. 1 Competitiveness in Respective Areas.” Junichiro Ikeda President & CEO How We See the External Environment We need to take a step beyond conventional marine transport model and enter new business fields. both public and private sectors around the world are promoting efforts to dramatically reduce greenhouse gas (GHG) emissions by 2050 based on an international consensus, namely the long-term targets of the Paris Agreement. In light of this, we must sensitively capture the changes in business strategies and focusing on environmental and change, the most important role and essential value of emission-free businesses. marine transport remains to transport goods safely and As we stated in “Rolling Plan 2019,” the time is over in efficiently. We must continue to preserve this unchanging which one successful business model can keep working value. From a customer’s perspective, I would say that and ensure growth in the future. We therefore need to marine transport services still cause a certain amount of the world, think beyond our conventional business models, leverage our long-cultivated competitiveness and business stress. Our ultimate mission is to reduce this stress as and take prompt action to change. foundation to take a step beyond the conventional marine much as possible, and we will remain thoroughly committed To adjust ourselves to such circumstances, in fiscal transport model and enter new business fields. to fulfilling this mission going forward. Global trade systems as well as the overall economic structure 2017 we transitioned from our previous practice of are clearly in a period of transition, making it extremely adopting three-year management plan to setting a yearly difficult for us to predict the future business environment. “rolling type” management plan. The intention was to When we look at the world, investment demand in developed maintain flexibility in our management and foster a cor- countries is slowing down, while that in the emerging markets porate culture that proactively pursues changes by is still growing although the outlook is becoming unclear. appropriately ascertaining our future direction without Under such circumstances where there is a mixture of being constrained to our current business performance. positives and negatives in the overall external environment, In fact, by actively responding to diversifying demand, we it is becoming more and more challenging for our company have already taken on repeated challenges, which To Continue Being the Chosen Partner of Our Customers We must make an unrelenting effort to further enhance our intangible assets. Now, the question is what can we do in order to be more proactive in dealing with customers’ stress. When I con- sider where the source of our value is, I believe that lies with our intangible qualities, an example of which is our human resources. They also include the track record we have built in providing solutions to our customers based on safe operations. The strong trust-based relationships we have cultivated with our customers through such services is another intangible quality. Of course, we have also been to foresee customer trends. cultivated our insight and built up a track record in the So far I have talked about the changes that are happening, promoting initiatives to develop other aspects of our The growing level of environmental awareness is energy domain. In addition, in terms of resolving but there are certain things that do not change over time. business, which include our technical skills and IT. another trend that has a significant impact on the marine environmental issues, we decided to accelerate our One thing is our role as a marine transport company and However, focusing just on these aspects will allow us transport industry. Especially in regard to climate change, efforts by placing these issues at the center of our the value we provide our customers. Even as the times beat the competition only in the near term, as other 6 7 For Our Sustainable GrowthMITSUI O.S.K. LINES MOL REPORT 2019MITSUI O.S.K. LINES MOL REPORT 2019 Message from the CEO companies will at some point catch up and we will lose Marine transport is an industry that cannot be parted our competitive edge. from the effect of the market conditions. Even with a good In the marine transport business, we are often not level of stable profits, we cannot avoid the occasional impact explicitly told the specific requests by the customers in of fluctuating market conditions. However, at times of such terms of methods or timing. This means we have to make fluctuations, we can still minimize the negative impact and concerted efforts to understand the nature of our customers’ maximize the positive if we are able to maintain “No. 1 businesses, including the direction of their strategies, our Competitiveness in Respective Areas.” It is obvious that position within their value chain, and their order of priorities. such competitiveness determines our success or failure as Then, based on such understanding, we need to offer them the cycle repeats over the long run. That is why I sincerely solutions that meet their needs. This is an area in which and strongly believe we as a company should always we can differentiate ourselves from the competition. To keep this in mind. Progress in Fiscal 2018 We succeeded in laying the groundwork for our future in each business field. For the progress we made in fiscal 2018, let me begin my explanation with our business performance. In April 2018, operations commenced at Ocean Network Express Pte. Ltd. continue being the chosen partner of our customers, we Our core strategies for achieving “No. 1 Competitiveness (ONE), our integrated containership business venture. must make an unrelenting effort to further enhance our in Respective Areas” are “Concentrated investment of However, due to such factors as confusion surrounding the start businesses into core businesses,” I believe that offering intangible assets. Direction of “Rolling Plan 2019” We will strongly commit to gaining “No. 1 Competitiveness in Respective Areas.” management resources in the business fields where MOL has strengths, which will mainly be offshore businesses,” “Provision of ‘stress-free services,’ which MOL will offer from the customer’s perspective,” and “Promotion of of operations of ONE, we unfortunately posted a large deficit LNG-based solutions will be the key to tackling issues in the containership business. With that said, we were still related to greenhouse gases and SOx, on the part of the able to secure a net overall ordinary profit and profit marine transport industry. In line with that, we achieved attributable to owners of parent that were close to the initial several milestones in fiscal 2018, including the LNG-fueled environmental strategies and development of the emission- forecasts, thanks to the steady accumulation of stable tugboat ISHIN’s successful delivery and the conclusion of free business into a core business.” Especially for “Provision of ‘stress-free services,’ which MOL will offer from the customer’s perspective,” we will remain dedicated to thoroughly promoting such services. Some management plans that I have seen seemed to lack consideration to what profits from medium- to long-term contracts in the Dry long-term charter contracts for LNG fuel supply vessels in Bulk Business, Energy Transport Business, and other Europe and Singapore. Looking into the future, we will businesses, as well as the relatively strong market further accelerate initiatives geared toward growth in this conditions. The positive effect from the Business Structural area so that our environmental and emission-free businesses Reforms that we have implemented in the past also helped become profitable enough to be considered as our valid We developed “Rolling Plan 2019” by keeping the fundamental is really useful for the customer. This comes from our push up the results. I have gained a certain sense of core businesses. directions of the Rolling Plans of the past two years, but tendency to focus on our competitors, which can cause us refining it based on our analysis of the external environment to lose sight of the essential perspective of our customers. mentioned earlier, the needs of our stakeholders, and fields Some think that providing “stress-free services” ultimately accomplishment to see we have finally become a company that can close its accounts without having to record a significant extraordinary loss due to the negative legacy of for growth. The major difference made this time was that means differentiating, but that is not what we are aiming for. the shipping boom in the 2000s. out of the three elements we have thus far adopted in our We want our customers to be impressed with our services, management plans as the 10-year vision for the MOL Group, and choose our services because of the fact that they are we chose “Become a Group of Business Units with No. 1 truly useful. I wanted our management plan to clearly Competitiveness in Respective Areas” as the element that state the importance of seeing things from the perspective best defines our vision. “No. 1 Competitiveness in Respective of customers. We will therefore continue to position Turning our attention to our 10-year vision, fiscal 2018 was a year in which we steadily laid the groundwork for achieving it in each of our business fields. Regarding business development, there were several significant achievements made especially in our offshore businesses. In addition to Focus Areas in Fiscal 2019 Through concentrated investment of resources, we will further solidify our competitiveness in respective areas. Areas” is not limited to universal factors such as profitability, “Provision of ‘stress-free services,’ which MOL will offer FPSO, which is already established as a pillar for our profit Our core growth strategies basically remain unchanged in cost competitiveness, safety, or trust. It also includes com- from the customer’s perspective” as an important pillar accumulation, FSRU is also becoming another pillar, as can fiscal 2019. Continuing on from the previous fiscal year, we petitiveness unique to each business that can be the reason of our management plans going forward. be seen in the projects we are currently involved with. will focus our investment in areas where we have strengths, our customers and business partners choose to work with us. Moreover, the concept of relativity to the competition is something I place particular importance on. As we constantly compete with other major players, simply claiming on our own that we are No. 1 is rather meaningless. Winning or losing in a competition boils down to how our services compare with those of our competitors. Accordingly, we need to always ask ourselves what specifically sets us apart from others and whether or not we are actually doing better than them. Ultimately, it is imperative that we secure a position that allows us to remain one step ahead of the competition. Witnessing this progress, I became convinced that offshore such as offshore businesses, LNG carriers, chemical businesses have the potential to serve as our core in the tankers, and ferries, in order to further solidify our future. As for “stress-free services,” one excellent example competitiveness in these fields. Meanwhile, as a change of our success in fiscal 2018 is the accumulation of long- adopted under “Rolling Plan 2019,” we have positioned term contracts using new-order wood chip carriers. This offshore businesses as the leading key area in which we was achieved through a thoughtful sales process that will concentrate investment. Since I became president, revolved around the customer’s point of view, meaning that I have always been troubled by the fact that, for many years, the frontline personnel deeply understood what solutions we have been unable to clearly state what will be our next our customers needed and when they needed them, which main business pillar to replace the dry bulk business. allowed our personnel to make the appropriate proposals. However, in light of the progress we have made in fiscal In regard to “develop environmental and emission-free 2018, and the confidence we have gained through it, I now 8 9 For Our Sustainable GrowthMITSUI O.S.K. LINES MOL REPORT 2019MITSUI O.S.K. LINES MOL REPORT 2019 Message from the CEO can say that the offshore businesses can be the leading force this does not happen again. To regain trust from our burden on society. In relation to the latter, we set “Strategic is the same. For example, it is a fact that marine transport to drive the Company’s future. In developing offshore customers, we have adopted as a focus area for fiscal 2019 actions for compliance with SOx regulations” as a focus places a burden on the environment, and this is something businesses, I strongly believe that the fact we are the only “Development of Groupwide safety and quality management” area for fiscal 2019, and are preparing for SOx regulations that causes concern and stress for our customers. To real- shipping company in Asia owning an FSRU appealed to our and are working to further reinforce the safety of that will tighten in January 2020. For our overall environ- ize the significant concept of providing “stress-free ser- customers. As a matter of fact, the range and potential of our operations. mental strategies, the newly established Environmental vices,” it is essential that we—as a provider of marine our businesses are growing significantly. What has been For “ICT” and “Technological development,” we launched Management Committee will take initiatives to develop and transport services that support the core of our various making this growth possible is our comprehensive our first application, “Fleet Viewer,” in May 2019 under the promote Companywide strategies. customers’ value chains—both maximize the positive impact, strengths, including our long-cultivated marine technical FOCUS Project, which aims to utilize voyage and engine In terms of “Workstyle reforms,” progress is being which is the solutions we offer for environmental issues and skills, technological capabilities, the relationships with data of our vessels, and we plan to release another app made centered on reforms to the workplace. In May 2019, minimize the negative, which is our environmental burden. To shipyards and other various partners, and so on. This is around October 2019. We believe these apps will help us a non-territorial office, which is a remodeled version of the that end, the Sustainability Issues that we have adopted are not something that others can easily imitate. enhance the safety of our operations and avoid economic fifth floor of our Head Office, opened for a trial. This is an inseparable from the three core strategies we have estab- Meanwhile, just because we do not consider a certain losses by promptly discovering equipment abnormalities. attempt to realize the ideal workstyle we target in our reforms. lished under “Rolling Plan 2019.” By promoting business a key area, it does not mean that we will not invest Such technology will also play a key role in realizing auton- Currently, the effectiveness of this pilot office is being examined. a two-pronged approach of executing our management resources in it. There are some businesses that we have yet omous sailing. When it comes to tangible aspects within This new office aims to revitalize communication and plan and resolving our Sustainability Issues, we aim to to call key areas but still actually hold great competitiveness. our technological development, we are steadily making promote creativity. I look forward to seeing how it will maximize our social and corporate value over the medium For other businesses where we have thus far been unable progress in the area of LNG-fueled vessels, including the improve productivity, which is one of the goals of to long term. to fully demonstrate our competitiveness, my intention is to previously mentioned delivery of the LNG-fueled tugboat “Workstyle reforms.“ have them improve their competitiveness. As we did with ISHIN. In addition, our vessels received the Ship of the Year the Structural Reforms in the Dry Bulker Business and the award, which is given by the Japan Society of Naval integration of the containership business, we will take Architects and Ocean Engineers to vessels that are outstanding action to increase our competitiveness in such areas so that in terms of concept and design, for two consecutive years. all our businesses can play a role in contributing to profits. Our success with the ice-breaking vessels for the Yamal And in case we ultimately see no progress or room for LNG project is another example of our technological improvement to obtain No. 1 competitiveness in a certain advantage. I am proud of the high reputation we receive for business, we in management will monitor it and examine our technological capabilities. Following the lead of our a wide range of options for dealing with it. Technology Department, we will keep striving to spur logistics innovations by anticipating the needs of customers as well as society and refining our ICT and technological capabilities. Turning to “environmental and emission-free businesses,” we need to both capture new business opportunities as explained earlier and further reduce our environmental Fiscal 2019 Initiatives That Underpin Our Management Policies We will continue to work on our priority areas for development and further evolve as a company. To enhance the value we provide and realize “stress-free services,” we will continue our efforts to strengthen our five priority areas for development, which we have been adopting since “Rolling Plan 2017.” Among them, what we value above all else is the “Marine technical skills,” which is one of the most important factors that supports our safe operation. Having said this, however, an accident regrettably occurred involving our cruise ship the NIPPON MARU in fiscal 2018. In light of this, I would like to offer my sincerest apologies for the trouble and worry we caused our customers and all the parties concerned. At the same time, I will promise we will strive to ensure an accident like ESG Approach to Promote Sustainability MOL needs to tackle social issues head on through fulfilling the essence of its business as a marine transport company. In Closing We will steadily move forward with confidence on the path we need to follow as a company. As I mentioned earlier, in light of the rapid changes In addition to formulating “Rolling Plan 2019,” we have also occurring in the external environment, we will not be able newly identified our Sustainability Issues (Materiality). to offer our shareholders and other stakeholders expected Looking at the recent trend of growing awareness and returns by simply following our conventional business importance of environmental, social, and governance (ESG) model. I believe that our new management plan further issues, we can tell that they are dramatically different from clarifies the direction we need to head as a company going the conventional thinking that calls for corporations to forward while maintaining a proper awareness of our realize a profit while also fulfilling their corporate social current circumstances. Of course, we still need to flexibly responsibilities (CSR). For example, Goal 1 of the SDGs is to examine specific actions to take in response to the changing “End poverty in all its forms everywhere.” To work on this environment. However, I believe that “Rolling Plan 2019” problem, we must consider what we can and should do as provides a universal direction for us, and so we will steadily a marine transport company to help eliminate poverty. proceed in that direction with confidence. I will take We must earnestly verify the essential value of our business the lead with a strong belief that MOL, as a solutions itself to ensure that we are playing a useful part in provider for all matters related to maritime affairs centering addressing this issue. It is for that reason that we placed on marine transport, can provide “stress-free services” to “Value-added transport services” as the first one among our our customers and “Become a Group of Business Units with Sustainability Issues. I believe that tackling issues related to No. 1 Competitiveness in Respective Areas.” I would like to SDGs or ESG head on through our business itself is the ask our shareholders and all stakeholders for their continued approach we need to take in order to further improve our understanding and support as we pursue these endeavors. corporate value. That was an example on poverty or the economy, but our basic approach to other themes such as the environment 10 11 For Our Sustainable GrowthMITSUI O.S.K. LINES MOL REPORT 2019MITSUI O.S.K. LINES MOL REPORT 2019 Overview of the Management Plan “Rolling Plan 2019” Road Map toward Improving Business Performance We have been adopting rolling-type management plans since fiscal 2017. With “Rolling Plan 2019,” we worked to create a management plan that is clear and can gain the support of our stakeholders. Based on our recognition of the current situation, including changes in the external environment, we formulated our 10-year vision to “Become a Group of Business Units with No. 1 Competitiveness in Respective Areas” as well as the three core strategies that we will promote to realize this vision. 10-Year Vision Become a Group of Business Units with No. 1 Competitiveness in Respective Areas Three Core Strategies to Realize the 10-Year Vision 1 2 3 Concentrated investment of management resources in the business fields where MOL has strengths, which will mainly be offshore businesses Provision of “stress-free services,” which MOL will offer from the customer’s perspective Promotion of environmental strategies and development of the emission-free business into a core business To maintain our competitiveness and ensure solid returns, we pref- erentially allocate management resources in fields where we have strengths. P14 Continuing on from fiscal 2017, we will promote efforts in our priority areas for development. We will also pursue a variety of initiatives through the two additional focus areas for fiscal 2019 of “Development of Groupwide safety and quality management” and “Strategic actions for compliance with SOx regulations.” P16 Recognition of Our Current Situation In the near future, we will almost certainly face difficulties in keeping appropriate and stable returns through conventional marine transport alone. Changes in the External Environment • Changes in trade patterns due to expanding protectionism, stagnation in seaborne trade • Slowdown of the global economy • Fleet supply pressure due to excess shipbuilding capabilities in China and South Korea • Shift to a decarbonized society etc. With the aim of realizing our medium- to long-term profit and business integration. Through these efforts, we aim to achieve financial targets shown below, we have broken down our ordinary our target levels for ordinary profit. profit into two classifications, “highly stable profits” and “other variable profits (losses),” according to the differences in profit structure. While continuing efforts to accumulate highly stable profits, we have reorganized the fleet to a more competitive one that is resistant to market fluctuations in order to secure other variable profits. In this way, we transformed our business model to be able to secure profits regardless of the market environment (please see the column below). As a result, in fiscal 2018, although we recorded an ordinary loss of ¥14.3 billion in the Containership segment due mainly to the impact of confusion regarding the start of operations of the integrated company Ocean Network Express (ONE), we were able to record ordinary profit from other businesses of ¥52.8 billion, thanks to the stable profits generated primarily in the Dry Bulk and Energy Transport businesses and the relatively favorable market condition. This indicates that we have steadily transitioned to a business structure that can achieve solid returns no matter what the conditions of the market may be. As we move forward, we will prioritize the allocation of resources into businesses and projects where the MOL Group boasts strengths with a view to generating highly stable profits. At the same time, we will work on improving other variable profits, a recently difficult task, in such ways as bringing ONE into the black, leveraging its competitiveness bolstered through the Medium- to Long-Term Profit Levels and Financial Indicators Vision for profit levels over the medium term Fiscal 2027 Targets Ordinary profit ROE Gearing ratio ¥80.0 billion– ¥100.0 billion 8–12% 2.0 times or less ¥150.0 billion– ¥200.0 billion — 1.0 times Ordinary Profit Forecasts (¥ billion) 100 Projected medium-term levels ¥80.0 billion–¥100.0 billion 80 60 40 20 0 -20 ¥38.5 billion ¥50.0 billion 56.2 55.5 58.0 65.0 Transitional costs related to containership business integration FY2018 Results FY2019 Forecasts FY2020 Plan FY2021 Plan Exchange rate assumption ¥110.63/US$1 ¥110.00/US$1 ¥110.00/US$1 ¥110.00/US$1 Highly stable profits (concluded contracts) Highly stable profits (to be acquired) Other variable profits Highly stable profits + Other variable profits (losses) = Ordinary profit (total) Highly stable profits: Dry bulkers / Tankers (under medium- to long-term contracts), LNG carriers / Offshore businesses, and Associated businesses Other variable profits (losses): Dry bulkers / Tankers (under short-term / spot business), Car carriers, Containerships, Terminals & Logistics, and Ferries & Coastal RoRo ships Shareholder Returns Set a 20% dividend payout ratio as a guideline in the near term and work to improve this ratio over the medium to long term. Transition to a More Competitive Fleet Composition Highly Resistant to Market Fluctuations In the Dry Bulk Business Unit, which has an enormous presence in our business portfolio, the market plummeted to record-low levels after the 2008 financial crisis as the balance between supply and demand col- lapsed due to the supply glut of new vessels. These severe conditions continued over the long term. Under these circumstances, a large number of vessels in the business unit became unprofitable because of the high and rigid cost structure. Accordingly, the Dry Bulk Business Unit had become a major factor behind our sluggish business performance in the mid-2010s. Instead of just waiting for market recovery, we took proactive actions to improve profitability. In fiscal 2015, we implemented the Business Structural Reforms that involved sweeping actions to eliminate unprofitable vessels primarily in the Dry Bulk Business Unit. Although these reforms led to significant loss on the sale of vessels and losses associated with the cancellation of charter contracts, they allowed the business unit to successfully transition to a business model that can generate stable profits regardless of movements in the spot market. Reducing Market Exposure within the Dry Bulk Fleet Implementation of the Business Structural Reforms Fiscal 2015 year-end Fiscal 2016 year-end Fiscal 2017 year-end Fiscal 2018 year-end 45 46 46 43 12 27 27 21 33 49 20 31 (%) Owned or medium- and long-term chartered vessels with medium- and long-term contracts Owned or medium- and long-term chartered vessels with short-term contracts (market exposure) Short-term chartered vessels with short-term contracts 12 13 For Our Sustainable GrowthMITSUI O.S.K. LINES MOL REPORT 2019MITSUI O.S.K. LINES MOL REPORT 2019 Overview of the “Rolling Plan 2019” Management Plan Concentrated investment of management resources in the business fields where MOL has strengths, which will mainly be offshore businesses Characteristics of the MOL Group’s Business Portfolio One of the World’s Largest Full-Line Marine Transport Groups with a Highly Diversified Business Portfolio • Unique business model that develops a wide range of highly competitive businesses as a group • The Group’s comprehensive strengths that enable the provision of one-stop solutions to the various transportation needs of customers • Reduced market risks by a highly diversified business portfolio • Accumulated marine technical skills and insights through horizontal expansion into various businesses Highly specialized* Strategic Fields for Resource Allocation—Fields Where MOL Has Strength Environmental and Emission-free Businesses Chemical Tankers NVOCC Business LPG Tankers Ferries & Coastal RoRo Ships LNG Carriers Offshore Businesses Terminal Business Logistics Business Iron Ore & Coal Carriers Real Estate Business Crude Oil Tankers Methanol Tankers Wood Chip Carriers Steaming Coal Carriers Stable profits Maritime Affairs Variable profits Car Carriers Containerships Bulk Carriers Product Tankers Less specialized* • The size of the circle indicates the total amount of assets used (as of September 30, 2018). • Dotted lines show directions and scale at which MOL is aiming. * In plotting the vertical axis (from highly to less specialized), each business was considered compre- hensively after taking into account the perspectives listed below. •  MOL’s relative competitiveness •  Versatility of vessel type •  Niche or mass market •  Competitive environment Concentrated Investment of Management Resources to Further Enhance Our Strengths Offshore Businesses LNG Carriers FPSO, FSRU, Powership businesses, etc., where the knowledge and experience MOL has accumulated in LNG and energy transport can be applied to address envi- ronmental and emerging market needs High-value-added, highly difficult LNG transport and handling businesses based on track records in areas such as operation of ice-breaking vessels Chemical Tankers Ferries Total logistics business for liquid chemicals, not limited to ocean transport by tankers Development of a cutting-edge ferry fleet, capitalizing on increasing demand caused by the modal shift Policy on the Allocation of Management Resources To establish an optimal business portfolio that enables sustain- management resources into target fields. Under “Rolling Plan able growth, we analyze and evaluate all of our businesses 2019,” we have clarified our intention to primarily invest man- periodically from two perspectives: the stability of profits and agement resources into fields centered on offshore businesses competitiveness compared with other companies. Based on where we can demonstrate our strengths. this analysis and evaluation, we are strategically allocating Strategy by Business In terms of our respective business strategies, while taking No. 1 Competitiveness in Respective Areas,” we will into account changes in the external environment, we have further enhance the strengths of each business and accelerate determined the following strategies for achieving growth by initiatives to promote “stress-free services” that are truly leveraging the strengths of each business to their fullest. To convenient for customers. realize our vision to “Become a Group of Business Units with Business Dry Bulk Business Strategies for Growth Dry Bulkers Provide services based on customer needs such as solutions for environmental issues, etc. Energy Transport Business Tankers LNG Carriers Product tankers: Utilize a tanker pool to maintain service network while reducing market exposure and to ensure fee-based revenue Chemical tankers: Become a total logistics solutions provider for liquid chemicals by actively expanding business domains vertically Expand businesses in high-value-added fields where we can leverage our track record as an industry leader and vast insight Expand the LNG bunker fuel supply business Offshore Businesses Collaborate with companies that have the top position in each field and local partners with a massive regional presence Steaming Coal Carriers Build and introduce next-generation steaming coal carriers that offer benefits to customers in respect to safety, efficiency, and environmental performance, etc. Product Transport Business Car Carriers Reorganize service network with an emphasis on operational profitability while making the most of the cost competitiveness of the fleet Containerships Swift turn to profitability for ONE by optimizing cargo and service portfolio and generating synergistic effects of business integration Logistics Develop asset-light businesses Ferries Capture demand through steady fleet expansion Associated Businesses Tugboats: Promote efforts toward new technologies and overseas businesses Real Estate: Actively develop overseas businesses Please see the “Overview of Operations by Segment” section on pages 58–69 for details on progress. 14 15 For Our Sustainable GrowthMITSUI O.S.K. LINES MOL REPORT 2019MITSUI O.S.K. LINES MOL REPORT 2019Overview of the “Rolling Plan 2019” Management Plan Enhancing Management Resources That Support Business Plans Progress Made under “Rolling Plan 2018” Priority Areas for Development and Focus Areas for Fiscal 2019 To realize “stress-free services” that are truly convenient for safety and quality management” and “Strategic actions for customers, we have set our priority areas for development compliance with SOx regulations.” We will strive to improve our where we will work on a Companywide level. Under “Rolling service quality and, by doing so, enhance the relative competi- Plan 2019,” we have additionally established two new focus tiveness of our overall businesses going forward. areas for fiscal 2019. These are “Development of Groupwide Priority Areas for Development (Continuing from fiscal 2017) Marine Technical Skills Thoroughly enforce safe operations that underpin high-quality transportation and work to further improve ship management quality ICT Develop underlying technologies for autonomous sailing and promote the FOCUS Project which aims to utilize the huge amount of data collected from operating vessels , Technological Development Promote the construction of LNG-fueled vessels, etc. Environmental and Emission-Free Business Promote the LNG fuel supply business as well as studies and research on alternative fuels Establish a driving force within the Group to promote environmental management (Environmental Management Committee created on April 1, 2019 as an organization under the Executive Committee) Workstyle Reforms Promote workplace reforms FOCUS Project Workplace Reforms The FOCUS Project aims to further enhance safe operation and reduce environmental burden by utilizing a vast number of onboard sensors to collect, thoroughly monitor, and analyze voyage and engine data from roughly 150 Company vessels under navigation. In May 2019, a newly established pilot office was opened on the fifth floor of our Head Office. Benefits of this pilot office are going to be studied in an effort to realize the workstyles we aim for. Development of Groupwide Safety and Quality Management Visualize the status of Groupwide safety and quality Improve Groupwide safety awareness and take specific measures Focus Areas for Fiscal 2019 Strategic Actions for Compliance with SOx Regulations Take actions on a Groupwide basis in order to enable MOL-operated vessels to switch fuels safely and economically Examine the effects of compliant oil on vessel performance in order to prevent any technical problems that may arise Please see the “Addressing Sustainability Issues” section on pages 26–41 for the progress of each initiative. Identifying Sustainability Issues Linked to Our Rolling Plans Year by year, the approach toward environmental and social linked with our rolling plans. We will strive to respond to these issues is having a greater impact on a company’s management issues simultaneously with the strategies we have adopted under and corporate value. To continue to be a corporate group that can “Rolling Plan 2019,” as represented by environmental and understand and meet the latent needs of customers and society emission-free businesses. In doing so, we will try to maximize in any time and accelerate the realization of our 10-year vision, both our economic and social value. we have identified Sustainability Issues (Materiality) that are MOL’s Sustainability Issues (Materiality) Value-added transport services Marine and global environmental conservation Innovation for development in marine technology Human resource cultivation and community development Governance and compliance to support businesses Maximizing our economic and social value through efforts to address these issues Leveraging Our Experience in Handling LNG and Operating FSRUs to Participate in the LNG-to-Powership Business In March 2019, we formed a partnership with Karpower stable profits, we will also work to strengthen the relative International B.V.* in the LNG-to-Powership business. Under competitiveness of our overall offshore businesses by acquiring the brand name KARMOL, we are carrying out joint investment know-how through the provision of total solutions throughout and business activities related to the Powership business so the LNG value chain, from LNG transport to regasification and that we can become the world’s most reliable LNG-to-Powership power generation. solutions provider. We are currently in the middle of converting an LNG carrier In the KARMOL brand LNG-to-Powership business, gas into an FSRU that supplies gas to the powership. Going forward, used as fuel will be supplied to the powership from an FSRU. we will jointly promote projects under the KARMOL brand and The electricity generated by the powership will then be stably work to provide competitive energy solutions in a wide range of provided to shore grids and facilities. Leveraging our long- regions with growing energy demand. In these ways, we aim to accumulated track record and expertise involving LNG carriers establish a solid track record over the next several years. * Karpower International B.V. is the core company involved in the Powership busi- ness under Karadeniz Holdings established in Turkey in 1948. and FSRU businesses and Karpower’s insight on the construction, maintenance, and operation of powerships, which the company has cultivated as a pioneer in this business area, we aim to address the growing demand for electric power, primarily in emerging countries, through providing solutions that offer high added value in terms of cost competitiveness and low environ- mental impact. We have positioned offshore businesses as a priority area for the investment of management resources in order to make use of our strengths to realize sustainable growth. With this new LNG-to-Powership business, not only will we aim to accumulate Powership owned by Karpower Accelerating the Evolution into a Total Logistics Provider for Liquid Chemicals Our Group company for the chemical tanker business, the wholly a global logistics company that operates businesses centered on owned subsidiary MOL Chemical Tankers Pte. Ltd., took several the transportation of liquid chemicals and gases by tank actions in fiscal 2018 with the aim of transforming itself into containers within Europe and all over the world. a total logistics provider for liquid chemicals. Through these actions, MOL Chemical Tankers will strive to First, in September 2018, MOL Chemical Tankers established gain access to new customers while aiming to realize services that SEA-MOL NV, a joint venture with the Belgian terminal company meet the diverse transport needs of customers, such as stream- SEA-Tank Terminal Antwerp NV, with a view to participating in lining of transportation flow utilizing tank terminals as a hub and the tank terminal business. SEA-MOL is planning the construction small-lot transport via containers. At the same time, the company of a liquid chemical storage terminal in the Port of Antwerp. will work to generate synergies within the MOL Group from a broad This terminal will allow for connections between a diverse range range of perspectives, such as making use of human resources of transportation means and serve as a hub for customers. with expertise in the tank container and tank terminal businesses. In January 2019, MOL Chemical Tankers acquired 100% of shares in a Danish chemical tanker operator, Nordic Tankers A/S. Through this acquisition, the company is now able to expand its global service network by incorporating the operational foundation of Nordic Tankers, which boasts strengths in the Atlantic Ocean and in South America. This in turn will allow the company to Overview of the Transition into a Total Logistics Provider for Liquid Chemicals • Expansion of global service network Acquisition of Nordic Tankers further extend its presence, which it has already firmly established • Response to diversifying demand for liquid chemical transport in its core Pacific Ocean routes as well as routes between Participation in tank container business the Middle East and Asia. Furthermore, in February 2019 MOL Chemical Tankers acquired a 20% share in the Dutch tank container transport company Den Hartogh Holding B.V. and subsequently concluded a collaborative business partnership agreement. Den Hartogh is • Vertical expansion in the supply chain Entrance into the tank terminal business MOL commenced operations of its first Arc7-class ice-breaking LNG carrier for the Yamal LNG project. Please see “Special Feature” on pages 20–25 for details. 16 17 For Our Sustainable GrowthMITSUI O.S.K. LINES MOL REPORT 2019MITSUI O.S.K. LINES MOL REPORT 2019 Message from the CFO Takashi Maruyama Senior Managing Executive Officer Road Map for Improving Profit Our basic strategy is to steadily accumulate “highly stable ¥80.0 billion and ¥100.0 billion and return on equity (ROE) of profits” while securing “other variable profits.” As for highly between 8% and 12% are more than achievable. stable profits, which are generated by long-term contracts lasting two years or more, we are projecting increases to ¥55.5 billion, ¥58.0 billion, and ¥65.0 billion, in fiscal 2019, fiscal 2020, and fiscal 2021, respectively. These increases will represent the result of our aggressive efforts to invest in LNG carriers and offshore businesses since the mid-2010s. With regard to other variable profits (losses), we regrettably posted a deficit in fiscal 2018 due to the impact of operational teething issues during the start-up period at the integrated containership business company, ONE. However, in fiscal 2019, ONE will turn profitable and with this turnaround we expect to see nearly balanced profits and losses on a basis that excludes the general management expenses of the Head Office. From fiscal 2020, we anticipate a return to the black. Accordingly, we believe that our medium-term target for ordinary profit levels of between Ordinary Profit Forecasts (¥ billion) 100 Projected medium-term levels ¥80.0 billion–¥100.0 billion 80 60 40 20 0 -20 ¥38.5 billion ¥50.0 billion 56.2 55.5 58.0 65.0 Transitional costs related to containership business integration FY2018 Results FY2019 Forecasts Highly stable profits (concluded contracts) Other variable profits (losses) FY2020 Plan FY2021 Plan Highly stable profits (to be acquired) Financial Strategy for “Rolling Plan 2019” A stable financial foundation is essential to achieving our fiscal 2018 was 2.11 times). In fiscal 2019, we plan to execute 10-year vision of “Become a Group of Business Units with investment totaling net cash outflows of ¥135.0 billion, Recently, institutional investors have been asking more often In order to capitalize on the heightened global awareness No. 1 Competitiveness in Respective Areas” under our primarily in LNG carriers and offshore businesses. While about our efforts toward achieving the SDGs. Since ancient of the SDGs from a financing perspective, we issued Green “Rolling Plan.” For this to happen, we need to be able to we anticipate negative free cash flow, we are striving not to times, the transport of goods by ship has enriched people’s Bonds totaling ¥10.0 billion. These bonds are issued to continuously invest in businesses where we have a competitive increase our interest-bearing debt. With this goal in mind, lives. Even now, at the height of e-commerce, ocean shipping, institutional and individual investors for the sole purpose of advantage, first and foremost in our offshore businesses but we rigorously select projects for investment using in-house which involves physical transport, is irreplaceable in the funding environment-related projects. The issuing of Green also in LNG carriers, chemical tankers, and ferries and indicators that give consideration to capital costs and combine global consumer economy. The fact that the Company has Bonds to individual investors was unprecedented for a coastal RoRo ships. A stable financial foundation also provides various methods to minimize the balance sheet burden, been able to operate its businesses over 130 years is the Japanese company, and with this new opportunity, we us with enough credibility to guarantee the steady execution such as the sale of assets including stock cross-holdings, result of its importance to the global economy as an artery of received a high rate of applications for the purchase. We will of long-term contracts, which can sometimes span over the the sale and lease-back of vessels, the utilization of logistics. At the same time, it is undeniable that the marine continue to utilize Green Bonds not only as a way to meet the course of 20 years or more, for the purpose of accumulating secondhand vessels, and project financing. This approach transport industry places a burden on the global environment, needs of investors who wish to contribute to the environment our priority—“highly stable profits.” Likewise, to offer our has been received positively, allowing us to maintain a BBB including the emission of CO2 into the atmosphere from the and a better society but also as a tool for diversifying our customers competitive freight and charter rates, it is (stable) rating from Rating and Investment Information, Inc. consumption of fuel. With this reality, the industry has become fund-raising methods. On the back of this response, we plan imperative that we procure funds under more favorable (R&I) and an A- rating from Japan Credit Rating Agency, Ltd. increasingly concerned in recent years about contributing to to issue Sustainability Bonds in fiscal 2019, which will provide conditions than our competitors. Accordingly, although our (JCR). In addition, our approach has garnered the support of environmental preservation. The strengthening of SOx financing for projects that address issues related to the SDGs. investment appetite is strong, we are practicing financial a broad range of financial institutions, including megabanks, regulations reflects this trend. Meanwhile, we believe that we I firmly believe that a company cannot pursue business discipline while aiming for a gearing ratio of 2.0 times or regional banks, government-affiliated financial agencies, and can do more to help reduce the negative impact on the global over the long term without providing value to society. As a Our Role as a Crucial Member of Society less over the medium-term (the gearing ratio at the end of foreign banks. Cash Flows (¥ billion) -150 (¥ billion) 150 2,000 -135.0 -126.2 -100.8 98.3 -100 -50 0 75.0 55.2 1,500 1,000 100 50 0 FY2017 Results FY2018 Results FY2019 Forecasts Cash flows from investing activities (left) Cash flows from operating activities (right) Cash flows from investing activities in fiscal 2018 does not include amount invested in ONE. Outlook for Cash Flows from Investing Activities in Fiscal 2019 (New projects internally approved for investment and potential investment projects) Environment / IT / Others 2% Other Vessels 12% Ferries / Associated Businesses / Terminals & Logistics 19% ¥135.0 billion LNG Carriers 44% Offshore Businesses 23% Increase investment in offshore businesses Continue to carefully examine and select projects for investment environment than simply complying with regulations. For global ocean shipping company, we will fulfill our role as a example, we can play a greater role through providing lifeline for people around the world while working to lessen solutions that meet our customers’ needs related to the burden on the global environment. Through these efforts, environmental countermeasures and supplying clean energy, as a crucial member of society we hope to gain the support of all which we will develop as new businesses. While still small our stakeholders, including our most valued—our customers. in scale, we have begun efforts toward the LNG bunker fuel supply business, participated in the offshore wind power Intended Use of Green Bond Funds generation facilities business, introduced LNG-fueled tugboats, and entered into the LNG-to-Powership business. In these ways, we are starting to see the fruits of our efforts in a wide range of environmental fields that we have been pursuing. Project Name Ballast water treatment systems SOx scrubbers LNG bunkering vessels LNG-fueled vessels (tugboats) New PBCF Total Amount (¥ billion) 5.5 2.2 1.4 0.7 0.2 10.0 18 19 For Our Sustainable GrowthMITSUI O.S.K. LINES MOL REPORT 2019MITSUI O.S.K. LINES MOL REPORT 2019 Special Feature MOL Opens Up a New Sea Route for LNG Trade ―Joining the Yamal LNG Project The Yamal LNG is a project that ambitiously makes use of the world’s first Arc7 class ice-breaking LNG carriers to transport liquefied natural gas (LNG) from the plant in Russia’s Yamal Peninsula to markets around the world. The project continues to run smoothly, with our first of three vessels having been in operation over a year since March 2018, and the second one since October of the same year. This section will describe the MOL Group’s bold venture into unknown territory, namely, entering the Northern Sea Route for LNG transport. Potentiality of the Arctic The Yamal LNG Project The LNG Transport Route from Yamal Due to growing concern over global warming, more emphasis The Yamal LNG project is a large-scale LNG production and is being placed on natural gas as a source of clean energy. As export project jointly owned by Russia-based Novatek, France- a result, worldwide demand for LNG is on the rise. Although based Total, and China-based China National Petroleum roughly 30% of the world’s undiscovered natural gas reserves Corporation (CNPC). The project, which began operations in are said to lie beneath the Arctic Circle, the lack of proper December 2017, enabled year-round LNG transport from means of transport has limited the full use of these Russia’s Yamal Peninsula to markets around the world by resources. The Yamal LNG project became the first one to utilizing the world’s first Arc7* class ice-breaking LNG carriers. break through this situation. LNG production capacity of Yamal and other Novatek- related LNG projects 18.0 million tons 16.5 million tons Leveraging our expertise of LNG carriers garnered from years of experience, we signed a long-term charter contracts for three Arc7 class ice-breaking LNG carriers and four conven- tional-type LNG carriers, and are now responsible for part of the overseas shipping for the project. * Ice-breaking and ice-resistant carriers are assigned an “ice class” based on their ice-breaking capabilities and degree of ice resistance as determined by hull strength and onboard equipment. There are nine classes determined by the Russian Maritime Register of Shipping: Ice1 to Ice3 and Arc4 to Arc9, with higher numbers denoting higher ice-breaking capabilities and a higher degree of ice resistance. 5.5 million tons 2017 2018 2019 Yamal LNG Project Operator Production timeline Production volume | Yamal LNG | Train 1: 2017 Train 3: 2018 | 17.4 million tons/year (3 trains of 5.5 million tons plus 1 Train 2: 2018 Train 4: 2019 train of 0.9 tons) Transport | Ice-breaking LNG carriers (Ice class Arc7): 15 (including three co-owned by MOL and China COSCO Shipping) | Conventional-type LNG carriers: 11 (including four co- owned by MOL and China COSCO Shipping) The most defining characteristic of the marine transport aspect and the Suez Canal, is now possible in a considerably shorter of the Yamal LNG project is the use of Arc7 class ice-breaking time period of about 15 days by navigating eastbound. carriers to open up the Northern Sea Route for LNG transport. Establishment of the Northern Sea Route for LNG transport High-spec ice-breaking carriers made it possible to pass has major merits, including a significant reduction in CO2 through thick-ice eastbound sea routes in the summer, in emissions and lower transport costs, both a result of the addition to year-round use of the westbound sea routes where shorter passage. the ice is relatively thin. Most importantly, transport to East Asia, which requires 35 days going westbound through Europe To Asia (Winter / Passage through Suez Canal) To Europe (All-year) Arctic Ocean To Asia (Summer / Northern Sea Route) Yamal LNG base (Sabetta port, Russia) Merits of the Northern Sea Route As compared to the westbound sea route Time at sea reduced by approx. CO2 emissions reduced by approx. 20days 30% Increased safety from foregoing areas frequented by pirates 20 21 For Our Sustainable GrowthMITSUI O.S.K. LINES MOL REPORT 2019MITSUI O.S.K. LINES MOL REPORT 2019 Special Feature July 2014 June 2017 December 2017 March 2018 July 2018 October 2018 November 2018 August 2019 End of 2019– End of 2020 Project Timeline MOL signs long-term charter contracts and shipbuilding contracts for three new ice-breaking LNG carriers MOL signs long-term charter contracts and shipbuilding contracts for four conventional- type LNG carriers MOL’s first ice- breaking LNG carrier christened the VLADIMIR RUSANOV The VLADIMIR RUSANOV conducts first loading operation at Sabetta port The VLADIMIR RUSANOV completes eastern transit via the Northern Sea Route, a much shorter passage than the route through the Suez Canal The VLADIMIR VIZE, MOL’s second ice- breaking LNG carrier, begins operation The VLADIMIR RUSANOV completes its first Ship-to-Ship LNG Transfer* operation Scheduled completion of MOL’s third ice-breaking LNG carrier Scheduled completion of MOL’s four conventional- type LNG carriers Entering the Unchallenged Route The Yamal Peninsula, which means “the end of the world” in Crew training was another issue. Navigation through polar waters requires compliance with the Polar Code,* which includes requisite the local language, is an extremely cold land with air tempera- training for crew members. At that time, none of our seafarers had tures reaching -60°C in winter. The key issue was how to polar sailing experience. Therefore, with the help of the outside facilitate year-round transport of LNG from this place closed partners, we had them complete special training from scratch. off by permafrost to Asia and Europe. Financing brought its own set of challenges. After concluding The revolutionary project that solved this crucial issue the shipbuilding agreement, sanctions against Russia were tightened, really began picking up steam in 2011. In 2013, Novatek, Total, which forced us to adopt a different funding structure than we and CNPC teamed up to materialize the plan of exporting LNG initially planned. However, we were able to achieve it by utilizing our from a base at Sabetta port in the Eastern Yamal Peninsula. deep well of financing experience across a range of projects. They called out for international marine transport companies It was our experience, expertise, and partnerships, accumulated who were willing to take part in the project. Due to the staggering through our many years of taking on challenges, that enabled us to amount of technical difficulty compounded by the political risks overcome these various obstacles. Without a doubt, the success in attached to the project, some companies were hesitant to be this project was the fruit of our comprehensive capability as a involved, but we, based on risk assessments honed over many marine transport company. years of business, judged that it was manageable. Ultimately, it In December 2017, construction of our first ship was completed. was determined that a joint venture of MOL and China COSCO The ship was christened the VLADIMIR RUSANOV, after the early Shipping would own and operate three out of the 15 ice-breaking 20th century Russian Arctic explorer and geologist. With the same LNG carriers committed to the project, and accordingly trailblazing energy of its namesake, the VLADIMIR RUSANOV shipbuilding orders for these ships were placed with Daewoo began operation in the Arctic Ocean in March 2018. Shipbuilding & Marine Engineering Co., Ltd in 2014. Out of all the marine transport companies in Japan, we were the only one * International standards adopted by the International Maritime Organization (IMO) to ensure ship safety and environmental conservation for vessels navigating through polar waters. participating in this project. Overcoming Obstacles with Comprehensive Strength from Years of Experience We faced a variety of obstacles in executing this unprecedented Applying Accumulated Expertise to Bigger Challenges Since the beginning of operation over one year ago, the VLADIMIR RUSANOV has been keeping good working order with project, such as construction of special ships, training of the crew, no major trouble, and has been accumulating new accomplish- and financing. For the ship construction, this project required the world’s ments. Further progress is on the horizon, with our second ship first LNG carriers capable of breaking through ice up to 2.1-meters having begun operation last year, and the third one set for thick on its own, without the assistance of a separate ice-breaking ship. completion this summer. At the same time, this opens up Because LNG carriers must keep and carry LNG at -162°C in their opportunities for us to apply the expertise acquired from the tanks, even conventional-type ones require a particularly high level of Yamal LNG project to other areas in the Arctic Ocean in addition technical prowess and safety measures compared to other merchant to Russia, such as Canada or the coast of Alaska, that have ships. To construct a ship with specifications required to withstand also been confirmed to contain an abundance of resources. the harsh environment of the Arctic Ocean, even more careful and The Yamal LNG project was a challenge that took us into complicated steps have to be taken. To this end, all parties involved, uncharted territory. With this accomplishment, we have cleared including the shipyard, worked together from the planning stage to the path for new possibilities. Leveraging the experience thoroughly uncover all possible risks. From there, we solved each acquired from this project, we will keep driving forward as one issue through repeated trial and error, examining things from different angles, for everything from the materials to structure. of the world’s leading marine transport companies. 20–30 year long-term contracts for a total increase of ¥100 billion in ordinary income * A transfer of cargo between two ships positioned alongside each other Tackling the Northern Sea Route To execute a project amid the cruel environment of the Arctic Ocean, some special specifica- tions had to be installed to the ships and specialized training for the crew had to be arranged. Below are some examples of such preparations. Special Specifications for the Ships Specialized Training for Navigating the Northern Sea Route Double-Acting Ice-Breaking System One important feature of the ice-breaking LNG carriers to ensure safe and unfailing navigation, even through the thick ice covering the waters of the Arctic Ocean, is the “double-acting ice-break- ing system.” Typically, the ship will navigate ahead through open water and thin ice, but when facing thick ice, it will turn 180° using the double-acting ice-break- ing system and proceed astern (backwards). By going astern, it can navigate through thicker ice up to 2.1 meters, as opposed to 1.5 meters with the bow ahead, because the stern is heavier and its shape is better suited for breaking ice. This is the first time that this technology has been adopted in an LNG carrier, and it plays an important role in the safe operation of the ship. The Polar Code, a set of international standards for shipping in polar regions, is set in place to ensure ship safety and environmental conservation. As we place the highest priority on safety measures for our ship crew, we give training to a broader range of crew members, not just the ones required by the code. Below are a few examples of such training. On-Land Training for Icy Waters At the Makarov Training Centre and Sovcomflot Training Centre in St. Petersburg, Russia, crew members acquire essential knowledge for ice navigation, including the characteristics of ice, and usage of ice charts. In addition, crew complete a practical training program for ice navigation maneuvers utilizing simulators at these facilities. At-Sea Training for Icy Waters The Polar Code requires that captains and first officers have a mini- mum of two months of experience aboard a vessel operating in a polar region. We managed to meet this requirement thanks to the cooperation from other companies. Our captains and first officers were given the opportunity to board ships transporting modules and materials for construction of the LNG plant in Sabetta of the Yamal LNG project, which were operated by two Dutch module ship and heavy carrier operating companies, and also atomic ice-breaking ships operated by Russian State shipping company Atomflot. 22 23 For Our Sustainable GrowthMITSUI O.S.K. LINES MOL REPORT 2019MITSUI O.S.K. LINES MOL REPORT 2019 Special Feature “This Groundbreaking Project Would Not Have Succeeded without the Hard Work of All Its Crew Members.” “There Is a Feeling That We Are Making History at This Very Moment.” To lead the world’s first ice-breaking LNG carrier project to success, we had to make careful preparations for navigating through a harsh natural environment and operating Arc7 ice-breaking LNG carriers. We had to complete not only ice navigation training as required by the Polar Code but also training for operating a type of propulsion engine with which the Company had no previous experience. Training programs varied from those using simulators to numerous on-site ice naviga- tion training programs at sea. All in all, the thorough preparation spanned two and a half years. The VLADIMIR RUSANOV is an ice- breaking LNG carrier that is equipped with outstanding specifications for adapting to severe environments and ensuring safety. Still, there are hardships that you only experi- ence during the actual voyages. As we continued to take on new challenges such as ice trials, eastward sailing to Asia, and Ship-to-Ship LNG Transfer operation, we occasionally faced extreme bad weather and ocean conditions. However, thanks to our well-trained crew members who came together to fulfill their duties and the well-designed special equipment onboard such as ice radars, we managed to overcome these challenges. Overall, these voyages were extremely meaningful experience in which we were able to utilize and confirm the effectiveness of our training and the proper functionality of the equipment aboard the vessel. In closing, I am extremely proud of the fact that I was able to fulfill my duties as a member of this exceptionally challenging and groundbreaking project. The success of the voyage is the direct result of the hard work and efforts of all crew members involved. Robert G Valentine Master / VLADIMIR RUSANOV “The Project Progressed Smoothly Because We Dealt With Problems before They Appeared.” Over its first year, the VLADIMIR RUSANOV provided service continuously without halting operations once. This gives me confidence that the project is progressing well. In order to complete construction of this new type of ship on-schedule and according to the required specifications, we held risk assessment meetings with all parties involved, including the shipyard. Starting with the designing stage, we went over every aspect with a fine-tooth comb to figure out the potential risks and their countermeasures. By doing this, we were able to take actions to avoid anticipated difficulties we could face in later stages. In addition, I believe that the relationship with Daewoo Shipbuilding & Marine Engineering that had already been cultivated from other projects we had worked on together previously allowed for an open exchange of opinions at an early stage, which was one of the reasons that the project progressed so smoothly. With regard to the technical aspect, we focused most on ensuring safe and stable operations of the vessel because we all understood that was the biggest issue for an LNG carrier that would navigate along the Northern Sea Route. In the event that the ship was to stop in icy waters, not only would this be a danger to the crew members stuck at sea, but the ship would also be unable to keep the cooled LNG in its tanks, as LNG would vaporize even in the cold temperatures of the Arctic Ocean. In a worst-case scenario, this gas would have to be released into the atmosphere. To prevent this kind of situation, we incorporated mechanisms to enhance ship’s mobility, including the “double-acting ice-breaking system” and all the details such as the engine room design. Furthermore, we engaged in detailed dialogues with the crew members who were going to board the ship and incorporated their requests into the ship specifications. The knowledge and experience we have acquired from this project, from risk assessment to actual operation of the ship is invaluable, as it can only be gained by overcoming new challenges. It will be a strength that we can leverage when taking on new projects and working with other shipyards going forward. I cannot wait to apply this expertise to our next project. I am very proud that we are making important milestones in the Yamal LNG project, which is the very first to transport LNG from the Arctic Circle to the rest of the world. I strongly believe that this project has major social significance in a sense that it made year-round transport of the previously difficult-to-access natural gas locked in the Arctic Circle possible and that use of the eastbound Northern Sea Route greatly reduced transit time and the amount of CO2 emissions. One of the key reasons why we got selected for the project was our experience and performance as a marine transport company boasting the world’s largest fleet of LNG carriers with a track record of safe operations. I also feel our attitude to actively having taken part in new overseas projects and the fact of having built mutual trust-based relationships with worldwide partners were taken positively. To take on this new challenge, there were initially some concerns over the risks within the Company. However, we conducted independent risk assessments on the Northern Sea Route, identified each risk from every aspect including safety, financial, and political factors, and then established fully thought-out countermeasure for each risk. We were able to participate in this project because we finally had everyone on the same page after communicating closely with those within the Company who were skeptical, explaining the feasibility of the project properly and carefully, and earning their understanding. Be that as it may, as one would expect with an unprec- edented project like this one, we faced considerable difficul- ties along the way. However, with any issue we faced, we were able to eventually overcome it by utilizing our accumulated knowledge and sometimes leveraging our network of outside partners. As an example, we had previous experience work- ing as partners with China COSCO Shipping, our joint venture partner in this project, and with Daewoo Shipbuilding & Marine Engineering, the company responsible for shipbuild- ing. These existing trust-based relationships were a major help in moving the project forward. As another example, we were able to leverage our Group connections and received cooperation from outside companies to secure opportunities for our crew’s required special training for Northern Sea Route operations. Execution of an LNG transport project requires all aspects of a marine transport company, including risk assessment before participation, negotiations until concluding the charter contract, supervision of shipbuilding, financing, post-construction ship management, and safe operation of the ship. Accomplishing this project, despite the many issues we had to overcome, is truly the result of the comprehensive strength we have fostered up to this point. Fortunately, our first ship, the VLADIMIR RUSANOV, has been running well without any major issues. In addition, our second ship began operation last year and our third will be delivered this summer. Operating the world’s first ice-break- ing LNG carriers gives us a feeling that we are making his- tory at this very moment. The project is off to an amazing start, but it is just the start. With the utmost care and atten- tion, we will strive for safe navigation and work to create a presence in the Northern Sea Route to be recognized as the top player. Kazuya Hamazaki General Manager Energy Transport Business Unit, LNG Carrier Division Mitsui O.S.K. Lines, Ltd. Yuta Orito Coordinator, LNG Carrier Project Team Technical Division, Technology Innovation Unit Mitsui O.S.K. Lines, Ltd. Stories from Key Members 24 25 For Our Sustainable GrowthMITSUI O.S.K. LINES MOL REPORT 2019MITSUI O.S.K. LINES MOL REPORT 2019 Addressing Sustainability Issues Overview of MOL’s Sustainability Issues (Materiality) The MOL Group aims to improve its corporate value over the long term by minimizing the negative social impact of its business activities while striving to maximize its social value through contributions to the SDGs and other efforts. For this purpose, we have newly identified Sustainability Issues (Materiality), which are deeply connected with “Rolling Plan 2019.” Process for Identifying Materiality STEP 1 STEP 2 STEP 3 STEP 4 List each item pertaining to the Sustainability Issues Evaluate and map each item related to the Sustainability Issues (Diagram on the right) Analyze risks and opportunities for each item Finalize the Sustainability Issues e g r a L y t e i c o s n o t c a p m I / s r e d l o h e k a t s o t e c n a t r o p m I Large-volume, bulk transport services High-quality transport services Safe and reliable transportation Prevention of marine pollution Promotion of measures to mitigate climate change Reduction of air pollution Response to environ- mental regulations Elimination of maritime accidents Prevention of work- related injuries Elimination of cargo accidents Promotion of LNG fuel usage Pursuit of workstyle reforms Development of human resources Realization of autonomous sailing Promotion of diversity Employment of high-quality seafarers Realization of transport means with low environmental burden Value-Added Transport Services Marine and Global Environmental Conservation Innovation for Development in Marine Technology Human Resource Cultivation and Community Development Issue related to all themes Governance and Compliance to Support Businesses Contribution to regional revitalization Advancement in the Wind Challenger Project Small Impact on the MOL Group’s businesses Large 1 Concentrated investment of management resources in the business fields where MOL has strengths, which will mainly be offshore businesses 2 Provision of “stress-free ser- vices,” which MOL will offer from the customer’s perspective 3 Promotion of environmental strategies and development of the emission-free business into a core business Sustainability Issues (Materiality) Themes / Targets / Goals Risks (Negative impact in the event the goal on left is not achieved) Opportunities (Positive impact in the event the goal on left is achieved) Main SDGs contributed to Management Plan “Rolling Plan 2019” Three core strategies for realizing the 10-year vision Five priority areas for development 1 2 3 Marine Technical Skills ICT Technological Development Environmental and Emission-Free Business Workstyle Reforms Value-Added Transport Services • Safe and reliable transportation • Large-volume, bulk transport services • High-quality transport services • Elimination of maritime accidents • Elimination of cargo accidents • Prevention of work-related injuries • Slowdown in economic activities and logistics • Loss of trust in the Company from society • Economic burden and damage to assets due to an accident • Risk of casualties as a result of an accident Marine and Global Environmental Conservation • Prevention of marine pollution • Promotion of measures to mitigate climate change • Reduction of air pollution • Response to environmental regulations • Realization of transport means with low environmental burden Climate Change • Decline in energy transport volume • Delay in response to changing transport demand and trade dynamics • Obstruction to safe operation caused by extreme climate conditions Response to Regulations • Disruption to vessel operation • Loss of trust in the Company from society • Economic burdens such as fines and sanctions Innovation for Development in Marine Technology • Promotion of LNG fuel usage • Advancement in the Wind Challenger Project* • Realization of autonomous sailing • Obsolescence of existing technologies • Inability to respond to shortage of seafarers in the future Human Resource Cultivation and Community Development • Employment of high-quality seafarers • Development of human resources • Pursuit of workstyle reforms • Promotion of diversity • Contribution to regional revitalization • Loss of outstanding human resources • Decline in productivity Governance and Compliance to Support Businesses • Adherence to fair business transactions • Prevention of bribery and corruption • Establishment of information security structure • Prevention of harassment • Protection of human rights • Business continuity risks due to insufficient governance and internal controls • Corrupted corporate culture * The Wind Challenger Project is a joint industry–academia research project that aims to significantly reduce the amount of fuel consumed by large vessels by maximizing the use of wind power through the installation of massive sail panels on vessels. MOL participates and is promoting the Wind Challenger Project, which commenced in 2009. • Contribution to active economic activity and creation of new transport demand • Contribution to establishment of energy infrastructure in emerging countries • Long utilization of vessels through appropriate ship maintenance, which leads to enhancement of competitiveness • Cultivation of operational insight • Incorporation of new transport demand and establishment of new transport model that quickly captures changes in cargo movements • Development of new sailing routes (Arctic Ocean) • Decrease in environmental burden and reduction of transport costs by utilizing new technologies • Involvement in environmental rule creation • Reduction of environmental burden by the widespread use of LNG fuel and the application of natural energy • Improved competitiveness of offshore businesses and marine transport • Enhanced ability to respond to environmental regulations • Improvement of human resource competitiveness through recruitment of outstanding talent and improved work productivity • Promotion of innovation and response to business opportunities • Incorporation of various ideas by attracting a diverse pool of talent from all over the world • Economic development and a higher standard of living in emerging countries • Highly transparent and fair management • Decision-making based on appropriate risk management 26 27 P28 P32 P36 P38 P42 For Our Sustainable GrowthMITSUI O.S.K. LINES MOL REPORT 2019MITSUI O.S.K. LINES MOL REPORT 2019 Addressing Sustainability Issues Value-Added Transport Services Through the transportation of various goods, such as resources, energy, raw materials, and products, the MOL Group supports people’s lives and industries around the world. By continuing to provide efficient, safe, and reliable transport services sustainably, which is the core of our business, we will fulfill our role as an important part of economic and social infrastructure. Percentage of Marine Transport within Japan’s Overall Trade Volume World Population and Volume of Cargo Transported at Sea (Billions of people) Average annual growth rate forecast (Billions of tons) 99.6 % 20 15 10 5 0 Average annual growth rate 4.6% 1.0% Forecasts for future cargo movements after 2019 1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 10.0 7.5 5.0 2.5 0 2050 World population (left) Volume of cargo transported at sea (right) Source: Japan’s Marine Transport Shipping Now 2018–2019, Japan Maritime Public Relations Center Source: Results for cargo movements were taken from Clarksons. Results and forecasts for world population were taking from the United Nations. Forecasts for future cargo movements are based off Company calculations. Offshore Businesses Drawing on our expertise and techniques cultivated in the field of energy transport through the operation of LNG carriers and tankers, we work to offer solutions beyond transportation, such as FSRUs and FPSOs, to meet the demand for energy primarily in emerging countries. Based on the track record and expertise we have gained in our over 130-year history, we provide safe and reliable transport services on a daily basis. In addition, through the operation of a diverse fleet that is world-leading in scale, we are able to offer large volume and low-cost transport services for various cargoes. Dry bulkers Customers Terminals We operate container terminals in five locations in Japan and eight locations overseas,* and also provide stevedore services across Japan for car carriers and other conventional cargo ships. Accordingly, we have developed a comprehensive terminal business. Tankers LNG carriers Car carriers Logistics Making full use of our wide-ranging network that spans across 27 countries, we deliver a diverse combination of logistics services to our customers, including marine, air, and land transportation as well as customs clearance and warehouse management. Marine Transport Containerships * Overseas container terminal business is scheduled to be transferred to the integrated containership business company, ONE. 28 29 End-consumers Food manufacturers Paper manufacturers Iron and steel producers Electric power companies Oil companies Gas companies Automobile and construction equipment manufacturers Other manufacturers Trading houses Forwarders For Our Sustainable GrowthValue that MOL ProvidesMITSUI O.S.K. LINES MOL REPORT 2019MITSUI O.S.K. LINES MOL REPORT 2019Addressing Sustainability Issues Value-Added Transport Services Pursuing Safe Operation That Supports High-Quality Transport Services In sustainably providing value to society through transportation, the most important element is ensuring reliable safe operation. To visualize the process for achieving safe operation, MOL adopted the “4 Zeroes” (zero serious marine incidents, zero oil pollution, zero fatal accidents, and zero cargo damage) as its goals and monitors the continuous number of days that “4 Zeroes” are achieved. In this way, we are increasing the safety awareness among all employees in their daily duties. In addition to the 4 Zeroes, we have other key performance indicators (KPIs) listed below. For this year in particular, we have adopted “Development of Groupwide safety and quality management” as a focus area under “Rolling Plan 2019” and all corporate officers and employees of the Group are prioritizing efforts to realize the world’s highest standards for safe operation. KPIs Related to the Thorough Enforcement of Safe Operation 1 2 3 4 Continuous achievement of the 4 Zeroes for: • Serious marine incidents • Oil pollution • Fatal accidents • Cargo damage LTIF*1: 0.7 or below Average operational stoppage time:*2 24 hours or less per vessel each year Operational stoppage accident rate:*3 1.00 or below per vessel each year Trend in Lost Time Injury Frequency (LTIF) Average Operational Stoppage Time and Operational Stoppage Accident Rate Safe Operation Management Structure The Operational Safety Committee, chaired by the president, Organizational Structure Supporting Safe Operation deliberates and determines basic policies and measurements for ensuring and thoroughly enforcing the safe operation of all Group vessels. In addition, we have the Safety Operation Supporting Center (SOSC), which monitors and supports the safety of Group vessels. * MOL Ship Management Co., Ltd. and MOL LNG Transport Co., Ltd. e e t t i m m o C e v i t u c e x E Operational Safety Committee Chairman: President Vice Chairman: Director General of Safety Operations Headquarters Safety Operations Headquarters Marine Safety Division Smart Shipping Division Marine Technical Management Division LNG Marine Technical & Ship Management Strategy Division Ship management companies* Efforts to Achieve Safe Operations Formulation of the MOL Safety Standard Specifications Based on the lessons learned from serious marine incidents that occurred in the past, we formulated the MOL Safety Standard Specifications in 2006 with the goal of ensuring a high level of safety on all our vessels. These standard specifications are revised opportunities to learn about actual accidents and work-related disasters and actively discuss the causes and measures to be taken to prevent reoccurrence. Establishment of the Safety Operation Supporting Center (SOSC) occasionally as necessary. The kind of specifications a vessel should The SOSC was established in 2007 within the Head Office under be equipped with are determined to better ensure the prevention of the motto “Never let the captain get isolated.” The SOSC is staffed collation and grounding, fire, flooding and loss of stability, oil leakage by two marine technical specialists, including an experienced MOL at sea and environmental pollution, and workplace accidents, captain. By monitoring the weather, sea, and other conditions which all have a significant impact on society and on Company surrounding the approximately 830 vessels operated by the MOL profits. We apply such specifications to MOL-operated vessels. Group, the SOSC provides information on vessel operation in a Cultivation of a Safety-Oriented Culture MOL implements a vast range of initiatives with the hope of foster- ing an awareness of safe operation in each employee. In our Safety Campaigns, which we conduct twice a year, directors and employ- ees gather together onboard our ships to share information and timely fashion. The SOSC provides assistance to all ship captains 24 hours a day, 365 days a year. exchange opinions on accident prevention. Furthermore, we have Progress on Autonomous Sailing Using ICT been holding annual Safety Conferences for seafarers on leave at locations across the globe since 2007. They are important Please see page 37 for details (examples of MOL’s technological innovation). (Hours per vessel) (Number of accidents per vessel) 2.0 Response to Allision of the NIPPON MARU in the Port of Guam 2.0 1.6 1.2 0.8 0.4 0 Average among all industries in 2018 (1.83) Average among marine transport industry in 2018 (1.20) MOL’s target since fiscal 2015 (0.7 or below) 2014 2015 2016 2017 2018 (Fiscal year) 40 30 20 10 0 MOL’s target for average operational stoppage time (24 hours or less) 1.5 1.0 0.5 MOL’s target for operational stoppage accident rate (1.00 or below) 2014 2015 2016 2017 0 (Fiscal year) 2018 Regarding the above KPIs, in fiscal 2018 we were unable to achieve 1 . as an accident regrettably occurred where the cargo space of a MOL-operated vessel caught fire. Also, as on the graph above, we were unable to achieve 3 . Average operational stoppage time (left) Operational stoppage accident rate (right) *1 Number of work-related accidents per one million hours worked that resulted in time lost from work of one day or more. In the scope of calculations, we originally included only workplace illnesses and injuries requiring disembarkation from the ship. The LTIF criteria was strengthened from fiscal 2015, and now includes any workplace illness or injury that prevents a worker from resuming even a reduced workload on that day, regardless of whether the illness or injury requires disembarkation. Reference: 2018 average for all industries: 1.83, 2018 average in the marine transport industry: 1.20 (Source: 2018 Survey on Industrial Accidents issued by the Ministry of Health, Labour and Welfare) *2 The amount of ship operational stoppage time due to an accident per ship per year *3 The number of accidents that result in operational stoppage per ship per year In December 2018, the NIPPON MARU, which is operated by support the measures that Mitsui O.S.K. Passenger Line implements Group company Mitsui O.S.K. Passenger Line, Ltd., allied into a to prevent any such incident from reoccurring. At the same time, pier in the Port of Guam. Following the occurrence, Mitsui O.S.K. we will make concerted efforts for “Development of Groupwide Passenger Line received an order from Japan’s Ministry of Land, Infrastructure, Transport and Tourism to ensure the safety of its safety and quality management,” which was adopted as a focus area for the current fiscal year under “Rolling Plan 2019.” transport services. The company has submitted the reoccurrence prevention measures, which are listed on the right, and its presi- dent and responsible officers have all taken pay cuts. The Master and Chief Engineer who were onboard the vessel at the time of the incident have been severely reprimanded in accordance with in- house disciplinary regulations. MOL solemnly recognizes the inadequacies of Mitsui O.S.K. Passenger Line that have been brought to light as a result of this incident, and has reduced the pay of its president and responsible officers. We offer our sincerest apologies for the inconvenience and concern caused to the passengers and all the people affected. We will monitor and Outline of Measures to Prevent Reoccurrence 1 -1. Hold regular trainings to improve operational techniques -2. Strengthen education on internal alcohol management regulations 2 Conduct inspections to prevent employees from working under the influence of alcohol 3 Establish an effective safety management structure on its own initiative 4 Implement policies to strengthen safety management as a company Please visit the following website for more details on measures to prevent reoccurrence in response to the order to ensure safety (Only available in Japanese). https://www.nipponmaru.jp/news/wp-content/uploads/sites/2/19f37d3ff3180b1ead02a9b720f49d70.pdf 30 31 For Our Sustainable GrowthMITSUI O.S.K. LINES MOL REPORT 2019MITSUI O.S.K. LINES MOL REPORT 2019 Addressing Sustainability Issues Response to Other Environmental Regulations Marine and Global Environmental Conservation MOL has identified five important themes for the Sustainability Issue of “Marine and global environmental conservation,” which are “Prevention of marine pollution,” “Promotion of measures to mitigate climate change,” “Reduction of air pollution,” “Response to environmental regulations,” and “Realization of transport means with low environmental burden.” We are taking specific measures to address these important themes, such as reducing CO2, SOx, and NOx emissions, thorough ballast water management in order to preserve biodiversity, and selecting vessel demolition yards from a stand- point of the impact to the environment. At the same time, we are examining new initiatives for reducing marine plastics. To Curtail Greenhouse Gas (GHG) Emissions Compared with other transportation methods, the amount of CO2 released into the atmosphere, having a negative impact on the emissions and air pollutants from marine transport per transport unit is remarkably small because a large volume of cargo can be environment. Accordingly, we have adopted GHG emissions targets under MOL Group Environmental Vision 2030, which was moved all at once. However, we cannot ignore the fact that marine formulated in April 2017, in order to make active efforts to reduce transport contributes to the overall amount of emissions being GHG emissions as an eco-minded company. CO2 Emitted When Transporting One Ton of Cargo One Kilometer CO2 Emissions of MOL Vessels Large containerships Crude oil tankers 3.0 2.9 Dry bulkers 2.5 Trucks*3 80 Cargo planes*4 0 100 200 *1 Twenty feet Equivalent Unit 100 *2 Deadweight Tonnage Source: Challenges in the Marine Transport Industry, *3 Over 40 tons 200 *4 Boeing 747 0 18,000 TEU*1 type 100 200,000 DWT*2 or more 200,000 DWT or more 435 300 300 400 400 500 (g) 500 80 60 40 20 0 The Japanese Shipowners’ Association GHG Emissions Targets under MOL Group Environmental Vision 2030 (Compared with fiscal 2014 / Per transport unit) Fiscal 2030 Fiscal 2050 25% reduction 50% reduction In April 2018, the IMO*5 determined GHG emissions targets*6 in (Thousands of tons) 25,000 20,000 15,000 10,000 5,000 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 0 (Fiscal year) Ship Recycling Per transport unit assuming fiscal 2009 as 100 (left) Total amount (right) Road Map to Reduce GHG Emissions (%) 50 25 Innovation such as application of alternative fuels, etc. Offset environmental impact through emission trading accordance with the Paris Agreement.*7 Based on the IMO Introduce LNG-fueled vessels, Wind Challenger Project, etc. targets, we are currently considering revisions to our targets as well as concrete measures for achieving these targets. Achieve EEDI*8 reduction target / Enhance vessel operational efficiency, including slow steaming / Vessel upsizing, etc. 0 2014 2030 2050 (Fiscal year) Please refer to the Environmental Data section on our corporate website for more details. https://www.mol.co.jp/en/csr/environment/data/index.html *5 The International Maritime Organization (IMO) is a specialized agency of the United Nations established in 1958 to promote collaboration among government agencies on a variety of issues in the maritime field, including marine safety and the preven- tion of marine pollution by vessels. *6 At the 72nd meeting of its Marine Environment Protection Committee, held in April 2018, the IMO determined targets for reducing the GHG emissions of international shipping sector. These targets aim to improve fuel efficiency of the sector compared with 2008 levels by 40% or more by 2030, and by 70% or more by 2050. In addition, these targets strive for a 50% reduction in total GHG emissions by 2050, while encouraging efforts toward eventually eliminating GHG emissions as quickly as possible within the 21st century. *7 In the Paris Agreement, a long-term target was set for keeping a global temperature rise this century well below 2°C compared with pre-industrial levels. The agreement also aims to pursue efforts to limit the temperature increase even further, to 1.5°C. *8 The Energy Efficiency Design Index (EEDI) is an index used during the design of a new ship to calculate the ship’s theoretical CO2 emissions on a g/ton-mile basis. The required EEDI reduction rate in each phase is as follows: Phase 1= 10%, Phase 2= 20%, and Phase 3= 30%–50% (depending on type of vessel) SOx Regulations SOx Regulations The SOx regulations limit the percentage of sulfur content in fuel in order to curtail the amount of sulfur in gas emissions. Starting in January 2020, the IMO will lower the current limit of 3.5% or less to 0.5% or less. There are primarily three ways to comply with the tightening regulations: Use compliant oil, install SOx scrubbers, and use LNG or other alternative fuels. While our approach for the time being focuses mainly on the use of compliant oil, we are exam- ining the best choice for each of our vessels. • In anticipation of tighter SOx regulations, we are implementing combustion tests using sample fuels at the MOL Group’s technological research centers to confirm performance and stability during use. We also implement trials with actual vessels, such as car carriers and tankers. • We are engaging in procurement negotiations with leading suppliers around the world, including major oil companies. In Singapore, which is a major port for bunkering (oil replenishment), we have secured a large part of the necessary amount of compliant oil for all MOL vessels for use during fiscal 2019. • Compliant oil costs more than heavy oil, which has been used conventionally. As such, the cost of bunker fuel is expected to rise. We believe that the costs related to environmental initiatives implemented on a global scale is something that should be shared among the whole society. We are working to gain the understanding of our customers for reflecting the additional fuel costs in freights and other fees. • We are installing SOx scrubbers primarily for larger vessels such as Very Large Crude Carriers (VLCCs) and Capesize bulkers, because such larger vessels can recover the cost of such installation more quickly. It is scheduled that we install SOx scrubbers on approximately 60 vessels across the Group by 2022, including cases where it is at the request of our customers.   Please see page 36 for our efforts toward LNG-fueled vessels (Innovation for Development in Marine Technology). Compliant oil SOx scrubbers LNG and other alternative fuels Ballast Water Management Ballast Water Management Convention The Ballast Water Management Convention highlights the negative impact of the cross-border transfer of foreign marine organisms, which occurs when vessels release ballast water, on marine ecosystems. Under the convention, all vessels are mandated to install ballast water treatment systems by 2024. In anticipation of the enactment of the Ballast Water Management Convention, adopted by the IMO, we decided to make the installation of ballast water management systems a Companywide policy in fiscal 2014. As of April 2019, we have completed installation of these management systems on 142 vessels, which is roughly 54% of owned vessels. Ballast Water Mechanism Discharging port Loading port Marine organisms Impact on marine ecosystem Ballast water is taken in to provide weight as the draft rises due to the unloading of cargo. On the other hand, ballast water is discharged when loading cargo as the weight it provides is no longer needed. Ship Recycling Convention The Hong Kong International Convention for the Safe and Environmentally Sound Recycling of Ships (Ship Recycling Convention) was adopted by the IMO in May 2009. The convention is not yet in effect as it is still in the ratification process in each country. However, after its implementation the Ship Recycling Convection will require inventory lists showing the quantity and location of hazardous materials on ships. When we demolish a ship, we select yards that are verified by ClassNK* for compliance with the Ship Recycling Convention. In addition, we are working on making inventory lists in accordance with the Ship Recycling Convention. * Nippon Kaiji Kyokai, or ClassNK, is an international ship classification society. ClassNK carries out vessel surveys and also examines and monitors vessels in operation and issues certificates of vessel classification. Environmental Management Structure Environment-related policies were previously discussed at meet- promoting environmental and emission-free businesses, which we ings of the Technology, Innovation and Environment Committee, aim to establish as core businesses in the future. the CSR Committee, or others. In April 2019, we established the Environmental Management Committee, which serves under the Executive Committee and is chaired by the vice president, to confirm important management issues to address and strengthen necessary efforts. In addition to formulating environmental targets and monitoring progress made toward reaching these targets, the Environmental Management Committee will be in charge of Structure for Promoting the Environmental Initiatives Environmental Management Committee SOx 2020 Regulation Response Committee Executive Committee Corporate Planning Division New & Clean Energy Business Division Technology Innovation Unit 32 33 For Our Sustainable GrowthMITSUI O.S.K. LINES MOL REPORT 2019MITSUI O.S.K. LINES MOL REPORT 2019 Addressing Sustainability Issues Marine and Global Environmental Conservation Our Efforts to Address Environmental Issues In the management plan announced in fiscal 2017, we set our Environmental Investments (Billions of yen) goal to develop environmental and emission-free businesses into core businesses in the future. Since then, we have proceeded with various efforts to achieve this goal. Over the past three years, a total of ¥18.4 billion has been invested in environment- related areas. Fiscal 2016 Fiscal 2017 Fiscal 2018 Environment-related R&D activities Utilization and expansion of existing environmental technologies Responses to environmental regulations Initiatives to save bunker fuel Initiatives of Group companies Total 0.4 0.5 3.1 1.1 0.3 5.4 0.5 0.8 3.1 0.8 0.5 5.7 0.9 1.8 3.6 0.6 0.4 7.3 Progress in Environmental and Emission-Free Businesses We have adopted “Promotion of environmental strategies and development of the emission-free business into a core business” as one of the three core strategies under “Rolling Plan 2019.” CO2 Emissions Reduction Business Support emissions reductions We are taking an approach toward establishment of PBCF / Utilization of wind power as energy (for vessel environmental and emission-free businesses as the pillar for propulsion) / Northern Sea Route / LNG to Powership / the next generation from four different perspectives: Renewable CO2 capture and storage (CCS) / Sale of highly energy- energy business, Alternative fuel business, CO2 emissions efficient equipment (storage batteries, LED lighting, etc.) reduction business, and Environmental value creation business. Propeller Boss Cap Fins Fields where MOL is already involved in Potential fields for MOL’s involvement Renewable Energy Business Generate and deliver eco-friendly electricity Offshore wind power generation / Biomass power generation / Solar power generation In March 2017, we invested in Seajacks International Limited, which owns and operates Self-Elevating Platform (SEP) vessels used for installation of offshore wind power generation systems, thereby entering the renewable energy business. Going forward, we will continue to contribute to the progression of the renewable energy field. Alternative Fuel Business Utilize and transport using innovative fuels LNG fuel supply / LNG-fueled vessels / Methanol- fueled vessels / Progress in LNG-fueled vessels Biomass fuel / Hydrogen transport   Please see page 36 for details (Innovation for Development in Marine Technology). (PBCF) is a kind of propeller attachment jointly developed by MOL, Akishima Laboratories (Mitsui Zosen) Inc., and MOL Techno-Trade, Ltd. that helps reduce the resistance to ship propulsion. In 2017, MOL Techno-Trade commenced sales of an upgraded version of PBCF, which has been confirmed to reduce a vessel’s fuel consumption by 5% compared to a ship without a PBCF. Navigation of Northern Sea Route   Please see page 20 (Special Feature) for details. Environmental Value Creation Business Create value from environmental activities themselves and conduct related trading activities Green finance / Investment in energy-saving and renew- able energy venture companies / Emission rights businesses (Sale of carbon offsets) In fiscal 2018, we issued a total of ¥10.0 billion in Green Bonds for the purpose of raising funds for our green projects, ¥5.0 billion of which sold to individual investors for the first time as a Japanese company. In addition, in July 2019 we plan on issuing a total of ¥20.0 billion in Sustainability Bonds, which extends the usage of the funds to projects that address issues related to the SDGs. Participation in Task Force on Climate-related Financial Disclosures (TCFD) We endorse the recommendations of the TCFD. Scenario Analysis In 2018, with the support of the Ministry of Environment and under TCFD recommendations, we conducted scenario analysis on a trial basis where we incorporated climate-related risks and opportunities into our management strategies. In this trial, we made an estimation of transport volumes, fleet demand, and other factors under the 2°C and 4°C scenarios.*1 In doing so, we examined the impact of higher temperatures on our businesses and measures we can implement going forward. More details of our analysis are available in the Practical Guide for Scenario Analysis in Line with TCFD Recommendations, which was published by the Ministry of the Environment. Based on the insight we have gained through this trial, we will further deepen our scenario analysis, impact evaluation, and examination of future measures, and work to reflect the results in our management strategies. *1 Climate scenarios announced by such organizations as the International Energy Agency (IEA) and the Intergovernmental Panel on Climate Change (IPCC). The 2°C Scenario is a scenario in which the necessary measures are implemented to control temperature increases to 2°C or less. The 4°C Scenario is a scenario in which economic initiatives and additional measures to address climate change are not implemented. For more details, please see pages 39–49 of the Practical Guide for Scenario Analysis in Line with TCFD Recommendations (Only available in Japanese ). http://www.env.go.jp/policy/Practical_guide_for_Scenario_Analysis_in_line_with_TCFD_recommendations.pdf MOL’s Vision of the World under the 2°C Scenario Cleaner society, shift toward renewable energy, and decrease in fossil fuel demand Government Carbon tax hike CO2 Increased use of EVs*2 and FCVs*3 FCV EV Shift toward local production & consumption which is low-carbon Expansion of carbon tax / Decrease in fossil fuel demand Fossil fuel Iron and steel H2 H2 Hydrogen H2 Biofuel Decline in demand due to the transition toward lighter automobiles Development of next-generation fuels Further utilization of Northern Sea Route using ice-breaking vessels MOL MOL Increase in demand for offshore wind power generation Clean energy CO2 SOx NOx Acceleration of EEDI / Initiatives on GHG emission reduction / Tightening of SOx and NOx regulations IMO Aim for zero GHG emissions by the end of the century *2 Electric Vehicles *3 Fuel Cell Vehicles Future Measures to Mitigate Climate Change Soft measures • Impose output limits on ship’s main engine to curtail CO2 emissions / Conduct further slow steaming • Enhance operational efficiency by keeping the fastest route and optimal trim using the Internet of Things (IoT) Hard measures Business portfolio change • Install energy-saving equipment in new and existing vessels • Construct LNG-fueled vessels • Promote the Wind Challenger Project • Expand joint industry–academia research and R&D investment aimed at next-generation fuels, such as biofuel, as well as technological innovation of ships • Expand renewable energy businesses such as offshore wind power generation and related businesses • Further develop offshore businesses such as FSRUs, which promote the use of eco-friendly LNG fuel, and the LNG-to- Powership business Response to climate- related regulations and conditions • Collaborate with related organizations to get involved in the formulation of rules at IMO • Collect information on carbon pricing and take action accordingly • Strive to deepen society’s understanding regarding the higher costs that come with efforts to reduce CO2 emissions 34 35 For Our Sustainable GrowthMITSUI O.S.K. LINES MOL REPORT 2019MITSUI O.S.K. LINES MOL REPORT 2019 Addressing Sustainability Issues Examples of MOL’s Technological Development Innovation for Development in Marine Technology To realize the 10-year vision, the MOL Group has established the three core strategies, including “Provision of ‘stress- free services,’ which MOL will offer from the customer’s perspective” and “Promotion of environmental strategies and development of the emission-free business into a core business.” With a view to executing these strategies, we are promoting technological development using natural energy and information and communications technology (ICT). Basic Policy on Technological Innovation For technological development in the marine industry, the which commenced in November 2016, we aim to spur logistics focus had been on underlying technologies for the parts of ship. innovation that captures the future needs of customers and In recent years, the potential has expanded further due to the society through both ICT and Technological Development, two rapid development of ICT such as IoT and big data. of the priority areas for development adopted under our man- Centered on the ISHIN NEXT—MOL SMART SHIP PROJECT, agement plan. Proactively promote ICT utilization in addition to technologies in conventional fields Advanced technologies for supporting safer vessel operation with a view to realizing autonomous sailing New technologies in various fields Safety and the Environment ICT, e.g., big data utilization Technologies that reduce environmental burden in order to protect the global environment Actively develop technologies to meet the needs of customers and society while inheriting the technological expertise MOL has cultivated thus far Our Goals 1 Eliminate human error and achieve safe operation by leveraging automated technologies 2 Develop eco-ships using natural energy Autonomous Sailing Wind Challenger Project 3 Develop vessels using alternative fuels that help reduce CO2 emissions LNG-Fueled Vessels 4 Expand the installation of equipment for collecting vessels’ operational data and create next-generation types of ship management support systems FOCUS Project 5 Provide technological solutions for issues related to logistics services Structure for Accelerating Technological Innovation We established the Technology Innovation Unit in April 2018 with the a Group company responsible for providing Groupwide IT support. goal of stepping up our efforts in technological development. The unit comprises three organizations: the Technical Division, which These three organizations collaborate to promote the development of next-generation technologies. Additionally, in the ISHIN NEXT— is in charge of managing and developing technologies from hard MOL SMART SHIP PROJECT, the Technological Innovation Unit aspects of the vessels; the Smart Shipping Division, which is in actively pursues inter-industry collaboration with external charge of marine-related ICT; and MOL Information Systems, Ltd., institutions, including the Wind Challenger Project. Technological Development Platform Universities / Research institutions Private companies MOL Information Systems Smart Shipping Division Technology Innovation Unit Technical Division Close collaboration as “One MOL” Co-creation with a wide range of stakeholders Examples of Technological Development through Co-Creation with External Institutions • Forecast for dry • Cameras to monitor bulker movement • Market estimations for dry bulks • MOL Light House • Wind Challenger Project • FOCUS Project • Autonomous sailing loading and unloading operation • Support systems for Northern Sea Route sailing • Support software for VLCC’s loading and unloading operation Shipyards / Manufacturers National govern- ments / Local governments 36 Achievement of Safe Operation through Pursuing Autonomous Sailing Autonomous sailing is one of the projects we are working on in the operation by crew members. In these ways, we are striving to provide safer and more high-quality transport services. Currently, we are considering technological development for ICT area, a priority area for development under management plan. supporting vessel operation in congested sea areas and arrival / By promoting ICT utilization based on the marine technical skills departure maneuvering as one of the utmost priorities. To that end, that we have gained over our long history, we are working to prevent we are working to achieve the mechanization of watch-keeping and human errors, which are the majority cause of maritime accidents, vessel operation, as well as auto berthing and un-berthing. and help ensure the appropriate recognition, decision-making, and Current Progress Future Targets (After 2025) 1 Development of navigation system using AR*1 technology that provides visual support to crew members during their watch-keeping and vessel’s operations The system integrates real-time video images from the bridge camera with other vessels’ information from the AIS*2 and radar (ship type, size, position, direction, speed, etc.), and displays on tablets and screens (pictured on right). 2 Research and development toward creating algorithm for avoiding areas where the risk of collision is high 3 Promotion of the Auto Berthing and Un-Berthing Demonstration Project (with the goal of implementing a demonstration test in 2020) Automatic Watch-Keeping Vessel’s Automatic Operation Complete Auto Berthing and Un-Berthing *1 The technology that integrates digital information with the real world and superimposes computer-generated images on the user’s view in the real world. *2 The Automatic Identification System that is used to share vessel and voyage information between ships. Release of FOCUS Project Part I “Fleet Viewer” Application—Aiming for the Visualization of Marine Operations In order to realize the visualization of marine operations through application around October 2019. This application will visualize the degradation of ships over time as well as the impact of ships on the environment, both of which are difficult to assess from shore. In these ways, we will strive to leverage ICT utilization in an even enhancing collection and utilization of vessel operation data, more sophisticated manner. we are promoting FOCUS Project jointly with Mitsui E&S Shipbuilding Co., Ltd. and Weathernews Inc. By utilizing voyage and engine data collected from approximately 150 vessels, we are developing applications for more advanced vessels’ operation monitoring and propulsion performance analysis. In doing so, we aim to strengthen the safe operation and reduce the environmental burden in marine transport. In May 2019, we launched “Fleet Viewer,” an application geared toward reinforcing vessel management, as Part I of the FOCUS Project. “Fleet Viewer” collects nearly 6,000 sensing data at a high frequency (one-minute intervals) including the operational status of all equipment, vessel position, and ocean and weather information. All data is shared among vessels and various locations on shore. As Part II of the FOCUS Project, we plan on releasing a new Commencement of Service of the LNG-Fueled Tugboat ISHIN LNG fuel is a clean energy source which gives off less CO2 and escort services to large cargo ships sailing Osaka Bay and the Seto Inland Sea. ISHIN also assists arrival and departure maneuvering at ports. We will accumulate the know-how through ISHIN’s SOx emissions compared with fossil fuels. Amid growing envi- operation to enhance our Groupwide expertise on LNG- ronmental awareness around the world, global demand for fueled vessels. LNG fuel is expected to increase significantly. Accordingly, we MOL takes a proactive approach in popularizing the use of LNG have been working to develop LNG-fueled vessels. As a fruit of fuel to meet the environmental needs of our customers and society. these efforts, we commenced service of the LNG-fueled tug- boat ISHIN in fiscal 2018. ISHIN is Japan’s first tugboat built to conform to the IGF Code.* Moreover, its excellent environmental performance earned the top rating of four stars under the Ministry of Land, Infrastructure, Transport and Tourism’s energy-saving rating scheme for Japan’s coastal ships. With its ability to navigate at high speeds, ISHIN offers * The IGF Code stands for the International Code of Safety for Ships Using Gases or Other Low-Flash Point Fuels. The code establishes safety require- ments for vessels that run on gas and low-flashpoint fuels, and took effect on January 1, 2017. 37 For Our Sustainable GrowthMITSUI O.S.K. LINES MOL REPORT 2019MITSUI O.S.K. LINES MOL REPORT 2019 Addressing Sustainability Issues Efforts toward Human Resource Development Human Resource Cultivation and Community Development Human resources are the driving force for the Group’s growth and what underpin our brand and reliability. We aim to achieve sustainable growth based on MOL CHART, the values shared by all Group members worldwide, and by creating an organizational culture that allows a diverse group of human resources from different backgrounds, including nationality and gender, and with varying attributes to work positively and lively. Furthermore, by offering opportunities for professional education by in-house educational institutes located in countries such as the Philippines and providing stable employment, not only will we secure top-quality seafarers that are indispensable to the Group’s operations, we will also contribute to the economic and industrial development of emerging countries. Basic Policy on Human Resource Development Developing human resources, which act as the source of our personal initiative and a sense of responsibility who can create added value, and ensuring diversity are two important issues new value and play an active role in the global market. To realize to address in order to realize our 10-year vision to “Become this goal, we provide training programs that support the growth a Group of Business Units with No. 1 Competitiveness in of each employee while at the same time create an environment Respective Areas.” In the development of Group human that brings out the full potential of our diverse human resources resources, our goal is to cultivate human resources with and allows them to work energetically. Fostering an Organizational Culture Based on MOL CHART To operate the wide range of MOL Group businesses on a global value on a Groupwide level, it is imperative to establish shared scale, we have been proactively employing people of different values that we cherish as a group to overcome the regional, nationalities and backgrounds. Nowadays, in a time of significant linguistic, and cultural boundaries. Therefore, we formulated changes in the external environment, it is becoming increasingly MOL CHART in April 2015 as a set of values that are to be important that we have a group of people that are diverse not embraced by all Group members. By instilling MOL CHART in all only in terms of nationality and gender but also in how they view domestic and overseas Group employees, as well as in all crew and approach different situations. We can keep creating value members on our vessels and making it the foundation on which only when such diverse people collaborate in a way each each employee makes decisions, we are fostering a corporate member extends his or her unique capabilities to the fullest. culture that further ensures compliance, enhances safety With that said, in order to continuously enhance our corporate awareness, and promotes the creation of new value. Challenge Honesty Accountability Reliability Teamwork Innovate through insight Do the right thing Commit to acting with a sense of ownership Gain the trust of customers Build a strong team With a goal to cultivating human resources with personal initiative their knowledge of vessels and operations, in addition to and a sense of responsibility who can create new value and enhancing their awareness of safety through firsthand experi- play an active role in the global market, we promote the growth ences on the frontlines. They also include the One MOL Global of each employee by offering a wide variety of training programs Management College, which is designed to develop management based on position and category of skills. These programs include executives for the next generation. onboard training for young employees, which aims to deepen Development of human resources who are globally active Optional Strengthening of fundamental skills Business skills, accounting, legal affairs, and training programs in agencies Optional Enhancing the ability to train team members Required Development of management executives and leaders Optional   Selection-based ICT literacy Optional Extension lectures, etc. Optional Staff Coordinators Team Leaders General Managers MOL BEST (English training) Required Global business skills Training programs before overseas transfer Chinese-language courses Long-term overseas training Short-term overseas training One MOL Global Management College Selection-based Practical training at in-port agency Onboard training Accounting, presentations, logical writing, and facilitation Reading contracts in English Fostering of safety awareness Business strategies Optional Excel skills ICT literacy Promoting diversity Coaching skills Employee evaluations ISL leadership training (fostering innovative leaders) Selection-based Management School Selection-based One MOL Global Management College Selection-based Mitsui Jyuku (an exclusive training program for senior employees in Mitsui Group companies) Public programs, correspondence courses, and extension lectures, etc. Founding One of the Largest Maritime Academies in the Asia–Pacific Region as an academy, it allows us to provide education to students before they become seafarers. In addition to ship operating techniques, the MMMA emphasizes fundamental education, the ability to think logically, and a strong sense of discipline. Based on such policy, the MMMA aims to develop human resources that can someday lead the future of the Philippines itself. At the inauguration ceremony for the MMMA held in September 2018, we welcomed around 700 guests, including Secretary of the Department of Transportation Arthur Tugade, Senator Grace Poe, and H.E. Koji Haneda, the Japanese Ambassador-designate to the Republic of the Philippines. Through the MMMA, we will aspire to develop outstanding human resources who can handle safe operation at a world-class level while at the same time offering high-quality education and creating stable employment. In these ways, we will contribute to the development of local communities. In August 2018, we opened one of the largest maritime academies in the Asia–Pacific region, MOL Magsaysay Maritime Academy Inc. (MMMA), in the Philippines. Filipino seafarers, comprising approximately 70% of all Group crew members, serve as the core workforce on our operating vessels. To date, we have co-managed the Magsaysay Institute of Shipping (MIS), which aims to develop Filipino crewmembers that can support our high safety standards. At MIS, we conduct onboard training using a training vessel dedicated to the institute. In addition, based on the Academia-Industry Linked Program (AILP) promoted by the Philippine government, we implement a cadet training curriculum at MIS named “Third-Year Program,” which involves education and training at Company facilities for students selected from partner maritime schools. At the recently opened MMMA, we accept a maximum of 300 students per year and endeavor to turn out high-quality seafarers stably and continuously based on the track record and insight we have gained from managing the MIS. We expect the graduates of MMMA to not only succeed onboard but also become personnel that can lead our organization in various fields, including safety management, voyage management, and technical support for sales divisions. We have thus far worked on employee training through the establishment and operation of training centers that allow our crew members to acquire technical operation skills and receive pre- boarding training. One important characteristic of the MMMA is that, 38 39 For Our Sustainable GrowthMITSUI O.S.K. LINES MOL REPORT 2019MITSUI O.S.K. LINES MOL REPORT 2019 Addressing Sustainability Issues Human Resource Cultivation and Community Development Creation of an Environment That Draws Out Employees’ Capabilities to Their Full Extent Promoting “Workstyle Reforms” We have established “Workstyle reforms” as a priority area for development under our management plan. The aim of these reforms is to enhance competitiveness of our human resources and accelerate innovation through a corporate culture that supports employees to work in a lively manner. To achieve our 10-year vision, we must execute our work procedures with a high level of efficiency, encourage creative thoughts that are not constrained by conventional ideas, and promote a culture and organization that can spur such creativity. In September 2016, we established the Improvement of Work Efficiency Committee, which is chaired by the president. Centered on this committee, we have been making various efforts in four focus areas―personnel system reforms, corporate culture reforms, workplace / workstyle reforms, and operational reforms―in order to enhance productivity and create time to pursue innovation that transcends conventional frameworks. At the same time, we endeavor to achieve a corporate culture where each employee can work with satisfaction and motivation. Brand new open-plan style pilot office on the fifth floor of our Head Office where employees choose desk by drop-in basis MOL’s Workstyle Reforms Creating a vibrant work environment that facilitates communication both horizontally and vertically throughout the organization New ideas and constructive discussions Four Areas of Focus for Reforming Workstyles 1 Personnel system reforms Introduced a new structure for the personnel system in fiscal 2018 based on the following principles •  Establish a system that supports earlier identification and cultivation of managers who will lead the organization with accountability and initiative •  Diversify the range of career paths to develop or secure specialists and give employees with various backgrounds more opportunity for accomplishment 2 Corporate culture reforms •  Conduct round-table conferences named “HOT Dialogue” to enhance communication between the president and each division and between the general managers, etc. •  Provide company support for employees gatherings across divisions •  Prepare discussion board for all employees on in-house social network application •  Implement No Overtime Days •  Introduce Casual Every Day •  Encourage male employees to take childcare leave 3 Workplace reforms •  Introduce a remote work program •  Create space by reducing the amount of paper documents and establish employee lounge area for more communication •  Introduce a pilot office where employees are free to choose desk by drop-in basis and start to measure effects of such office 4 Operational reforms •  Promote the use of robotic process automation (RPA) •  Provide facilitator training to teach employees the skills needed to manage meetings better •  Introduce large touchscreen displays (Surface Hub) to improve meeting productivity •  Start the Paper OFF! Project, which aims to significantly reduce the amount of paper documents Sustainable corporate growth “Creating innovation” “Differentiation from competitors” “Leading the industry in individual competitiveness” The President Serves as Chairman of the Improvement of Work Efficiency Committee Enhancing productivity •  Reform corporate culture •  Improve efficiency of working processes Creating a corporate culture and working style that enhance productivity and lead to new ideas in order to encourage innovative thinking •  Reduce time spent on low- Organization priority activities Proceeding with workstyle reforms from the perspectives of both the organization and employee Employee Enhancing employee satisfaction •  Clear separation of work and private life •  Working “smartly” •  Creating momentum for the future Promoting Diversity and Inclusion The MOL Group positions the promotion of diversity as an important management strategy in order to continue to be a dynamic and innovative organization that can flexibly respond to changes in the external environment and realize sustainable growth. We provide various forms of support and are working to establish an environment that allows each of the approximately 15,000 multinational employees and seafarers working in the Group to maximize their abilities and play an even more active role, regardless of differences in experience, values, life stages, and attributes. We established the Diversity and Healthcare Management Office in the Human Resources Division in 2017 (currently the Diversity and Healthcare Management Team), thereby creating a system to more intensively carry out these efforts. Moving forward, we will improve our working environments so that employees of various nationalities and from different back- grounds can contribute to the greatest extent possible. By doing so, we will enhance the comprehensive strengths of the Group. Number of Employees / Ratio of Female Employees / Ratio of Women in Managerial Positions* Ratio of Employees by Region (Consolidated) 64% 16% 9% 7% Japan Europe Southeast Asia North America East Asia 4% Ratio of Seafarers on Company-Operated Vessels by Region (Consolidated) 68% Philippines Russia Other India Japan Europe Indonesia 15% 5% 5% 3% 3% 1% (People) 1,500 1,000 500 0 2013 2014 Number of employees (left) Ratio of women in managerial positions (right) 2015 Ratio of female employees (right) 2017 2016 2018 (%) 20 15 10 5 0 (Fiscal year) * Unconsolidated basis excluding loaned employees, contract employees, part-timers, etc., but including expatriate employees Recruitment of an Athlete MOL recruited its first athlete in 2016, hiring wheelchair rugby player Kae Kurahashi. She balances both office work and athletic activities, working for the Human Resources Division two days a week (including one day of remote work) and practicing three days a week. MOL Group executives and employees eagerly support Ms. Kurahashi who participates in both domestic and international competitions and always delivers an outstanding performance including a victory in the World Championships in August 2018 as a member of the national team. In 2017, MOL signed an official sponsorship agreement with BLITZ, Ms. Kurahashi’s wheelchair rugby Photo: Kinzo Takaba team. In 2018, we became an official partner of the Japan Wheelchair Rugby Federation. In addition to helping to promote the expansion of wheelchair rugby, we will work to foster an environment that encourages our diverse employees to play active roles inside as well as outside the Company. Kae Kurahashi Human Resources Division Diversity and Healthcare Management Team Promoting Health and Productivity Management We believe that ensuring the safety and health of our employees and creating a work environment, including on vessels, where they can work with peace of mind provides the foundation for our corporate activities. Based on this belief, centering on the Diversity and Healthcare Management Team, the Company spearheads efforts to provide a wide range of support and establishes an environment that enables each and every employee to maintain and improve their mental and physical health and work with energy and motivation. These efforts were evaluated highly, with MOL being selected as a “White 500 Company” in the large enterprise category of the 2019 Certified Health and Productivity Management Organization Recognition Program, a cooperative initiative by Japan’s Ministry of Economy, Trade and Industry (METI) and Nippon Kenko Kaigi. Key Initiatives in Health and Productivity Management • In collaboration with workstyle reforms, formulate “Smart Work Plans” for each division to reform workstyles, correct the issue of long working hours, and achieve a work–life balance with the goal of creating time for generating new value • Provide the mental and physical support of all employees—including onboard and overseas employees—through collaboration between the Human Resources Division and occupational health physicians, in-house doctors, clinical psychologists, and public healthcare nurses • Conduct mental health consultations at major locations in Japan and introduce a web-based mental health self-check tool • Organize health courses and campaigns on themes such as quitting smoking, stretching, walking, and sleep and eating habits, thereby promoting employee health awareness • Implement the “Breakfast Campaign” that provides breakfast at the employee cafeteria during summer to help improve work efficiency and health • Adopt “MOL Body Fit Exercise,” a unique calisthenic exercise routine that supports the health of ocean-going employees, as well as nutrition improvement projects on MOL's fleet For more information regarding our health and productivity management initiatives, please visit the website below. https://www.mol.co.jp/csr/hr/health/index.html 40 41 For Our Sustainable GrowthMITSUI O.S.K. LINES MOL REPORT 2019MITSUI O.S.K. LINES MOL REPORT 2019 Dialogue between the Outside Directors Hideto Fujii Outside Director Etsuko Katsu Outside Director MOL is striving to further enhance its governance to realize growth through reinvention. The Company’s outside directors Hideto Fujii and Etsuko Katsu discussed how MOL should strengthen its governance in order to get into new fields beyond conventional ocean shipping business and to realize the 10-year vision to “Become a Group of Business Units with No. 1 Competitiveness in Respective Areas” amid dramatic changes in the external environment. Evaluation of MOL’s Governance intensifying geopolitical risks and the rise of protec- are made, and I believe this was an excellent trend for tionism, leading companies in the ocean shipping the Company to adopt. industry in particular are facing increasingly difficult Katsu: In the past two years, the volume of information challenges. Seeing the hardships that are arising in that is shared at Board meetings has greatly increased, this industry, it was an extremely important action for thereby helping the directors to be better aware of the the Company to transition to “Rolling Plan,” which is particular details of each issue. Especially in the case flexible and agile, rather than adhere to a conven- of the integration of the containership business, there tional medium-term management plan that aims to has been a significant increase of information since pursue a set vision and strategies for several years. last year, despite the fact that several details were Fujii: Since I took on the position of outside director, actually not communicated in the beginning of the there have been two major changes. The first change integration process. Also, in order to take proactive was the improvements the Company has made to the steps to address risks that would likely materialize format and process regarding projects brought up at as losses in the future fiscal years, the Company set Board meetings. Discussions are now held on specific aside adequate provisions and extraordinary loss projects with a clear awareness of their level of strategic related to the integration. The speed at which the importance or of their relationship with “Rolling Plan.” Company was able to do this is something I believe By determining a clear focus, the Company is now deserves praise. able to sufficiently deliberate the most important Fujii: At the time of the NIPPON MARU accident last aspects pertaining to each project with a sense of year, the measures the Company should take to speed. The other significant change was that the respond to the accident and prevent a reoccurrence Company has been able to set up opportunities to were promptly reported to Board of Directors. It was a actively share issues relating to projects and discuss good example showing the Company’s well-functioning during the examination phase of a project. Such an governance. I have a high opinion of the swift opportunity allows for more specific discussions responses taken against scandal, more so than the toward a project’s realization before final decisions action toward business growth. The Role the Nomination Advisory Committee and the Remuneration Advisory Committee Should Play Katsu: As can be seen in the revision of Japan’s as the direction to develop them. The Nomination Corporate Governance Code, we are being constantly Advisory Committee should become more involved Fujii: In my evaluations of MOL’s governance, the discussions were consistently held with a global view far reminded how the role of committees has become more when the Company considers the qualities, the size of extremely open and natural discussions that are beyond Japan-based perspectives and ways of thinking. and more significant in terms of meeting social demands. the pool, and the evaluation standards for candidates. held at Board meetings have always impressed me. Fujii: Given MOL’s history of having developed as a When it comes to director nomination, the face-to-face Furthermore, for the Remuneration Advisory Since the start of my position, I recognized that such major player in the ocean shipping industry, it may be information, which we can obtain as outside directors, is Committee, there is a need to incorporate non-financial discussions have been an unchanging part of MOL’s easy to become optimistic and assume that MOL can somewhat limited compared with inside directors, and indicators in evaluations, in addition to short-, corporate culture. They enable the Company to provide naturally continue to enjoy such position going forward. it is therefore important to have a large number of medium-, and long-term contribution to profit. Also, a foundation for and play an important role in enhancing However, based on the dramatically changing global opportunities to receive information that helps us gain the committee should deepen its discussions on the the effectiveness of the Company’s governance. economy, MOL is anticipating the future and taking an understanding of future management candidates. ideal evaluation standards and remuneration levels Katsu: I also give the Company high praise for having steps by actively promoting a forward-thinking In the case of MOL, we have been given opportunities regarding efforts toward projects with future potential a corporate culture that facilitates the open exchange approach and carefully selecting businesses to be to meet with the candidates rather frequently at training and other qualitative aspects. of opinions. From the beginning of my assignment, preferentially invested within its portfolio. programs and presentations given at Board meetings. The roles of both of these committees have I have had the impression that MOL was a global Katsu: “Rolling Plan,” which entails reviewing the These are extremely valuable opportunities for us. become more significant than ever from the points of company given the nature of its business. Through Company’s medium-term management plan each Fujii: At a recent meeting of the Nomination Advisory eliminating arbitrariness, ensuring transparency and the actual discussions, I was truly moved by how year, is an extremely good idea. Taking into account Committee, we discussed how we should select the fairness, and establishing an effective framework to open-minded the Company’s approach was and how the current external environment, including candidates for future management positions as well increase sustainable corporate value. 42 43 For Our Sustainable GrowthMITSUI O.S.K. LINES MOL REPORT 2019MITSUI O.S.K. LINES MOL REPORT 2019 Dialogue between the Outside Directors Evolution of Governance to Accelerate Growth through Reinvention Reinforcement of Risk Management during This Period of Change Fujii: In the process of strategically allocating Katsu: When it comes to risk management, in addition resources toward becoming a “Group of Business to the “Total Risk Control”* approach, which considers Units with No. 1 Competitiveness in Respective Areas,” things from a set point in time, it is also important to the business fields that are highly specialized and enable adapt and appropriately respond to the situation at differentiation should be prioritized. However, the the time. For example, for the currently popular topic specific projects that the Company should pursue in of clean energy transport, it goes without saying that the future will likely be more complex both qualitatively its initial evaluation varies as time passes due to and quantitatively due to the further diversification of changes in the external environment and the compe- countries in which these projects take place and the tition conditions. While the “Rolling Plan” already increasing scale of investment. For overseas projects, requires such mechanism, the Company must carefully an even wider range of risk factors is to be considered. monitor the changes occurring with each project and Also, the larger the scale of investment becomes, make swift decisions. the more sophisticated risk management is required from various aspects, including deciding what scheme to go with, diversifying risk through joint investment, and establishing project finance frameworks. At the same time, it is essential that the Company thoroughly * “Total Risk Control” is a unique risk management method in the industry developed by the Company based on management methods commonly used in financial institutions. The method controls the total amount of risk in the whole fleet at a level that is less than the Company’s shareholders’ equity even in the event that the market continues to be at historically low levels for an extended period of time. monitor the ongoing projects. As the conditions Fujii: Reflecting on MOL’s risk management to date, surrounding a project can change rapidly, the Company the relative comparisons between its shareholders’ needs to be always well aware of how its evaluation equity and overall risk amount were done properly varies from when the investment is decided and and periodically. Meanwhile, the Company sometimes swiftly adjust the plan depending on the situation. was unable to utilize its risk control method in Accordingly, it is of the utmost importance that the decision-making for investment. However, each Board of Directors enact a two-pronged approach division has better recognized its importance through relying on beforehand risk management enhancement repeated discussions on specific projects, including and continuous monitoring. the recent integration of the containership business. While aiming to enhance corporate value over the medium to long term, it is also extremely important for a company to increase its presence as an entity that contributes to the sustainability of society and the resolution of social issues. As projects become more complex both qualitatively and quantitatively, it is of the utmost importance that the Board of Directors ensures beforehand risk management enhancement and continuous monitoring. Accordingly, the “Total Risk Control” approach is being Directors can steer the Company as a whole. As outside applied even more thoroughly. directors, we will therefore confirm whether the Katsu: It is important that each division understands Company is consistently making decisions incorporating risk management perspectives and controls risks global trends and is heading toward the appropriate independently. At the same time, the most crucial direction from a macro perspective. aspect in risk management is how the Board of ESG Initiatives to Ensure Sustainability Katsu: While strengthening cash flows is obviously contribute more extensively to social activities such necessary in the aim to enhance corporate value over as education. the medium to long term, it is also extremely important Katsu: I have also experienced this kind of DNA within for a company to increase its presence as an entity the mindset of personnel involved in ocean shipping. that contributes to the sustainability of society and the In terms of “Rolling Plan,” environmental perspectives resolution of social issues such as those adopted are being incorporated deeply within the strategies under the SDGs. MOL includes environmental and from the standpoint of both business opportunities governance-related goals within its “Rolling Plan,” and risk, such as the Company’s participation in clean as management that integrates ESG elements is energy fields and its response to SOx regulations. In becoming key. addition, as diversity is becoming increasingly Fujii: Recently, companies are required to respond to important, the Company newly appointed a female multifaceted issues such as social and environmental Audit & Supervisory Board member and an executive issues from an ESG standpoint. This trend can also officer in fiscal 2019. I hope to see MOL hold discussions be a new business opportunity. MOL has traditionally from more diversified viewpoints going forward. shared a DNA of contributing widely to society, for Although MOL tends to be seen as a male-dominated which it should be proud. While deepening the company, there is actually a considerable number of knowledge and faculty cultivated by the many social women working in managerial positions as well as contributions the Company has made through its non-Japanese staff. Therefore, I can expect more businesses, I would like to see MOL move forward from the future human resources strategy that takes with projects to reduce environmental burden and diversity into account. 44 45 For Our Sustainable GrowthMITSUI O.S.K. LINES MOL REPORT 2019MITSUI O.S.K. LINES MOL REPORT 2019Board of Directors, Audit & Supervisory Board Members, and Executive Officers (As of June 25, 2019) Junichiro Ikeda Representative Director Born 1956 Shizuo Takahashi Representative Director Born 1959 Takeshi Hashimoto Representative Director Born 1957 Apr. 1979 Jun. 2004 Jun. 2007 Jun. 2008 Jun. 2010 Jun. 2013 Jun. 2015 Joined Mitsui O.S.K Lines, Ltd. General Manager of Human Resources Division General Manager of Liner Division Executive Officer Managing Executive Officer Director, Senior Managing Executive Officer Representative Director, President, Chief Executive Officer (to present) Apr. 1981 Jun. 2006 Jun. 2008 Jun. 2010 Jun. 2011 Jun. 2014 Jun. 2015 Apr. 2018 Joined Mitsui O.S.K. Lines, Ltd. General Manager of Corporate Planning Division Executive Officer, General Manager of Corporate Planning Division Executive Officer Managing Executive Officer Director, Managing Executive Officer Director, Senior Managing Executive Officer Representative Director, Executive Vice President, Executive Officer (to present) Apr. 1982 Jun. 2008 Jun. 2009 Jun. 2011 Jun. 2012 Jun. 2015 Apr. 2016 Apr. 2019 Joined Mitsui O.S.K. Lines, Ltd. General Manager of LNG Carrier Division Executive Officer, General Manager of LNG Carrier Division Executive Officer Managing Executive Officer Director, Managing Executive Officer Director, Senior Managing Executive Officer Representative Director, Executive Vice President, Executive Officer (to present) Akihiko Ono Director Born 1959 Takashi Maruyama Director Born 1959 Hideto Fujii Outside Director (Independent Officer) Apr. 1983 Jun. 2010 Jun. 2011 Jun. 2015 Apr. 2017 Jun. 2018 Joined Mitsui O.S.K. Lines, Ltd. General Manager of Corporate Planning Division Executive Officer, General Manager of Corporate Planning Division Managing Executive Officer Senior Managing Executive Officer Director, Senior Managing Executive Officer (to present) Apr. 1983 Jun. 2010 Jun. 2011 Jun. 2015 Jun. 2017 Apr. 2018 Joined Mitsui O.S.K. Lines, Ltd. General Manager of Finance Division Executive Officer, General Manager of Finance Division Managing Executive Officer Director, Managing Executive Officer Director, Senior Managing Executive Officer (to present) Jun. 2015 Jun. 2016 Adviser, Sumitomo Corporation (to present) Outside Director, Mitsui O.S.K. Lines, Ltd. (to present) Etsuko Katsu Outside Director (Independent Officer) Masaru Onishi Outside Director (Independent Officer) Kenji Jitsu Audit & Supervisory Board Member Born 1960 Apr. 2003 Mar. 2015 Jun. 2016 Nov. 2016 Apr. 2018 Mar. 2019 Professor, School of Political Science and Economics, Meiji University (to present) Director, Center for Entrance Examination Standardization (to present) Outside Director, Mitsui O.S.K. Lines, Ltd. (to present) Administrative Board Member, International Association of Universities (to present) Chairman of Fund Management Advisory Committee, The Japan Foundation (to present) Outside Director (Audit & Supervisory Committee Member), DENTSU INC. (to present) Apr. 2013 Jun. 2015 Jul. 2018 Jul. 2018 Oct. 2018 Jun. 2019 Jun. 2019 Trustee, KEIZAI DOYUKAI (Japan Association of Corporate Executives) (to present) Trustee, International University of Japan (to present) Senior Representative, External Affairs, Japan Airlines Co., Ltd. (to present) Visiting Professor, Toyo University (to present) Advisor, Mitsubishi Heavy Industries, Ltd. (to present) Outside Director, Teijin Limited (to present) Outside Director, Mitsui O.S.K. Lines, Ltd. Apr. 1984 Jun. 2009 Jun. 2013 Jun. 2015 Jun. 2017 Joined Mitsui O.S.K. Lines, Ltd. General Manager of CSR and Environment Office, Corporate Planning Division General Manager of Investor Relations Office General Manager of Accounting Division Audit & Supervisory Board Member, Mitsui O.S.K. Lines, Ltd. (to present) Toshiaki Takeda Audit & Supervisory Board Member Born 1964 Hideki Yamashita (Independent Officer) Outside Audit & Supervisory Board Member Junko Imura Outside Audit & Supervisory Board Member (Independent Officer) Apr. 1986 Jun. 2015 Apr. 2018 Jun. 2019 Joined Mitsui O.S.K. Lines, Ltd. General Manager of General Affairs Division General Manager of Secretaries & General Affairs Division Audit & Supervisory Board Member, Mitsui O.S.K. Lines, Ltd. (to present) Apr. 1982 Apr. 1985 Mar. 2012 Jun. 2014 Registered as an attorney at law Established YAMASHITA HIDEKI LAW OFFICE (now YAMASHITA & TOYAMA LAW OFFICE) (to present) Outside Corporate Auditor, I-cell Networks Corp. (to present) Outside Audit & Supervisory Board Member, Mitsui O.S.K. Lines, Ltd. (to present) Aug. 1994 Sep. 2015 Jul. 2018 Jun. 2019 Registered as a certified public accountant Visiting Professor, Tama Graduate School of Business (to present) Established Imura Accounting Office (to present) Outside Audit & Supervisory Board Member, Mitsui O.S.K. Lines, Ltd. (to present) 46 47 For Our Sustainable GrowthMITSUI O.S.K. LINES MOL REPORT 2019MITSUI O.S.K. LINES MOL REPORT 2019Board of Directors, Audit & Supervisory Board Members, and Executive Officers Executive Officers Junichiro Ikeda President, Chief Executive Officer Masanori Kato Managing Executive Officer Tsuneo Watanabe Executive Officer Shizuo Takahashi Executive Vice President, Executive Officer (Assistant to President, Chief Compliance Officer, Chief Information Officer, Deputy Director General of Technology Innovation Unit, Responsible for: The Americas Area, Kansai Area, Corporate Audit Division, Secretaries & General Affairs Division, Corporate Marketing Division, MOL Information Systems, Ltd.) Takeshi Hashimoto Executive Vice President, Executive Officer (Assistant to President, Director General of Energy Transport Business Unit, In charge of Human Resources Division, Responsible for: Europe and Africa Area, Energy Business Strategy Division, Bunker Business Division) Akihiko Ono Senior Managing Executive Officer (Deputy Director General of Safety Operations Headquarters, Deputy Director General of Product Transport Business Unit, Responsible for: Corporate Planning Division, Liner Business Management Division) Takashi Maruyama Senior Managing Executive Officer (Chief Financial Officer, Responsible for: Corporate Communication Division (IR), Finance Division, Accounting Division) Yoshikazu Kawagoe Senior Managing Executive Officer (Chief Technical Officer, Director General of Technology Innovation Unit, Responsible for: Technical Division, Smart Shipping Division, Secondarily Responsible for MOL Information Systems, Ltd.) Koichi Yashima Senior Managing Executive Officer (Responsible for: Asia, the Middle East, Oceania Area, Managing Director of MOL (Asia Oceania) Pte. Ltd.) (Chief Safety Officer, Director General of Safety Operations Headquarters, Responsible for: Human Resources Division, Marine Safety Division, Secondarily Responsible for Smart Shipping Division) Kenta Matsuzaka Managing Executive Officer (Deputy Director General of Energy Transport Business Unit, Responsible for: LNG Carrier Division, LNG Marine Technical & Ship Management Strategy Division) Masato Koike Managing Executive Officer (Deputy Director General of Energy Transport Business Unit, Responsible for: Tanker Division (A), Tanker Division (B), Secondarily Responsible for Bunker Business Division) Yutaka Hinooka Managing Executive Officer (Deputy Director General of Energy Transport Business Unit, Responsible for: Tanker Division (B) (Chemical Tanker Business), Managing Director of MOL Chemical Tankers Pte. Ltd.) Atsushi Igaki Executive Officer (Deputy Director General of Product Transport Business Unit, Responsible for Ferry Business Division, Chairman of Ferry Sunflower Limited) Hiroyuki Nakano Executive Officer (Deputy Director General of Energy Transport Business Unit, Responsible for Offshore Project Division) Hirotoshi Ushioku Executive Officer (Deputy Director General of Product Transport Business Unit, Responsible for Car Carrier Division) (Director General of Product Transport Business Unit, Responsible for Port Projects & Logistics Business Division) Michael P.Y. Goh Executive Officer Kayo Ichikawa Executive Officer (Chief Communication Officer, Responsible for: Work Efficiency Improvement, Sustainability Promotion, Corporate Communication Division, Secondarily Responsible for: Corporate Planning Division, Human Resources Division) Toshinobu Shinoda Executive Officer (General Manager of Corporate Planning Division) Hirofumi Kuwata Executive Officer (Deputy Director General of Dry Bulk Business Unit, Deputy Director General of Energy Transport Business Unit, Responsible for: Steaming Coal & Energy Project Division, New & Clean Energy Business Division) (Deputy Director General of Product Transport Business Unit, Responsible for Port Projects & Logistics Business Division (NVOCC Business), Secondarily Responsible for Asia, the Middle East, Oceania Area, Chief Executive Officer of MOL Consolidation Service Ltd.) Kazuhiko Kikuchi Executive Officer (Deputy Director General of Dry Bulk Business Unit, Responsible for Wood Chip Carrier Division, General Manager of Bulk Carrier Division) Junko Moro Executive Officer (Responsible for: Diversity Promotion, Human Resources Division) Mitsuru Endo Executive Officer (Deputy Director General of Safety Operations Headquarters, Responsible for: Marine Technical Management Division, LNG Marine Technical & Ship Management Strategy Division, Secondarily Responsible for: Marine Safety Division, Smart Shipping Division) Toshiaki Tanaka Managing Executive Officer Nobuo Shiotsu Executive Officer (Director General of Dry Bulk Business Unit, Responsible for: Dry Bulk Business Planning & Co-ordination Division, Bulk Carrier Division) (Deputy Director General of Dry Bulk Business Unit, Responsible for Iron Ore and Coal Carrier Division) Corporate Governance Governance Summary Governance System Company with an Audit & Supervisory Board Total Directors 8 Including outside directors (ratio) 3 (37.5%) Total Audit & Supervisory Board Members 4 Including outside Audit & Supervisory Board members (ratio) 2 (50%) Independent Officers (Directors and Audit & Supervisory Board Members) 5 Number of Board Meetings Held in Fiscal 2018 Attendance Rate of Outside Directors for Board Meetings in Fiscal 2018 10 100% Term of Directors Stock Option System 1 year Yes Retirement Benefit System Anti-Takeover Measures Compliance Rules No No Yes External Compliance Advisory Service Desk Yes 2000 Management organization reform: HISTORY 1. Introduced system of executive officers 2. Established the Executive Committee 3. Reformed the Board of Directors (positioned as highest- ranking decision-making body and supervisor of business activities), reduced membership from 28 to 12 4. Appointed two outside directors 5. Established the Corporate Visionary Meeting Established the IR Office Started scheduling Annual General Shareholders’ Meeting to avoid overlapping with other shareholders’ meetings 2001 2011 2014 2015 2017 Formulated Compliance Policy, established the Compliance Committee Revised MOL’s Compliance Policy and Rules of Conduct Revised the Compliance Policy, established Chief Compliance Officer (CCO) Established the Nomination Advisory Committee and Remuneration Advisory Committee (chaired by outside directors) Established independence determination standards for outside directors and Audit & Supervisory Board members Corporate Governance for Sustainable Growth and Enhancement of Corporate Value MOL greatly shored up its management structure around 2000. utilize management resources in a careful balance of offense Taking a lead position among Japanese companies at that time, and defense. We believe that the essentials of corporate MOL established an advanced and highly transparent corporate governance are fostering sustainable growth and increasing governance structure by, for example, inviting outside directors corporate value by making decisions swiftly and boldly, guided and introducing an executive officer system. The business by appropriate risk management, while ensuring the transparency environment surrounding the marine transport business and and fairness of management and carefully considering its risk factors change rapidly. In order to navigate through such the viewpoints of our diverse stakeholders. Based on this a difficult situation, we must accurately grasp our business belief, we will make continuous efforts to promote our level environment, always confront risks appropriately, and effectively of corporate governance. 48 49 For Our Sustainable GrowthMITSUI O.S.K. LINES MOL REPORT 2019MITSUI O.S.K. LINES MOL REPORT 2019 Corporate Governance Corporate Governance System MOL has established a corporate governance system that we have expanded the scope of authority transferred to the maximizes shareholder profits through appropriate allocation Executive Committee, and narrowed down and reviewed which of management resources, with high transparency of corporate issues to be taken up by the Board so that more of its meeting management from a shareholder's perspective. The Board of time can be used to discuss the MOL Group’s long-term vision Directors, with the participation of independent outside directors, and strategy direction and supervise management. supervises and encourages business operations, which are At MOL, we believe that the true strength of corporate carried out by the president as chief executive officer. In addition, governance is drawn out not by its structure or organization, as a company with an Audit & Supervisory Board, business and but by whether or not it functions effectively. The framework accounting audits are conducted by four Audit & Supervisory described in the preceding paragraphs is operated in the Board members, including two outside members. manner outlined in the following sections. To enhance the functionality of the Board of Directors, The Board of Directors comprises five internal directors and discusses and decides on basic policies and the most important three outside directors who have no stake in the Company. As matters related to MOL Group management. the Company’s highest-ranking decision-making body, it Board of Directors Deliberation on Corporate Strategy and Vision At every Board meeting, one hour out of the three is committed to “Deliberation on Corporate Strategy and Vision,” where opinions are exchanged freely in regard to our management strategies, long-term vision, and overall management in general, including outside directors and outside Audit & Supervisory Board members. Agenda for Fiscal 2018 Month Agenda May July Direction and strategy for technological innovation Strategy for international logistics business September Strategy for offshore businesses October Direction of next management plan December Corporate marketing strategy January Strategies of Non-Vessel Operating Common Carrier (NVOCC) business expansion February Overall summary of “Rolling Plan 2019” Corporate Governance Organization (as of June 25, 2019) General Shareholders’ Meeting Elect and appoint / dismiss Business audit / accounting audit Board of Directors (Total: 8) Elect and appoint / dismiss Audit & Supervisory Board (Total: 4) Outside members: 2 Internal members: 2 Elect and appoint / dismiss Chairman Male Female Outside directors: 3 Internal directors: 5 Accounting audit Audit & Supervisory Board Manager Accounting Auditors Elect and appoint / supervise Elect and appoint / supervise Submit basic manage- ment policies and other issues for discussion Report Nomination Advisory Committee (Total: 4) Outside directors: 3 Internal directors: 1 Executive Committee (Total: 9) Report Remuneration Advisory Committee (Total: 4) Outside directors: 3 Internal directors: 1 Internal directors and executive officers: 9 Provide direction on important business issues Submit to Executive Committee after preliminary deliberations Submit for discussion and / or report on important business and other issues Committees under the Executive Committee STEER Committee, Investment and Finance Committee, Operational Safety Committee, Compliance Committee, SOx Emissions Regulation in 2020, and Environmental Management Committee Executive Officers (Total: 24) Submit for discussion and / or report on important business and other issues Instruction Audit plan / audit report Collaborate with Audit & Supervisory Board members and Accounting Auditor Directors / Executive officers: 5 Executive officers: 19 Divisions / Branches / Vessels / Group companies Business audit / accounting audit Corporate Audit Division For Effective Corporate Governance Assessment of Board Effectiveness MOL regards enhancing corporate governance as an important year. The results of this this assessment is used to improve management issue to ensure sustainable growth. Accordingly, Board effectiveness further. Nomination Advisory Committee and Remuneration Advisory Committee effectiveness of the Board of Directors is assessed each fiscal MOL created the Nomination Advisory Committee and the standpoint emphasizing the perspective of shareholders. The Remuneration Advisory Committee as discretionary organizations Nomination Advisory Committee focuses on the selection and under the Board of Directors. In order for outside directors to dismissal of directors and executive officers. The Remuneration supervise directors responsible for business execution more Advisory Committee focuses on the remuneration of officers, effectively, both committees are chaired by an outside director and including incentives for contributing to long-term enhancement of comprised of three outside directors and the Company president corporate value. The Board of Directors respects the advice from (as of June 25, 2019). Each committee discusses from an objective both committees and makes necessary resolutions. Meetings in Fiscal 2018 Nomination Advisory Committee Number of meetings: 4 Chair of committee: Masayuki Matsushima Members: Koichi Muto, Junichiro Ikeda, Masayuki Matsushima, Remuneration Advisory Committee Number of meetings: 4 Chair of committee: Hideto Fujii Members: Koichi Muto, Junichiro Ikeda, Masayuki Matsushima, Hideto Fujii, Etsuko Katsu Hideto Fujii, Etsuko Katsu Main Agenda • Selection process for the president • Involvement of Nomination Advisory Committee in election and dismissal of Audit & Supervisory Board members • Election of officers (including outside officers) for fiscal 2019 Main Agenda • Bonus for directors for fiscal 2017 • Remuneration for directors in fiscal 2018 • Formula for remuneration for executive officers Measures Taken to Improve the Board of Directors in Fiscal 2018 The Company implemented various measures in light of issues raised from the effectiveness assessment of the preceding fiscal year. MOL shifted more authority to the Executive Committee, enhanced prior explanation of issues to be brought up to the Board of Directors, held “Board Member Discussion Sessions” to facilitate early-stage discussion and share information of important matters, and simplified its materials for use in meetings. Summary of Assessment in Fiscal 2019 Elicit feedback from Board of Directors and Audit & Supervisory Board members via self-evaluation questionnaire Summarize results of questionnaire Report results and hold discussions at the Board of Directors' meeting Main Items Rated in the Self-Evaluation Questionnaire • Composition of the Board of Directors • Quality of discussion and appropriate- ness of risk management • Effectiveness of discussions pertaining to management plan • Management of “Deliberation on Corporate Strategy and Vision” Assessment Results in Fiscal 2019 After an assessment, it was concluded that the Board of Directors' meeting operated with a sufficient level of effectiveness under an appropriate composition. Especially, the simplification of materials implemented in fiscal 2018 improved discussions at meetings, and that “Board Member Discussion Sessions” served as an opportunity for fruitful exchanges of information and opinions. There were some constructive opinions on agenda, time allocation, and ideal explanations for further improvement, which are recognized as issues to work on. Executive Committee and Committees Training for Directors and Audit & Supervisory Board Members Within the scope of the basic policy approved by the Board of There are six committees under the Executive Committee to Directors, MOL transfers a significant amount of authority to study and deliberate especially important matters, which will be conduct businesses to the Executive Committee. This helps to brought to the Executive Committee, and matters straddling speed up decision-making on individual matters by the president divisions (see the chart on page 51). and the executive officers. MOL provides opportunities for directors and Audit & supervisory function is in place. For example, they are given an Supervisory Board members to acquire the knowledge and orientation upon their appointment to understand the nature of expertise necessary to fulfill the duties of each role. Expenses the Company’s businesses. Moreover, in order to improve related to this training are covered by the Company. deliberations at Board meetings, discussion topics are shared and Furthermore, support system for outside directors and Audit explained beforehand on paper or face to face and timely reporting & Supervisory Board members to increase the effectiveness of its is made whenever an important business execution takes place. 50 51 For Our Sustainable GrowthMITSUI O.S.K. LINES MOL REPORT 2019MITSUI O.S.K. LINES MOL REPORT 2019 Corporate Governance Appointment and Dismissal Process of Directors and Audit & Supervisory Board Members Compensation for Directors, Audit & Supervisory Board Members, and Independent Public Accountants MOL appoints a variety of directors with different backgrounds submitted to the Board of Directors after gaining the approval of the in terms of areas of expertise and experience, whether they be Audit & Supervisory Board. officers with a deep knowledge of Company business or outside directors and Audit & Supervisory Board members who bring an Selection Criteria for the Board of Directors independent and objective viewpoint. The Company has set up the Nomination Advisory Committee in order to add objectivity and transparency to the selection process and improve accountability in the selection of directors and Audit & Supervisory Board members. The committee selects the candidates a) Candidates must possess extensive experience and knowledge and be capable of enhancing the Company’s corporate value b) Candidates must have a broad viewpoint, foresight, and be able to make management decisions from a global perspective c) Candidates must possess high moral fiber and good sense based on its set of selection criteria and give advices to the Board of Selection Criteria for Audit & Supervisory Board Members Directors. The Board then nominates the candidate directors and a) Candidates must have an appropriate set of experience, qualifi- Audit & Supervisory Board members, taking into account advice from the Nomination Advisory Committee. Candidates for Audit & Supervisory Board members are cation, ability, and expertise b) Candidates must possess a high degree of financial and accounting knowledge (more than one member) Role of Outside Directors and Outside Audit & Supervisory Board Members To incorporate an outside perspective in Company management and to add a layer of supervision to business execution, the Major Activities of the Outside Directors in Fiscal 2018 Company appoints three outside directors. Outside directors confirm the appropriateness of management decisions and check the status of business operations from a shareholder’s perspective based on their individual experience and knowledge, while playing a major role in revitalizing the Board of Directors by expressing beneficial opinions regarding overall management. In addition, two of the four corporate Audit & Supervisory Board members are selected from outside. As the importance of the audit system in a company has increased, the Company ensures the independence of a corporate Audit & Supervisory Board member from management and execution. A total of five, including three outside directors and two outside Audit & Supervisory Board members, have been designated as independent officers. Please refer to Independence Criteria for Outside Officers on page 18 of the NOTICE OF CONVOCATION OF THE ORDINARY GENERAL MEETING OF SHAREHOLDERS. https://www.mol.co.jp/en/ir/stock/gms/pdf/notice19.pdf Reasons for Appointment of Outside Directors • Lectures and discussions in director training sessions (Tokyo) • Attendance at the inauguration ceremony and observation of MOL Magsaysay Maritime Academy (MMMA) (Philippines) • Discussion meetings with MOL Group companies (Singapore) Outside directors Mr. Matsushima (Top row, left) and Ms. Katsu (Bottom row, left) at inauguration ceremony for MMMA (Philippines) Name Hideto Fujii (Reappointed) Etsuko Katsu (Reappointed) Mr. Fujii has many years of experience and expertise from his involvement in Japan’s economic management and policy finance. Using such experience and insight, he proactively contributes to discussions at meetings of the Board of Directors from a position of independence and fairness, and appropriately fulfills his role as a supervisor of the Company’s execution of operations. He has also contributed to enhancing the transparency and objectivity of decision-making procedures in the Nomination Advisory Committee and the Remuneration Advisory Committee. Ms. Katsu proactively contributes to discussions at meetings of the Board of Directors from a fair and independent standpoint, reflecting her extensive knowledge and insight as an expert in international economics and finance, experience in university management, and experience and knowledge regarding global human resource development initiatives. As such, she appropriately fulfills her roles such as supervising the Company’s business execution. She has also contributed to enhancing the transparency and objectivity of decision-making procedures in the Nomination Advisory Committee and the Remuneration Advisory Committee. Masaru Onishi (Newly appointed) We believe that Mr. Onishi will contribute to increasing the Company’s corporate value while maintaining and strengthening its corporate governance, drawing on his considerable experience and achievements as a corporate manager and his extensive experience in the operation of boards of directors at other companies as a chairman. Hideki Yamashita (Current) Mr. Yamashita has many years of experience, specialized knowledge, and a strong dedication to compliance as an attorney at law, and he effectively fulfills his duties as an Audit & Supervisory Board member responsible for auditing management and execution of business operations from a fair and objective standpoint. Junko Imura (Newly appointed) Ms. Imura has many years of experience as a certified public accountant and extensive knowledge related to accounting. We therefore deem that she will be able to competently carry out her duties as an outside Audit & Supervisory Board member who performs audits of management and business execution from a position of objectivity and fairness. MOL adopts a performance-based compensation system for directors as motivation to increase corporate value in the medium to long term, and as an appropriate means to secure talent. Furthermore, the Remuneration Advisory Committee deliberates over compensation and treatment system such as calculation methods and individual remuneration for members of the Board of Directors, including outside directors. Compensation for the Audit & Supervisory Board members is determined within the limits approved at the General Shareholders’ Meeting, with consideration given to whether it is full- or part-time employment, the amount of auditing work assigned, and the levels of director compensation, after discus- sion with the Audit & Supervisory Board. Bonuses and stock options are not provided to Audit & Supervisory Board members. The amounts of compensation for directors, Audit & Supervisory Board members, and independent public accountants are as follows. Director Compensation System [Monthly Remuneration] Each director receives monthly compen- sation based on their position and level. [Bonuses] Bonuses are determined based on performance and provided in June every year. It is a set amount calculated according to the Company’s performance, adjusted based on director position, added to an individual bonus calculated based on performance of the division for which the director is responsible. (Performance-based compensation is determined by the degree to which the Company meets performance goals, dividend payout ratio target, and qualitative goals in its management plan. The qualitative goals are evaluated based on the specific progress made in the following three areas: 1) The Company’s investment and business strategies, 2) Enhancing awareness of long-term goals and improving competitiveness in pricing, and 3) Highlighting theme of priority areas which supports meeting long-term goals. [Stock Options] Stock options are granted every August to directors, based on each director’s position. Compensation for Directors and Audit & Supervisory Board Members Compensation for the Accounting Audit & Supervisory Board Members No. of people remunerated Total remuneration (Millions of yen) Directors (excluding outside directors) Audit & Supervisory Board members (excluding outside members) Outside directors and outside members Total 7 2 5 14 381 65 61 507 Compensation for audit operations (Millions of yen) Compensation for non-audit operations (Millions of yen) Total (Millions of yen) Parent company Consolidated subsidiaries Total 88 109 197 1 2 4 89 111 201 Internal Control System MOL has put in place a basic policy on the establishment of internal compliance. In fiscal 2018, 5,874 employees took lectures on control systems* and extends beyond the scope required by law to antitrust or competition law, while 5,503 employees took lectures promote activities to further enhance MOL Group management on anti-corruption (anti-bribery). In addition, employees are effectiveness, efficiency, and transparency, namely ensuring the required to attend in-person lectures on antitrust law upon appropriateness of business operations and the trustworthiness of reaching new management levels, and the Company provides financial reporting. The following are extracts from the policy on annual antitrust seminars for officers and employees. two topics: 1) Compliance, and 2) Role of the Audit & Supervisory Board members. 2. Role of the Audit & Supervisory Board Members * The policy was approved by the Board of Directors in 2006, with final revisions made MOL has determined rules regarding reporting to its Audit & headed by the Chief Compliance Officer, and formulated the appropriate frameworks for reporting legal violations and other Compliance Policy. General managers of each division are compliance issues to Audit & Supervisory Board members. appointed as Compliance Officers. They are responsible for Furthermore, the representative directors strive to hold regular enforcing compliance regulations within their division, and are also meetings with Audit & Supervisory Board members, and the required to report to the Compliance Committee in the event of Corporate Audit Division works in coordination with the Audit & a compliance breach. The Corporate Audit Division, a body that Supervisory Board members to provide assistance. In these ways, operates independently of the Company’s divisions, provides a the Company actively facilitates effective auditing by the Audit & counseling service regarding compliance. The division also Supervisory Board members. undertakes investigations of breaches and reports the results to the Compliance Committee. In addition to the existing counseling service, the Company set up an external advisory service desk, which we entrusted an outside attorney to run. The desk offers anonymous counseling services. Furthermore, Group companies in Japan and overseas have implemented e-learning in order to further promote thorough E-learning Participation Rates for Fiscal 2018 Antitrust act or competition law Anti-corruption (Anti-bribery) Internal control ICT governance 98.0% 98.1% 85.3% 91.1% Note: E-learning sessions about antitrust act or competition law, anti-corruption (anti-bribery), and ICT governance were conducted by MOL Group companies in Japan and overseas. Sessions on internal control ware held only in Japan. Reason for Appointment The Company has set up a Compliance Committee, which is in 2018. 1. Compliance Supervisory Board members, creating a system in which directors, executive officers, and employees report to the Audit & Supervisory Board members on the important matters that may impact the Company’s business or performance. These rules also safeguard 52 53 For Our Sustainable GrowthMITSUI O.S.K. LINES MOL REPORT 2019MITSUI O.S.K. LINES MOL REPORT 2019 At a Glance FY2018 Performance (Consolidated) Business Activities Revenues by Segment ¥1,234.0 billion Associated Businesses and Others 9% Associated Businesses 8% Product Transport Business 44% Car Carriers 18% Containerships 22% Ferries & Coastal RoRo Ships 4% Ordinary Profit (Loss) by Segment (¥ billion) Dry Bulk Business 21.9 Energy Transport Business 21.1 Product Transport Business (12.2) Containership Segment (14.3) Associated Businesses Others Adjustments Total 12.9 2.5 (7.7) 38.5 Dry Bulk Business 24% Dry Bulkers 24% Energy Transport Business 23% Tankers 12% LNG Carriers / Offshore Businesses 7% Steaming Coal Carriers 4% Fleet Composition (Number of ships) Fleet Composition (Deadweight tons) Others 6% Containerships 8% Car Carriers 13% LNG Carriers /Offshore Businesses 12% 839 Dry Bulkers (including Steaming Coal Carriers) 39% Tankers 22% Containerships 9% Car Carriers 3% LNG Carriers / Offshore Businesses 12% Tankers 26% Dry Bulkers (including Steaming Coal Carriers) 50% 63 million Total Assets ¥2,134.4 billion Equity Ratio 24.6 % ROE 5.2 % Gearing Ratio 2.11 times Dry Bulk Business Energy Transport Business Product Transport Business Dry Bulkers (excluding Steaming Coal Carriers) With one of the world’s largest fleets, MOL reliably transports large quantities of such dry bulk cargo as iron ore, coal, grains, logs, wood chips, cement, fertilizer, and salt. Our fleet includes highly versatile bulk carriers as well as specialized vessels for specific cargo types. Tankers With a tanker fleet that boasts one of the largest sizes in the world, MOL is developing businesses globally. Our fleet includes crude oil tankers; product tankers that carry naphtha, gasoline, and other refined petroleum products; chemical tankers that carry liquid chemical products; methanol tankers that exclusively carry methanol; and LPG tankers that carry liquefied petroleum gas. LNG Carriers / Offshore Businesses With the world’s largest LNG carrier fleet, MOL safely transports LNG, which is experiencing growing global demand. In addition, we are active in offshore businesses, including FPSOs and FSRUs, which are poised for continued growth. Moving forward, MOL will vertically expand its scope of services to include the operation of LNG to Powerships and LNG receiving terminals, among others. Steaming Coal Carriers MOL transports coal for thermal power generation, mainly on medium- to long-term transport contracts with electric power companies in Japan. Considering the expected growth, we also engage aggressively in coal transport for emerging countries. As a member of the Energy Transport Business Unit, the Steaming Coal & Energy Project Division coordinates with other divisions in the Unit to meet diversifying customer needs. Car Carriers MOL stably provides transport services to meet the changing needs of automakers moving production to optimal sites around the world. We operate globally with specialized car carriers that can effectively transport any type of vehicle from passenger cars to construction equipment. Containerships Through a global network provided by Ocean Network Express (ONE), a company formed by the integration of the containership businesses at three Japanese shipping companies, we transport containers loaded with electric products, automotive parts, clothes, furniture, food products, and numerous other products to deliver them around the world. In addition to our self- operated routes, we expand our network through joint operations with partners, leading to wider port coverage and increased service frequency. Also, we operate container terminals and logistics businesses in Japan and overseas. Ferries & Coastal RoRo Ships MOL operates the ferry business, which transports passengers, passenger cars and freight cars (trucks, trailers, etc.), and the coastal RoRo ships business, specializing in the transport of freight vehicles. We are increasing our presence as the leader of an eco-friendly modal shift in domestic logistics. Associated Businesses Leveraging the know-how accumulated over more than 130 years mainly in the marine transport business, we are promoting various businesses in related activities including real estate, tugboats, a cruise ship (the NIPPON MARU), and trading. 54 55 Business Strategy & ReviewMITSUI O.S.K. LINES MOL REPORT 2019MITSUI O.S.K. LINES MOL REPORT 2019 Market Position (Fleet Size) (March 2019) All Vessel Types 0 200 400 600 800 (Number of vessels) 1,400 1,200 1,000 Dry Bulkers (including Steaming Coal Carriers) (Thousand DWT) China COSCO NYK MOL Oldendorff APM-Maersk K Line MSC China Merchants CMA-CGM Fredriksen Hapag Lloyd Euronav 0 20 Number of Vessels 40 DWT 839 6363 60 80 100 120 140 80,000 60,000 40,000 20,000 0 31,387 Oldendorff China COSCO NYK MOL K Line Swiss Marine (Million DWT) Source: Companies’ published data and Clarksons Source: MOL internal estimation based on each company’s published data, Clarksons and Alphaliner (Thousand DWT) Tankers 30,000 25,000 20,000 15,000 10,000 5,000 0 16,359 China COSCO China Merchants Euronav MOL Bahri NITC Source: Companies’ published data and Clarksons LNG Carriers (including on order) (Number of vessels) 100 93 80 60 40 20 0 MOL NYK Nakilat* K Line Teekay Maran Gas Maran Gas In operation On order * Qatar Gas Transport Company Ltd. Source: MOL internal estimation Note: The numbers include the vessels which are owned by each company (wholly or partially) and the vessels for which vessel operation is entrusted to each company. Market Data Dry Bulker Market (BDI*1) (Jan. 4, 1985=1,000) 2,000 1,500 1,000 500 0 2014/4 2015/4 2016/4 2017/4 2018/4 2019/4 Source: MOL internal calculation based on Tramp Data Service and others *1 Baltic Dry Index VLCC*2 Market (Arabian Gulf→Japan) (US$/day) 120,000 100,000 80,000 60,000 40,000 20,000 0 2014/4 2015/4 2016/4 2017/4 2018/4 2019/4 Source: MOL internal calculation based on Clarksons *2 Very Large Crude Carrier (300,000 DWT class) (Number of vessels) 120 111 100 80 60 40 20 0 Car Carriers Containerships Containership Market (CCFI*3) (Thousand TEU) 5,000 4,000 3,000 2,000 1,000 1,553 (Jan. 1, 1998=1,000) 1,500 1,200 900 600 300 0 MOL NYK K Line EUKOR GLOVIS WWL HOEGH 0 Maersk MSC CMA-CGM Group COSCO Group Hapag Lloyd Evergreen ONE Hyundai Yang Ming Source: MOL internal estimation Note: Excluding spot-chartered vessels Fleet capacity On order Source: Alphaliner 2014/4 2015/4 2016/4 2017/4 2018/4 2019/4 Europe Trade U.S. West Coast Trade U.S. East Coast Trade Source: Shanghai Shipping Exchange *3 China Containerized Freight Index 56 57 Business Strategy & ReviewMITSUI O.S.K. LINES MOL REPORT 2019MITSUI O.S.K. LINES MOL REPORT 2019 Overview of Operations by Segment (From left) (Responsible business area) Nobuo Shiotsu Executive Officer Toshiaki Tanaka Managing Executive Officer Deputy Director General (Iron Ore & Coal Carriers) Director General (Bulk Carriers) Hirofumi Kuwata Executive Officer Deputy Director General Kazuhiko Kikuchi Executive Officer Deputy Director General (Wood Chip Carriers) Dry Bulk Business Unit Portfolio Highly specialized Iron Ore Carriers Wood Chip Carriers Variable profits Stable profits General Bulk Carriers Less specialized Dry Bulker Fleet Table (Number of vessels) Standard DWT At the end of Mar. 2019 At the end of Mar. 2018 Main cargo Capesize 180,000 - i m u d e m d n a - l l a m S s r e k l u b d e z i s Panamax Handymax Small handy Subtotal Wood chip carriers Short sea ships Total 80,000 55,000 33,000 54,000 12,000 94 21 50 32 103 39 47 283 88 26 54 28 108 39 61 296 Steel raw materials (iron ore, coking coal) Iron ore, coking coal, steaming coal, grains, etc. Steaming coal, grains, salt, cement, steel products, etc. Steel products, cement, grains, ores, etc. Wood chips, soybean meal, etc. Steel products, plant equipment, etc. Dry Bulkers Opportunities Segment Strengths • Expanding business chances in overseas markets • Trust-based relationships with customers • Growth in cargo movements (grains, cement for infrastruc- ture, chemical materials) due to increasing populations • Extensive overseas network • Ability to make proposals that flexibly meet diverse • Increasing demand for biomass fuel transport customer needs Risks • Change in the global economy stemming from the rise of protectionism • Increase in vessel operation costs due to the tightening of SOx regulations • Frontline capabilities at loading ports, discharging ports, and vessels including marine technical skills • Vessels designed suitably for the port facilities of customers • A lean fleet with resilience to market fluctuations that has been reinvented via the Business Structural Reforms (Small- and medium-sized bulkers) Market Environment and Business Opportunities The dry bulker market had continued to experience an oversup- Turning to transport demand, demand for iron ore, coal, ply of vessels following the economic crisis in 2008 and reached and wood chips is expected to remain solid for the time being. a record low in 2016. Since then, however, the gap between Additionally, in overseas markets such as China and India, the fleet supply and demand has been gradually subsiding. While competitive edge we have gained through the high quality of there have been short-term fluctuations due to seasonal fac- our transport services will likely provide us with growth oppor- tors and issues in exporting regions, the market has been on tunities. Also, the demand for biomass fuel transport has been an overall trend of gradual recovery. In addition, fleet supply increasing recently, becoming a rare source for long-term is expected to temporarily decrease as scrubber installation contracts in the market for small- and medium-sized bulkers, reaches its peak during the second half of 2019 before the where short-term contracts are mainstream. Accordingly, we tightening of SOx regulations. This will likely have a positive view biomass fuel as a potential profit foundation for the future. impact on dry bulker market conditions. Business Strategies Steadily capture contract renewal demand from domestic customers Actively expand into overseas markets Provide high-quality, comprehensive transport services that leverage our marine technical skills and frontline capabilities Flexibly develop and utilize good-quality and a competitive fleet Progress and Outlook of Business Fiscal 2018 in Review Direction in Fiscal 2019 Iron Ore & Coal Carrier Division We won medium- and long-term contracts by actively making Iron Ore & Coal Carrier Division We will strive to further enhance the quality of our transport proposals that ascertained customer needs. In addition, we started services by refining the on-site skills and marine technical new businesses such as the transport of bauxite from Africa skills that we have cultivated over the years. In addition, we will via Capesize bulkers. In terms of profit, we worked on efficient vessel respond to the needs of customers through initiatives toward operation and optimal fleet allocation, thereby realizing a year-on- eco-friendly transportation. By leveraging our expansive net- year increase. Furthermore, as part of our efforts to pursue work and information-collecting ability, we will continue to take environmental and emission-free projects, since fiscal 2017 on challenges in new fields such as diverse cargo transport we have continued to promote the Green Corridor Project, that we have yet to be involved with to date. which involves the joint production of LNG-fueled Capesize bulkers with our customers. Bulk Carrier Division For small- and medium-sized bulkers, we have been narrowing Bulk Carrier Division In regard to small- and medium-sized bulkers, we will aim for continuous growth while maintaining a balance between cargo and fleet capacity. By forming diverse and competitive down market exposure to establish a fleet that is resistant to charter contracts, we will enhance our fleet’s resilience to market fluctuations. This, combined with efficient vessel allocation, changes in market conditions and further promote efficient has allowed us to earn profits. In addition, we secured a long-term vessel allocation, thereby maximizing profit. contract for the transport of biofuel. Such long-term contracts are rare in the field of small- and medium-sized bulk carriers. Wood Chip Carrier Division Demand for wood chip transport is expected to remain solid Wood Chip Carrier Division Pulp prices soared in fiscal 2018, which led to heightened during fiscal 2019. We will work to win medium- and long-term contracts in response to this demand. We will also leverage our demand for the transport of wood chips, a raw material for marine technical skills and network to flexibly make proposals pulp. Accordingly, we realized an increase in profit. In addition, and enact a swift response in accordance with the individual needs we secured stable profits through such means as acquiring new contracts and extending existing contracts. of customers in Japan and overseas. In this way, we will further strengthen the trust-based relationships we have with customers. 58 59 Business Strategy & ReviewMITSUI O.S.K. LINES MOL REPORT 2019MITSUI O.S.K. LINES MOL REPORT 2019 Overview of Operations by Segment (From left) (Responsible business area) Tsuneo Watanabe Executive Officer Deputy Director General (Chemical Tankers) Masato Koike Managing Executive Officer Takeshi Hashimoto Executive Vice President Executive Officer Kenta Matsuzaka Managing Executive Officer Hirofumi Kuwata Executive Officer Deputy Director General (Tankers) Director General Deputy Director General (LNG Carriers) Deputy Director General (Steaming Coal Carriers) Hiroyuki Nakano Executive Officer Deputy Director General (Offshore Businesses) Energy Transport Business Unit Portfolio Highly specialized Chemical Tankers LPG Tankers Variable profits Offshore Businesses LNG Carriers Crude Oil Tankers Methanol Tankers Stable profits Steaming Coal Carriers Product Tankers Less specialized Fleet Table (Number of vessels) At the end of Mar. 2019 At the end of Mar. 2018 Crude oil tankers Product tankers Chemical tankers Tankers (Methanol tankers) (MOLCT*) LPG tankers Subtotal LNG carriers (including ethane carriers) FPSOs FSU / FSRUs Offshore businesses Subsea support vessels Steaming coal carriers 42 21 110 (27) (83) 8 181 87 6 4 3 47 39 39 87 (26) (61) 8 173 83 5 1 1 41 * Chemical tankers operated by MOL Chemical Tankers Tankers Opportunities • Expanding demand for offshore crude oil transport • Increasing demand for gas oil following the tightening of SOx regulations • Growing demand in emerging countries • Economic sanctions on Iran and Venezuela, oil production cuts by OPEC, and other political risks such as trade conflicts Segment Strengths • Diverse tanker lineup • Safe and high-quality fleet, vessel management capabilities, • Increasing demand for chemical transport due to establishment and marine technical skills of new plants for chemical derived from shale gas Risks • Vessel supply pressure • Declining oil demand in Japan and integration of Japanese oil companies • Social reliability and trust in business continuity capabilities supported by the above • Global business partnerships, including pool partners • Long-cultivated customer relationships Market Environment and Business Opportunities For crude oil tankers, the trend of fleet capacity surplus has been likely be created through the construction of new plants in North continuing for several years. In addition, over the medium to long America triggered by the shale revolution combined with increasing term, oil demand in Japan is expected to decline, possibly inducing chemical demand in emerging countries. Similarly, in terms of further integration of oil companies. Optimization of vessel LPG tankers, with the startup of the export terminals in North allocation resulting from such integration could lead to a decrease America, demand is expected to increase going forward, as in transport demand. However, it is anticipated that demand in long-distance trade to Southeast Asia and India—where demand India and other emerging countries will continue to rise, and continues to rise—increases. For product tankers, a rise in demand for offshore crude oil transport will also expand. demand for gas oil transport is anticipated due to the impact For methanol and chemical tankers, transport demand will of SOx regulations, which will tighten in January 2020. Business Strategies (Crude oil tankers and methanol tankers) Maintain long-term contracts with top-class customers and capture new demand (Product tankers) Reduce market exposure by streamlining fleet and transition to a business model based on entrusted vessel operation services through management of pools to maintain service networks (LPG tankers) Continue to maintain market presence by managing LPG tanker pool jointly with a partner (Chemical tankers) Become a comprehensive chemical logistics services provider through vertical expansion of business domains Progress and Outlook of Business Fiscal 2018 in Review As a result of the steady strategies we have undertaken with In terms of crude oil tankers, we steadily maintained medium- and each type of vessel, the Tankers segment has recorded a profit long-term contracts thanks largely to the trust-based relationships for the fifth consecutive year. we have cultivated with our Japanese and South Korean customers over many years. In addition, we acquired new contracts with other Direction in Fiscal 2019 overseas charterers, thereby accumulating stable profits. We also For crude oil tankers, we will continue to deepen the trust-based realized long-term contract renewals for methanol tankers, which relationships we have accumulated with our Japanese and South in turn helped us secure stable profits. For product tankers, we Korean customers as we steadily address their renewal demand for reduced the size of our fleet in fiscal 2018, from 36 vessels to 21 medium- and long-term contracts as well as their diverse transport vessels, in response to stagnant market conditions. Meantime, we established and commenced operations of a pool company, Asahi demand. At the same time, in light of the decline in domestic demand going forward, we will work to capture transport demand MOL Tankers Ltd., together with Asahi Tanker Co., Ltd., with the from overseas customers such as those in India, and also seek aim of maintaining our service network and knowledge, and opportunities for new businesses, including offshore crude oil transitioning to a business model based on entrusted vessel handling. For methanol tankers, we will not only work on operation services. In chemical tankers, one of our strategic business maintaining and expanding long-term contracts with existing fields, our wholly owned subsidiary MOL Chemical Tankers Pte. Ltd. customers but also leverage our solid track record to capture new established a joint venture with SEA-Tank Terminal Antwerp NV, transport demand in North America and other regions. In regard with a view toward constructing and operating chemical tank to product tankers, while maintaining our current fleet size for storage terminals in the Port of Antwerp. In addition, MOL Chemical the time being, we will strive to sustain our presence in the market Tankers acquired the Denmark-based chemical company, Nordic and enhance our fleet operational efficiency through the new pool Tankers A/S, which has an operational foundation in the Atlantic that commenced operations at the start of 2019. Turning to Ocean region. The company also established a strategic alliance chemical tankers, we will maintain the progress we have been with the Dutch tank container company, Den Hartogh Logistics. As making in the tank terminal and tank container businesses to act such, MOL Chemical Tankers has been taking steps toward upon the investment decisions made during fiscal 2018. transitioning to a comprehensive chemical logistics company. 60 61 Business Strategy & ReviewMITSUI O.S.K. LINES MOL REPORT 2019MITSUI O.S.K. LINES MOL REPORT 2019 Overview of Operations by Segment LNG Carriers / Offshore Businesses Photo courtesy of MODEC,Inc. Opportunities Segment Strengths • Growing marine transport volume of LNG • World’s largest scale LNG fleet and a solid track record of • Rising need for FSRUs and LNG-powerships due to the increase in LNG importing countries centered on emerging countries • Steady demand for the development of deep-sea oil fields, primarily in Brazil safe operation • Highly sophisticated marine technical skills that enable the development of new business domains, such as the operation of ice-breaking LNG carriers • Collaborative relationships with prominent overseas partners • Increasing demand for offshore wind power • High levels of creditability that allow for the stable fulfillment of super long-term contracts (15–25 years) Risks • Trend of shorter charter period for LNG carriers Market Environment and Growth Opportunities Vertical Expansion in the LNG Value Chain there will still be needs for developing new oil fields to com- LNG marine transport volume exceeded 300 million tons in 2018, pensate for existing oil fields that are becoming depleted. We driven by demand in China and India. By 2025, this amount is therefore anticipate that demand for offshore oil field production expected to increase to roughly 430 million tons. To respond to this will continue for a while. Accordingly, we expect to see sustained increase in demand, new gas field projects are being promoted in demand for oil-producing infrastructure such as FPSOs and countries such as Mozambique and Russia and a large-scale subsea support vessels, particularly in Brazil. expansion of existing projects in Qatar is underway. Meanwhile, more and more emerging countries are commencing LNG import, Offshore Wind Power which has led to new business opportunities that go beyond the Demand for wind power is increasing, centered on Europe, as frameworks of conventional LNG transport, such as utilizing FSRUs a form of energy with low environmental burden. Recently, wind and LNG-powerships as a powerful solution that can establish power has started to be introduced in East Asia as well. In light a base to receive LNG at low costs and in short time periods. of this, we expect to see business opportunities in fields such as the installation of wind power peripheral equipment as well Crude Oil-Related Offshore Businesses as wind power operation and maintenance. Even after demand for crude oil reaches its peak, it is likely that Business Strategies Leverage our industry-leading track record and expertise in the field of LNG carriers and pursue business expansion in high-value-added fields Vertically expand our scope of services to include not only FSRUs but also LNG-powerships and LNG terminals in order to offer “stress-free services” Secure stable profits through long-term contracts Capture business opportunities through collaboration with local partners who have significant influence in their respective regions Progress and Outlook of Business Fiscal 2018 in Review LNG Carriers We operate a fleet of approximately 90 LNG carriers, which is completed LNG transport to East Asia from the Arctic Ocean region going eastbound, which was a world-first achievement. In addition, we concluded a new charter contract for an LNG In fiscal 2018, a new FPSO commenced the charter, which con- record in LNG transport projects with high levels of difficulty, tributed to accumulating stable profits. Additionally, we entered including voyages on the Northern Sea Route, we will strive to take into a long-term contract for an FPSO off the coast of Brazil. We part in new projects as a high-value-added service provider. also agreed to participate in the construction, ownership, and operation of an FSRU in Indonesia. Capitalizing on opportunities in these ways, we have expanded our business. Direction in Fiscal 2019 Offshore Businesses Although no new units are scheduled to commence operations in fiscal 2019, we still expect to record stable profits from existing projects that started in and before fiscal 2018. Offshore businesses LNG Carriers In fiscal 2019, we expect stable business performance as more new represent an area of strength in which we can leverage the exper- tise and technical skills that we have long cultivated through the LNG carriers will be delivered to be dedicated to long-term contracts transport of LNG and other forms of energy. Accordingly, we are and begin to contribute to profits. In a period of transition toward a prioritizing the investment of management resources in this area. carbon-free society, we believe that LNG transport is a promising Going forward, we aim to lead the way for offshore businesses in the growth field that stands out within the energy domain. Amid rising context of the commercial distribution of resources and energy, by demand, the needs within the LNG value chain are diversifying. collaborating with business partners from the development stage of To address this, we are working to expand the scope of our services each project, differentiating ourselves in terms of quality of opera- vertically to include not only LNG transport but also FSRU and tion and maintenance services, and expanding our business LNG-to-Powership business. Furthermore, by accumulating a track domains to include power generation. Time Charter Contracts That Commence between 2019–2021 Tokyo Gas JERA Yamal (ice-breaking LNG carriers) Yamal (conventional-type LNG carriers) Mitsui Osaka Gas / Kyushu Gas Uniper LNG Carriers ex. USA To Japan ex. USA ex. Russia ex. Russia ex. USA ex. Australia ex. USA To Japan To China To China To Japan To Japan To Europe Vessels 2 1 1 4 2 1 1 Petrobras ENI Mexico Hong Kong LNG Terminal PT Jawa Satu Power Swan Energy Swan Energy Offshore Businesses Brazil Mexico Hong Kong Indonesia India India FPSO FPSO FSRU FSRU FSRU FSU Vessels / Units 2 1 1 1 1 1 Steaming Coal Carriers Business Strategies Construct and introduce next-generation steaming coal carriers that suit customer interests (in terms of safety, efficiency, eco-friendliness, etc.) Accelerate promotion of LNG-fueled steaming coal carriers Progress and Outlook of Business The majority of our steaming coal carriers are operating under strategy, including promoting the introduction of next-generation medium- and long-term contracts with our Japanese customers, steaming coal carriers that offer enhanced safety through double- and this allowed us to realize stable profits in fiscal 2018. Against hull cargo holds as well as LNG-fueled vessels. For overseas, we the backdrop of a heightened environmental awareness, some old anticipate a continuous increase in demand for steaming coal in power stations have suspended operations or been abolished. India and Southeast Asia, where energy demand has been rising There also have been changes and suspension of plans for new following economic development. We aim to enhance our presence power stations. Due in part to such movements, domestic demand in these regions by leveraging our proposal capabilities, marine for coal used for power generation has been on a gradual down- technical skills, and the brand power that we have cultivated through the largest in the world. Essentially all of these carriers are carrier with Uniper SE, the largest gas and electricity company ward trend. Nevertheless, with delays to the restart of operations of coal transport for domestic use, in addition to the comprehensive under long-term charter contracts, which helped us record in Europe, which is slated to begin in 2020. profits steadily in fiscal 2018. During the year, two ice-breaking LNG carriers for the Yamal LNG project (see “Special Feature” on page 20) were delivered and the first vessel successfully Offshore Businesses Our offshore businesses also operate under long-term contracts. nuclear power plants, we believe there continues to be demand for strengths of the entire MOL Group. In addition, not constraining coal-fired power generation as a base-load energy source that is ourselves to coal transport, we will seek opportunities in the transport of both stable and cost effective. We will work to expand our market share in coal transport for domestic use through our differentiation alternative fuel that meets the needs of customers and in the commer- cialization of technologies that promote the reduction of CO2 emissions. 62 63 Business Strategy & ReviewMITSUI O.S.K. LINES MOL REPORT 2019MITSUI O.S.K. LINES MOL REPORT 2019Overview of Operations by Segment (From left) (Responsible business area) Hirotoshi Ushioku Executive Officer Akihiko Ono Senior Managing Executive Officer Deputy Director General (Car Carriers) Deputy Director General (Containerships) Yutaka Hinooka Managing Executive Officer Director General (Terminals & Logistics) Atsushi Igaki Executive Officer Deputy Director General (Ferries & Coastal RoRo Ships) Michael P.Y. Goh Executive Officer Deputy Director General (NVOCC) Market Environment and Growth Opportunities In the automotive industry, there have been strong social demands such factors as economic slowdowns and the rise of protective for reduction of environmental impact and the evolution of mobil- trade, which can change the trade dynamics. With that said, we ity. In conjunction with this, technological innovation in automobile expect that both the number of car sales worldwide and cargo manufacturing and information transmission has been progress- movements via marine transport are still gradually going to ing simultaneously at an accelerating rate, and it is anticipated increase. While transport ton-miles are on a downward trend that the needs related to the marine transport of automobiles will due to the progressing shift toward local production, we believe become more and more complex. In addition, there are potential we will see new business opportunities, such as an increase in risks regarding fluctuations in the demand for automobiles due to exports from China following the widespread use of EVs. Product Transport Business Unit Business Strategies Portfolio Highly specialized Ferries & Coastal RoRo Ships Terminals Logistics NVOCC Fleet Table (Number of vessels) At the end of Mar. 2019 At the end of Mar. 2018 Car carriers Containerships* Ferries & coastal RoRo ships Total 113 65 16 194 119 91 14 224 * Operated by Ocean Network Express (ONE) since April 2018 Variable profits Containerships Car Carriers Stable profits Less specialized Car Carriers Opportunities • Changes to the production and export structure of car manufac- turers following the widespread use of electric vehicles (EVs) • Improvement in vessel supply and demand balance following slowdown in new vessel orders Risks • Decline in marine transport demand stemming from the rise of trade protectionism • Increase in vessel operation costs following the tightening SOx regulations Segment Strengths • High-quality, highly cost-effective fleet • Extensive global trade routes and sales networks • Diverse customer base that enables optimal cargo combina- tion for each shipment Optimize fleet scale to match our cargo portfolio Reorganize services including withdrawal from unprofit- able routes Strengthen solution-proposing sales activities to custom- ers by making use of our cost effectiveness and ICT Reinforce environmental and emission-free businesses in such ways as an intensive study of LNG-fueled car carriers Progress and Outlook of Business Fiscal 2018 in Review Direction in Fiscal 2019 On certain trade routes, there have been quarantine issues and Viewing the next several years as a period of dramatic change impacts from natural disasters such as the earthquake in Hokkaido in the overall car transport industry, we will strive to update our and the heavy rains in western Japan. In addition, there have been services (trade routes) and fleet by enhancing the quality of our changes in the business environment, including the trade conflict profitability analysis and improving freight rate levels. Also, with between the United States and China and the new regulations for the aim of providing long-term, stable transport services to our exhaust emissions and fuel economy standards in Europe. These customers, we will promote the aforementioned efforts while factors led to overall stagnation in the transportation needs of leveraging ICT technologies based on the new operational support automobiles. Although we made efforts to enhance vessel opera- system PCC.NET. In doing so, we will reinforce our solution-based tion efficiency by reorganizing trade routes and streamlined our sales capabilities to customers. For example, we will undertake fleet scale, profit declined year on year. As achievements during initiatives to boost operational efficiency and enhance customer fiscal 2018, all four FLEXIE series next-generation car carriers, satisfaction by developing cargo tracking websites and reorganizing which won the Good Design Award 2018, were delivered, thereby reinforcing the quality of our core fleet. Furthermore, we took vehicle loading systems. As a preparation for future investments in a new fleet, we will examine LNG-fueled vessels, which is in steps to strengthen our IT infrastructure by introducing a new line with efforts to strengthen our environmental and emission- operational support system called PCC.NET worldwide and free businesses. Through these efforts, we will transition to a reformed our operational process and data foundation. robust organization capable of realizing significant profit. Main Routes 64 65 Business Strategy & ReviewMITSUI O.S.K. LINES MOL REPORT 2019MITSUI O.S.K. LINES MOL REPORT 2019Overview of Operations by Segment Containerships Ocean Network Express Pte. Ltd. (ONE) Opportunities Segment Strengths • Increasing volume of worldwide cargo movement • Solid customer base rooted in the big three Japanese ship- • Diversifying cargo sources • Advancement of IT technologies that can be used to improve customer services Risks • Downturn in the global economy and declining cargo volume due to the further progression of trade protectionism • Increase in vessel operation costs following the tightening of SOx regulations ping companies and THE Alliance* • Dense service network on Transpacific and Asia–Europe trade routes leveraging the presence in the market as well as extensive services that cover the Asian region and North / South trade routes • High level of competitiveness reinforced through the synergies from the integration of three companies (reduction of variable costs and overhead costs, etc.), which have steadily been realized since ONE’s initial fiscal year • High-quality customer service * Containership service alliance among ONE, Hapag-Lloyd AG, and Yang Ming Marine Transport Corporation. Hyundai Merchant Marine is scheduled to join in April 2020. Direction in Fiscal 2019 earnings, ONE intends to move into the black in fiscal 2019. In The operational difficulties ONE experienced in its initial fiscal year January 2020, SOx regulations that limit the percentage of sulfur of operation have already been overcome, and liftings are expected content in vessel fuel oil will tighten, and this is expected to cause a to recover to a level that is on a par with that of the three companies hike in fuel oil prices. ONE will strive to conserve fuel oil consump- before the integration was implemented. Furthermore, ONE has tion as an important mission to not only cut costs but also reduce been working on cargo portfolio optimization, which aims to com- environmental impact. Meanwhile, ONE is working to gain cus- bine inbound and outbound cargo collection in a way they can tomer understanding to implement a fuel surcharge in order to achieve higher profitability, as well as on upsizing vessels and trade compensate for the rise in fuel oil prices. route reorganization. By promoting these measures to improve Transpacific Trade (‘000 TEU) 300 Liftings at ONE (Fiscal 2018 / 2019 Results) Asia–Europe Trade (‘000 TEU) 200 240 180 120 60 0 4 5 6 7 8 9 10 11 12 1 2 3 (Month) 160 120 80 40 0 4 5 6 7 8 9 10 11 12 1 2 3 (Month) Eastbound voyage (Fiscal 2018) Eastbound voyage (Fiscal 2019) Westbound voyage (Fiscal 2018) Westbound voyage (Fiscal 2019) Westbound voyage (Fiscal 2018) Westbound voyage (Fiscal 2019) Eastbound voyage (Fiscal 2018) Eastbound voyage (Fiscal 2019) Market Environment and Growth Opportunities Terminals & Logistics After the financial crisis in 2008, the growth rate of transport containership companies. Today, that number has been reduced demand slowed while the vessel supply increased due to the to just nine. In the midst of this trend, MOL, Nippon Yusen deliveries of new vessels that were ordered before the crisis. Kaisha, and Kawasaki Kisen Kaisha decided to spin out and This worsened the supply and demand balance for container- merge their containership businesses, thereby establishing the ships, causing long-term market stagnation. In an attempt to integrated company ONE in 2017. ONE commenced its service in enhance competitiveness in such harsh market conditions, many April 2018, operating a combined fleet of approximately 1.55 players in the industry pursued scale expansion through means million TEUs including on order, which is equivalent to a 6% such as M&As, resulting in significant reorganization of the global share. industry. At the beginning of the 2000s, there were 19 major Business Strategies Improve profit by optimizing cargo portfolio and flexibly reorganizing trade routes Provide highly competitive services enhanced by the gen- eration of synergies (scale merit) Progress and Outlook of Business Fiscal 2018 in Review insufficiencies in terms of the number of staff after the integration, Freight rates in Transpacific trade, which is ONE’s major route, were ONE experienced tough operational conditions at the start, which steady overall as cargo movements remained lively against the not only inconvenienced customers but also led to a considerably backdrop of rather robust personal consumption in the United lower number of liftings than initial expectations. Although capacity States and a rush-in demand related to the trade conflict between utilization rate improved in the second half as a result of extensive the United States and China. For Asia–Europe trade, which is the efforts to normalize the service, ONE recorded a significant loss in next major route for ONE following Transpacific, while the supply fiscal 2018. On the other hand, the synergistic effects that were and demand situation worsened due to the oversupply of vessels, envisioned at the time of integration have steadily emerged since cargo movements themselves were still relatively solid. However, ONE’s initial fiscal year through such achievements as the reduction due to staff members’ unfamiliarity with the IT systems and of variable costs and overhead costs. Business Strategies (Terminals) Further strengthen the competitiveness of container terminals in Japan (Logistics) Bolster the NVOCC business and expand the customer-oriented logistics business globally through collaboration with overseas local partners Progress and Outlook of Business Among our container terminal businesses, overseas assets through centralized marketing, network operations, and global are scheduled to be transferred to ONE, and discussions are customer support. Additionally, for our overseas operations, we currently being held among related parties for executing this are working toward the enhancement of logistics businesses transfer. In the domestic container terminal business, we expect deeply rooted in local economies. In line with this, we acquired demand to be solid in locations such as Tokyo Bay. additional shares in PKT Logistics Group Sdn. Bhd., a compre- In the logistics business, we established MOL Worldwide hensive logistics company in Malaysia, in August 2018. Going Logistics Ltd. in July 2018, which is expected to lead the MOL forward, we will further expand our overseas operations Group’s NVOCC* business. MOL Worldwide Logistics will through means such as collaboration with local partners. aggregate resources related to the NVOCC businesses of the two group companies, MOL Logistics (Japan) Co., Ltd. and MOL Consolidation Service Ltd., and strengthen these businesses * Non-Vessel Operating Common Carrier. Without having their own transport means (vessels), NVOCCs transport cargoes by leasing space from other shipping companies to transport cargoes between ports and to the final inland points of delivery. 66 67 Business Strategy & ReviewMITSUI O.S.K. LINES MOL REPORT 2019MITSUI O.S.K. LINES MOL REPORT 2019 Overview of Operations by Segment Ferries & Coastal RoRo Ships Business Strategies Improve the convenience of services for customers through upsizing vessels and enhancing intermodal transport services Develop the “Casual Cruise” market by launching brand- new, attractive vessels and by further promoting the “Sunflower” brand Progress and Outlook of Business Fiscal 2018 in Review two new RoRo ships in the Tokyo–Kanda (North Kyushu) route and In fiscal 2018, cargo volumes were firm due to acceleration in the commenced new services operating on an everyday basis (excluding modal shift. This acceleration comes from aging and a shortage Sundays). In addition, by utilizing the many trailers we possess, of truck drivers and the promotion of workstyle reforms, to we are able to provide highly convenient transportation methods improve their labor conditions by reducing driving hours. The to customers. These include not only port-to-port transport services number of passengers was also steady for all Hokkaido, Setouchi, using RoRo ships but also services that respond to diverse intermo- South Kyushu routes, partly due to our efforts such as the deploy- dal demand, such as inland transport from points of collection to ment of two new ferries on the South Kyushu route and promotion of points of delivery. For passenger transport, in addition to trains the concept of “Casual Cruise.” While overall profit declined on a and airplanes, ferries are now starting to be considered as a means year-on-year basis due to the impact of ferry cancellations of transportation. Moreover, the ways people enjoy travel are diversi- caused by large-scale typhoons and prolonged mechanical troubles fying, including cruises that make the experience of riding on a ship with vessels, we were still able to secure a profit in a stable manner. itself entertaining. Against the backdrop of these types of In order to share the best practices between our consolidated changes, we forecast an expansion in the markets where our concept subsidiaries MOL Ferry Co., Ltd. and Ferry Sunflower Limited, of “Casual Cruise” can appeal. Going forward, we will keep working to we established the Ferry Virtual Company (FVC). As a result, enhance the quality of the fleet by replacing vessels and increase the mutual exchange of information on aspects of activities that the value of the “Sunflower” brand through appropriate marketing two companies have in common, including cargo and passenger activities with the aim of leading the new market expansion. sales activities, marketing know-how, vessel management, and Additionally, we will improve our services by further promoting administrative business procedures is promoted. This is leading initiatives by FVC, which was established in the previous fiscal year. to improvements in business activities in both companies. We also intend to leverage the strengths of the Group to Direction in Fiscal 2019 Although no major growth is anticipated in the overall market for enhance safe vessel operation and address the issue of crew member shortages. domestic transport due to the declining population, there are regions, Transport Results of Three MOL Group Companies* such as Kyushu, where a modal shift is expected to accelerate. We believe there will still be increasing demand for transport by ferries and coastal RoRo ships in this area. To that end, we have introduced (People) 900,000 860,000 820,000 (Units) 440,000 410,000 380,000 Adoption of luxurious interior design on new vessels to meet “Casual Cruise” needs 0 2014 Passengers (left) 2015 Cargo (right) 2016 2017 0 (fiscal) 2018 * MOL Ferry Co., Ltd., Ferry Sunflower Limited, and Meimon Taiyo Ferry Co., Ltd. (converted as MOL’s share) Associated Businesses Environmental and Emission-Free Businesses Variable profits Highly specialized Less specialized Real Estate Business Stable profits Maritime-Related Businesses Business Strategies Shin-Daibiru Building (Osaka) Receiving the Osaka Mayor Award at the 37th Osaka Machinami Awards (Real estate) Target properties in major cities, etc., that hardly decline in value regardless of market conditions (Tugboat) Horizontally share the best practices of each tugboat company within the Group and participate in overseas projects using secondhand vessels (Cruise ship) Thoroughly reinforce safe operation and capture steady cruise demand (Maritime-related, trading, and new businesses) Expand the scale and the domains of the business Progress and Outlook of Business Fiscal 2018 in Review Direction in Fiscal 2019 This segment comprises MOL’s real estate, cruise ship, tug- In fiscal 2019, we will continue to operate each business in a boat, trading, and other businesses. In the real estate business, stable manner, and expect to achieve a result similar to that of although the lease office market performed favorably centered fiscal 2018. In the real estate business, although the favorable on the metropolitan areas, profit edged down slightly year-on- market conditions are expected to continue until around 2020, year due to the impact of large-lot tenant replacement. there is the possibility that rent levels will drop after that in some Meanwhile, we acquired properties in both domestic and over- areas and for certain properties. Therefore, we will continue our seas markets that can be expected to contribute to stable profit efforts to maintain and expand our portfolio of properties in in the future. major urban areas that will not be impacted by market condi- In terms of the tugboat business, the first LNG-fueled tions to keep accumulating stable profit. For tugboats, we will tugboat ISHIN was delivered in Osaka Bay in February 2019. examine ways to reinforce our overseas businesses, including in Additionally, a new business in Viet Nam was launched. Viet Nam. In the cruise ship business, we will thoroughly foster Cruise ship, trading, and other businesses achieved rela- and instill safety awareness while at the same time working to tively solid results, and the overall performance of associated capture steady cruise demand. In other business fields, we businesses was on a par with that of the previous fiscal year. will aim to enter into offshore peripheral businesses and new business domains in which we can leverage our long-cultivated expertise, including environmental and emission-free businesses such as wind power businesses as well as transportation vessels for offshore wind power sites and other associated businesses. 68 69 Business Strategy & ReviewMITSUI O.S.K. LINES MOL REPORT 2019MITSUI O.S.K. LINES MOL REPORT 2019 Financial and Non-Financial Highlights For the year Shipping and other revenues Shipping and other expenses Selling, general and administrative expenses Operating profit (loss) Ordinary profit (loss) Income (loss) before income taxes and non-controlling interests Profit (loss) attributable to owners of parent Free cash flow [(a) + (b)] Cash flows from operating activities (a) 104,104 197,211 204,510 197,732 126,987 (71,038) 118,984 98,546 20,939 24,234 27,776 12,722 (40,055) 93,428 Cash flows from investing activities (b) (190,022) (133,483) Depreciation and amortization 78,155 88,366 MOL ADVANCE GEAR UP! MOL RISE 2013 STEER FOR 2020 ROLLING PLAN 2009/3 2010/3 2011/3 2012/3 2013/3 2014/3 2015/3 2016/3 2017/3 2018/3 2019/3 (Millions of yen) ¥1,865,802 ¥1,347,964 ¥1,543,660 ¥1,435,220 ¥1,509,194 ¥1,729,452 ¥1,817,069 ¥1,712,222 ¥1,504,373 ¥1,652,393 ¥1,234,077 1,564,485 1,228,478 1,328,959 1,368,794 1,432,014 1,587,902 1,683,795 1,594,568 1,388,264 1,513,736 1,094,915 91,300 123,400 121,621 90,885 (24,459) (24,320) 92,946 (15,766) (28,568) 100,458 41,092 54,985 116,024 17,249 51,330 115,330 2,323 36,267 113,551 2,558 25,426 115,972 22,684 31,473 95,366 (33,516) (137,938) 71,710 58,332 (154,385) 23,303 (28,709) 58,277 46,970 181,755 (134,785) 77,445 (26,009) (129,298) 5,014 (134,312) 85,624 (178,846) (25,285) 78,955 57,393 (25,615) 94,255 42,356 (66,656) 92,494 (104,240) (119,870) (159,150) 94,685 83,983 87,803 (170,447) 182,508 209,189 (26,681) 92,771 5,257 (56,318) 17,623 (73,941) 87,190 (47,380) (2,471) 98,380 (100,851) (198,341) 86,629 90,138 101,442 37,718 38,574 46,778 26,875 (143,093) 55,248 At year-end Total assets Total tangible fixed assets Interest-bearing debt Net assets Shareholders’ equity Amounts per share of common stock*1 1,807,079 1,861,312 1,868,740 1,946,161 2,164,611 2,364,695 2,624,049 2,219,587 2,217,528 2,225,096 2,134,477 1,106,746 1,209,175 1,257,823 1,293,802 702,617 695,021 623,715 775,114 735,702 659,508 724,259 740,247 660,795 869,619 717,909 637,422 1,303,967 1,046,865 619,492 535,422 1,379,244 1,094,081 783,549 679,160 1,498,028 1,183,401 892,435 782,556 1,376,431 1,044,980 646,924 540,951 1,323,665 1,122,400 683,621 571,983 1,290,929 1,118,089 628,044 511,242 1,193,910 1,105,873 651,607 525,064 Profit (loss) attributable to owners of parent (Yen) ¥ 1,061.30 ¥   106.30 ¥   487.50 ¥  (217.60) ¥ (1,495.70) ¥   479.90 ¥   354.20 ¥ (1,425.00) ¥    43.95 ¥  (396.16) ¥   224.72 Net assets (Yen) 5,212.26 5,517.01 5,528.30 5,332.70 4,477.60 5,679.00 6,542.60 4,522.80 4,782.25 4,274.81 4,390.39 Cash dividends applicable to the year (Yen) 310 30 100 50 0 50 70 50 20 20 45 Management indicators Gearing ratio (Times) Net gearing ratio (Times) Equity ratio (%) ROA (%) ROE (%) Dividend payout ratio (%) 1.13 0.99 34.5 11.0 19.5 29.2 1.18 1.05 35.4 1.3 2.0 28.2 1.10 1.00 35.4 6.5 8.8 20.5 1.36 1.23 32.8 (1.3) (4.0) ― CO2 emissions of MOL Group*2 fleet (Thousand tons) Number of MOL Group*3 employees 20,473 10,012 18,708 9,707 20,073 9,438 19,660 9,431 Note: Rounded down to the nearest ¥1 million *1 The Company consolidated every 10 shares into 1 share effective October 1, 2017. Accordingly, figures have been calculated as if the consolidation of shares had been con- ducted at the beginning of the fiscal year ended March 31, 2009. *2 Mitsui O.S.K. Lines, Ltd. and its primary Group companies *3 Mitsui O.S.K. Lines, Ltd. and its consolidated subsidiaries 1.96 1.58 24.7 (1.4) (30.5) ― 1.61 1.35 28.7 2.4 9.5 10.4 1.51 1.35 29.8 2.1 5.8 19.8 1.93 1.64 24.4 1.5 (25.8) ― 1.96 1.64 25.8 1.1 0.9 45.5 2.19 1.82 23.0 1.4 (8.7) ― 2.11 1.88 24.6 1.8 5.2 20.0 18,876 9,465 17,810 10,289 18,803 10,508 18,676 10,500 18,204 10,794 17,774 10,828 16,369 8,941 70 71 Data SectionMITSUI O.S.K. LINES MOL REPORT 2019MITSUI O.S.K. LINES MOL REPORT 201914/3 15/3 16/3 17/3 18/3 19/3 14/3 15/3 16/3 17/3 18/3 19/3 14/3 15/3 16/3 17/3 18/3 19/3 14/3 15/3 16/3 17/3 18/3 19/3 14/3 15/3 16/3 17/3 18/3 19/3 Revenues (left) Ordinary profit (right) Revenues declined ¥418.3 billion from the previous fiscal year due to a business spin-off. In terms of ordinary profit, we recorded a significant loss at ONE, causing us to incorporate equity in losses. However, ordinary profit rose ¥7.1 billion due to highly stable profits primarily from the Dry Bulk and Energy Transport businesses as well as relatively favorable market conditions. Bulkships Containerships Other segments, etc. Dry Bulk Business Energy Transport Business Product Transport Business Associated Businesses / Others / Adjustments In the Dry Bulk Business, profit rose ¥6.5 billion supported by favorable market conditions and medium- and long-term contracts. For the Energy Transport Business, profit increased ¥7.5 billion due to several factors, including the accumulation of highly stable profits from LNG tankers and offshore businesses, robust conditions in the oil tanker market, and successful efforts to decrease the number of unprofit- able vessels. However, the Product Transport Business recorded a loss stemming from the impact of the confusion that occurred during the commencement of operations at ONE and transitional costs. Total assets (left) Net assets (right) In fiscal 2018, we sold off 17 vessels that were either old or had a low level of profitability in an effort to rejuvenate and enhance the competitive- ness of our fleet. As a result, total assets as of March 31, 2019, declined ¥90.6 billion. Meanwhile, net assets increased ¥23.6 billion due primarily to the rise in retained earnings. Interest-bearing debt Net interest-bearing debt Shareholders’ equity Gearing ratio (left) Net gearing ratio (left) Equity ratio (right) Interest-bearing debt declined ¥12.2 billion, to ¥1,105.8 billion, due mainly to the decrease in long-term debt. Shareholders’ equity was up ¥13.8 billion, to ¥525.0 billion, owing in part to the increase in retained earnings. The gearing ratio edged up 0.08 and the equity ratio rose 1.6 points, reflecting the ¥12.2 billion decline in interest-bearing debt, the ¥90.6 billion decline in total assets, and the ¥13.8 billion increase in shareholders’ equity. *1 Interest-bearing debt – Cash and cash equivalents *2 “Shareholders’ equity” in this section comprises the total of owners’ equity and accumulated other comprehensive income (loss). Cash Flows ROA (Based on Ordinary Profit) / ROE Capital Expenditure Fleet Size (All types of vessels)* Key Indicators Revenues / Ordinary Profit Ordinary Profit (Loss) by Segment Total Assets / Net Assets Fiscal 2018 Revenues Ordinary Profit ¥1,234.0 billion ¥38.5 billion Fiscal 2018 Dry Bulk Business ¥21.9 billion ¥21.1 billion Energy Transport Business Product Transport Business ¥(12.2) billion ¥7.7 billion Associated Businesses / Others / Adjustments Fiscal 2018 Total Assets Net Assets ¥2,134,4 billion ¥651.6 billion (¥ billion) 2,000 1,500 1,000 500 0 (¥ billion) 200 (¥ billion) 80 150 100 50 0 40 0 –40 (¥ billion) 3,000 2,400 1,800 1,200 600 0 (¥ billion) 1,000 800 600 400 200 0 Net Income (Loss)* per Share / Cash Dividends Applicable to the Year / Dividend Payout Ratio Fiscal 2018 Net Income (Loss) per Share Cash Dividends Applicable to the Year Dividend Payout Ratio ¥224.72 ¥45.00 20.0% Fiscal 2018 Cash Flows from Operating Activities ¥55.2 billion Cash Flows from Investing Activities ¥(198.3) billion Fiscal 2018 ROA ROE (¥) 500 0 –500 –1,000 –1,500 (%) 50 (¥ billion) 300 0 150 0 –150 –300 (%) 20 10 0 –10 –20 –30 1.8% 5.2% (%) 10 5 0 –5 –10 –15 14/3 15/3 16/3 17/3 18/3 19/3 14/3 15/3 16/3 17/3 18/3 19/3 14/3 15/3 16/3 17/3 18/3 19/3 Net income (loss) per share (left) Cash dividends applicable to the year (left) Dividend payout ratio (right) Cash flows from operating activities Cash flows from investing activities Free cash flow ROA (right) ROE (left) Profit attributable to owners of parent was ¥26.8 billion, turning around from the significant loss recorded in the previous fiscal year due to the provision related to charter rates of containerships for ONE. Also, in accordance with our policy of maintaining a consolidated payout ratio of 20%, we issued an interim dividend of ¥20 per share and a year-end divided of ¥25 per share, following the increase in net profit. * Profit (loss) attributable to owners of parent Free cash flow was significantly negative as a result of our investment associated with the spin-off of the containership business as well as investments in LNG carriers and offshore businesses, two areas the Company concentrates management resources in. To improve free cash flow going forward, we will examine the liquefaction of assets while continuing to carefully select investment projects. While total assets decreased compared with the previous fiscal year-end, return on assets (ROA) improved due to the increase in ordinary profit. Return on equity (ROE) also improved significantly, exceeding 5%, as profit attributable to owners of parent turned into the black. Interest-Bearing Debt / Net Interest- Bearing Debt / Shareholders’ Equity Gearing Ratio / Net Gearing Ratio / Equity Ratio Credit Ratings (As of June 2019) Fiscal 2018 Interest-Bearing Debt ¥1,105.8 billion Net Interest-Bearing Debt*1 ¥986.7 billion ¥525.0 billion Shareholders’ Equity*2 Fiscal 2018 Gearing Ratio Net Gearing Ratio Equity Ratio 2.11 1.88 24.6% JCR R&I Moody’s A– BBB Ba2 (¥ billion) 1,500 1,200 900 600 300 0 2.50 2.00 1.50 1.00 0.50 0 (%) 50 40 30 20 10 0 Type of rating Rating Short-term debt rating (CP) J–1 JCR Long-term senior debt (issuer) rating A– (Stable) Long-term debt rating A– Issuer rating BBB (Stable) R&I Short-term debt rating (CP) a–2 Long-term debt rating BBB Moody’s Corporate family rating Ba2 (Stable) Despite uncertainty in the business environment, MOL has maintained its current ratings, reflecting steady improvement in MOL’s business performance. Going forward, MOL will continue working to bolster its profitability and improve its financial standing, in an effort to further enhance its ratings. Fiscal 2018 Capital Expenditure ¥113.0 billion Fiscal 2018 Number of Vessels 839 vessels 63,129 thousand tons Deadweight (¥ billion) 200 160 120 80 40 0 (Number of Vessels) 1,000 (Thousand tons) 100,000 800 600 400 200 0 80,000 60,000 40,000 20,000 0 14/3 15/3 16/3 17/3 18/3 19/3 14/3 15/3 16/3 17/3 18/3 19/3 Number of vessels (left) Deadweight (right) Capital expenditure represented here is the net amount calculated by deducting proceeds from the sale of vessels from the amount of “Tangible / intangible fixed assets increases” contained in the annual securities report. Following the integration of the containership business, we gradually redelivered containerships for which chartering contracts had completed with ship owners. As a result, the number of container- ships we possess or charter declined by 26 compared with the previous fiscal year-end, to 65 vessels. Going forward, ONE will purchase or charter vessels on its own. * Including spot-chartered ships and those owned by joint ventures Note: The Company consolidated its common shares on the basis of one (1) unit for every ten (10) shares effective October 1, 2017. Accordingly, each figure was calculated as if the consolidation of shares had been conducted at the beginning of the fiscal year ended March 31, 2014. 72 73 Data SectionMITSUI O.S.K. LINES MOL REPORT 2019MITSUI O.S.K. LINES MOL REPORT 2019 The MOL Group Mitsui O.S.K. Lines, Ltd. March 31, 2019 Consolidated Subsidiaries Affiliated Companies Accounted for by the Equity Method Product Transport Business Registered Office Voting Rights (%)* Dry Bulk Business Energy Transport Business Product Transport Business Mitsui O.S.K. Kinkai, Ltd. MOL Bridge Finance S.A. MOL Cape (Singapore) Pte. Ltd. Shipowner / Chartering companies (74 companies) in Panama, Marshall Islands, Liberia, Hong Kong, Cayman Islands and Singapore Other (1 company) Gearbulk Holding AG Shipowner company (1 company) in Panama Bamboo Mountain Power B.V. Coconutland Maritime INC. El Sol Shipping Ltd. S.A. Lakler S.A. MCGC International Ltd. MNN Holdings Inc. MOG LNG Transport S.A. MOL Chemical Tankers Japan Co., Ltd. MOL Chemical Tankers Pte. Ltd. MOL Coastal Shipping, Ltd. MOL LNG Transport Co., Ltd. MOL Netherlands Bulkship B.V. MOL Nordic Tankers A/S Pacific LNG Transport Ltd. Phoenix Tankers Pte. Ltd. Pine Mountain Power B.V. Samba Offshore S.A. Shining Shipping S.A. Unix Line Pte. Ltd. Shipowner / Chartering companies (112 companies) in Panama, Marshall Islands, Liberia, Hong Kong, Singapore, Indonesia and Malta Akofs Offsore As Aramo Shipping (Singapore) Pte. Ltd. Asahi Tanker Co., Ltd. Carioca MV27 B.V. Cernambi Norte MV26 B.V. Cernambi Sul MV24 B.V. Den Hartogh Holdings B.V. LNG Fukurokuju Shipping Corp. LNG Jurojin Shipping Corp. Karmol Lng Company LTD. Libra MV31 B.V. Mozanbique Fsru Company LTD. PT Jawa Satu Regas Sepia MV30 B.V. T.E.N. Ghana MV25 B.V. Tartaruga MV29 B.V. Trans Pacific Shipping 2 Ltd. Trans Pacific Shipping 5 Ltd. Trans Pacific Shipping 8 Ltd. Viken MOL AS Viken Shuttle AS Shipowner / Chartering companies (53 companies) in Panama, Marshall Islands, Liberia, Hong Kong, Cayman Islands, Singapore, Indonesia, Cyprus, Bahamas and Malta Asia Utoc Pte. Ltd. Bangkok Container Service Co., Ltd. Bangpoo Intermodal Systems Co., Ltd. Blue Highway Express Kyushu Co., Ltd Blue Highway Service K.K. Blue Sea Network Co., Ltd. Chugoku Shipping Agencies Ltd. Euro Marine Carrier B.V. Euro Marine Logistics N.V. Ferry Sunflower Limited International Container Transport Co., Ltd. International Transportation Inc. Mitsui O.S.K. Lines (Thailand) Co., Ltd. MOL Consolidation Service Ltd. MOL Consolidation Service Ltd. (China) MOL Container Center (Thailand) Co., Ltd. MOL Ferry Co., Ltd. MOL Hong Kong Ltd. MOL Logistics (Deutschland) GMBH MOL Logistics (Europe) B.V. MOL Logistics (H.K.) Ltd. MOL Logistics (Japan) Co., Ltd. MOL Logistics (Netherlands) B.V. MOL Logistics (Singapore) Pte. Ltd. MOL Logistics (Taiwan) Co., Ltd. MOL Logistics (Thailand) Co., Ltd. Japan Panama Singapore Switzerland Netherlands Panama Panama Uruguay Bahamas Liberia Panama Japan Singapore Japan Japan Netherlands Denmark Bahamas Singapore Netherlands Panama Panama Singapore Norway Singapore Japan Netherlands Netherlands Netherlands Netherlands Bahamas Bahamas Marta Netherlands Marshall Islands Indonesia Netherlands Netherlands Netherlands Bahamas Bahamas Bahamas Norway Norway Singapore Thailand Thailand Japan Japan Japan Japan Netherlands Belgium Japan Japan USA Thailand Hong Kong China Thailand Japan Hong Kong Germany Netherlands Hong Kong Japan Netherlands Singapore Taiwan Thailand 100.00 100.00 100.00 49.00 100.00 100.00 100.00 100.00 80.10 75.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 25.00 50.00 27.83 20.60 20.60 20.60 20.00 30.00 30.00 50.00 20.60 — 19.00 20.60 20.00 20.60 20.00 50.00 50.00 50.00 — 100.00 100.00 74.62 100.00 100.00 100.00 100.00 75.50 50.00 99.00 51.00 51.00 47.00 100.00 100.00 99.60 100.00 100.00 100.00 100.00 100.00 75.06 100.00 100.00 100.00 99.00 MOL’s Paid-in Capital (Thousands) ¥660,000 US$8 US$62,752 US$228,100 US$0 US$14,408 US$10 US$101,401 US$1 US$22,100 ¥0 ¥100,000 S$262,370 ¥650,000 ¥40,000 € 18 DKK 8,000 US$1 US$379,311 US$0 US$10 US$10 US$344 NKR 60,000 US$20,743 ¥600,045 € 169,419 € 175,026 € 162,160 € 60 ¥1,000 ¥1,000 US$9,781 US$100 US$9,781 IDR 11,272,000 US$100 € 149,650 US$206,138 ¥3,961,000 ¥2,672,000 ¥1,265,000 US$61,500 US$38,104 S$900 THB10,000 THB130,000 ¥50,000 ¥30,000 ¥54,600 ¥10,000 € 91 € 1,950 ¥100,000 ¥100,000 US$60,000 THB20,000 HK$1,000 RMB8,000 THB10,000 ¥1,577,400 HK$40,000 € 537 € 414 HK$14,100 ¥756,250 € 3,049 S$700 NT$7,500 THB20,000 Associated Businesses Others Registered Office Voting Rights (%)* MOL Logistics (UK) Ltd. MOL Logistics (USA) Inc. MOL Logistics Holding (Europe) B.V. MOL Worldwide Logistics, Ltd. Nissan Carrier Europe B.V. Nissan Motor Car Carrier Co., Ltd. Shanghai Huajia International Freight Forwarding Co., Ltd. Shosen Koun Co., Ltd. Thai Intermodal Systems Co., Ltd. TraPac Jacksonville, LLC. TraPac, LLC. Utoc Corp. Utoc Engineering Pte. Ltd. Utoc Logistics Corp. Utoc Ryutsu Service Corp. Utoc Stevedoring Corp. Utoc Transnet Corp. World Logistics Service (U.S.A.), Inc. Shipowner / Chartering companies (52 companies) in Panama, Marshall Islands, Liberia, Hong Kong, Cayman Islands, Singapore and Isle of Man Others (18 companies) Meimon Taiyo Ferry Co., Ltd. Nippon Concept Corp. Ocean Network Express Holdings, Ltd. Ocean Network Express Pte. Ltd. PKT Logistics Group Sdn. Bhd. Rotterdam World Gateway B.V. Shanghai Kakyakusen Kaisha, Ltd. Tan Cang-Cai Mep International Terminal Co. Ltd. TIPS Co., Ltd. Other (1 company) Daibiru Corporation Daibiru CSB Co., Ltd. Daibiru Holdings Australia Pty Ltd. Daibiru Facility Management Ltd. Daibiru Saigon Tower Co., Ltd. Green Kaiji Kaisha, Ltd. Green Shipping, Ltd. Hokuso Kohatsu K.K. Ikuta & Marine Co., Ltd. Japan Express Co., Ltd. Japan Hydrographic Charts & Publications Co., Ltd. Jentower Limited Kitanihon Tug-boat Co., Ltd. Kobe Towing Co., Ltd. Kosan Kanri Service Co., Ltd. Kosan Kanri Service-West Co., Ltd. M.O. Tourist Co., Ltd. MOL Kosan Co., Ltd. Mitsui O.S.K. Passenger Line, Ltd. MOL Career Support, Ltd. MOL Kaiji Co., Ltd. MOL Techno-Trade, Ltd. Nihon Tug-Boat Co., Ltd. Nishinihon Sogo Setsubi Co., Ltd. Tanshin Building Service Co., Ltd. Tokai Tugboat K.K. Ube Port Service Co., Ltd. White Lotus Properties Ltd. Chartering company (1 company) in Panama Other (2 companies) Shinyo Kaiun Corp. South China Towing Co., Ltd. Tan Cang-Cai Northern Maritime Joint Stock Company Tan Cang-Cai Mep Towage Services Co., Ltd. Euromol B.V. Linkman Holdings Inc. Mitsui O.S.K. Holdings (Benelux) B.V. MOL (Americas) LLC. MOL (Americas) Holdings, Inc. MOL (Asia Oceania) Pte. Ltd. MOL (Europe Africa) Ltd. MOL Accounting Co., Ltd. MOL Adjustment, Ltd. MOL Engineering Co., Ltd. MOL Information Systems, Ltd. MOL Manning Service S.A. MOL Marine Co., Ltd. MOL Ocean Expert Co., Ltd. MOL Ship Management Co., Ltd. MOL Ship Tech Inc. MOL Treasury Management Pte. Ltd. Other (1 company) UK USA Netherlands Hong Kong Netherlands Japan China Japan Thailand USA USA Japan Singapore Japan Japan Japan Japan USA Japan Japan Japan Singapore Malaysia Netherlands Japan Viet Nam Thailand Japan Viet Nam Australia Japan Viet Nam Japan Japan Japan Japan Japan Japan British Virgin Islands Japan Japan Japan Japan Japan Japan Japan Japan Japan Japan Japan Japan Japan Japan Japan British Virgin Islands Japan Hong Kong Viet Nam Viet Nam Netherlands Liberia Netherlands USA USA Singapore UK Japan Japan Japan Japan Panama Japan Japan Japan Japan Singapore 100.00 100.00 100.00 100.00 100.00 90.00 76.00 79.98 100.00 100.00 100.00 67.55 100.00 100.00 100.00 100.00 100.00 100.00 41.13 15.00 31.00 — 35.13 20.00 31.98 21.33 24.44 51.07 99.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 95.25 100.00 62.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 87.26 100.00 100.00 70.00 99.39 100.00 36.00 25.00 36.00 40.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 MOL’s Paid-in Capital (Thousands) £400 US$9,814 € 19 HK$58,600 € 195 ¥640,000 US$1,720 ¥300,000 THB77,500 — — ¥2,155,300 S$2,000 ¥50,000 ¥10,000 ¥50,000 ¥90,000 US$200 ¥880,000 ¥600,440 ¥50,000 US$3,000,000 MYR276,354 € 14,018 ¥100,000 VND732,966,020 THB100,000 ¥12,227,847 VND349,000,000 A$140,000 ¥17,000 VND124,203,000 ¥95,400 ¥172,000 ¥50,000 ¥26,500 ¥99,960 ¥32,000 US$0 ¥50,000 ¥50,000 ¥20,000 ¥14,400 ¥250,000 ¥300,000 ¥100,000 ¥100,000 ¥95,000 ¥490,000 ¥134,203 ¥10,000 ¥20,000 ¥10,000 ¥14,950 ¥6,810,000 ¥100,000 HK$12,400 VND 118,560,000 VND 112,717,115 € 8,444 US$3 € 17,245 — US$200 S$2,350 US$8,402 ¥30,000 ¥10,000 ¥20,000 ¥100,000 US$3,889 ¥100,000 ¥100,000 ¥50,000 ¥50,000 US$2,000 * MOL’s voting rights include voting rights of MOL and its subsidiaries 74 75 Data SectionMITSUI O.S.K. LINES MOL REPORT 2019MITSUI O.S.K. LINES MOL REPORT 2019The MOL Group’s Global Network Information Disclosure and External Recognition Countries and Regions with Group Offices Europe / Africa Asia / Middle East / Oceania UK Netherlands Belgium France Italy Turkey Russia Poland Germany Austria Czech Republic Egypt Algeria Ghana Kenya Republic of South Africa Japan China Republic of Korea Taiwan Hong Kong Philippines Myanmar Malaysia Singapore Viet Nam Thailand Indonesia India Sri Lanka Qatar UAE Oman Australia New Zealand North America / Central America / The Caribbean USA Canada Mexico South America Brazil Chile UK USA Japan Singapore Brazil Headquarters & Chief Executive Representatives Chief Country / Regional Representatives Group company (50% stake or more) offices ONE MOL Network for Global Information Strategy —Utilizing Information across Divisions, Countries, and Regions— Regional Representative, Europe, Africa: UK Chief Country Representative: Turkey Regional Representative, Asia, Middle East, Oceania: Singapore Chief Country / Regional Representatives: China, Taiwan, India, Indonesia, Republic of Korea, Malaysia, Myanmar, Philippines, Thailand, Viet Nam, UAE, Australia, Hong Kong, Singapore Headquarters: Japan Dry Bulk Business Unit Energy Transport Business Unit Product Transport Business Unit Corporate Marketing Division Administrative Department Regional Representative, North America, Central America & the Caribbean: USA Chief Country Representative: Mexico Regional Representative, South America: Brazil Chief Country Representative: Brazil Promoting Information Disclosure and Engagement MOL considers timely and accurate disclosure of management information about management strategy, investment plans, market and financial information as a matter of great importance. In addition conditions, and other information through its website. to being accountable to shareholders and investors by providing As expressed in the Corporate Governance Code, MOL information, the Company communicates their opinions to its proactively holds constructive dialogues with institutional investors management. The distinguishing feature of our investor relations (IR) and there will be no change to this policy. Feedback is regularly activities is that the president takes the lead in their implementation. provided to management with regard to the content of discus- In fiscal 2018, based on the belief that the president himself sions held with investors and analysts. MOL will continuously should directly communicate the Company’s future strategies, bolster the quality and quantity of communication while being the president gave the Company’s presentations of interim and mindfully aware of fair disclosure rules enacted in April 2018. full-year results and attended meetings with domestic and foreign The responsibility to provide information is not limited to investors. The Company is also aware of the need for full and management and financial issues. MOL’s basic stance is to fair disclosure to all investors, whether in Japan or overseas. quickly disclose information, including negative information on In releasing its quarterly financial results, the Company discloses such matters as accidents, to all stakeholders. Furthermore, the financial highlights in Japanese and English on the Tokyo Stock Exchange’s TDnet, while simultaneously posting the Company holds regular drills for responding to the media in emergencies and are working to strengthen its ability to quickly the Japanese and English presentation materials on its website. and properly disclose information. MOL will continue working to Such information is emailed to domestic and foreign investors raise reliability in its business policies and management through who request notification. Additionally, MOL actively disseminates close communication with various stakeholders. IR Activities in Fiscal 2018 (April 2018–March 2019) IR Materials (Available on MOL’s website) Activity Frequency Details Material Japanese English Business performance presentations 4 times Quarterly results/forecasts President’s small meetings 4 times Held for analysts in Japan For securities analysts and institutional investors For overseas institutional investors Overseas investor road shows 5 times Conferences held by securities companies For individual investors Corporate presentations for individual investors 4 times 2 times Twice in Europe, twice in Asia, and once in North America Attended conferences in Japan and held individual meetings Attended seminars for individual investors in Nagoya and Takamatsu, once in each city External Recognition Financial reports Stock exchange filings (financial highlights, etc.) Business performance presentation materials (including summaries of Q&A sessions) Integrated report Securities reports Quarterly reports Business reports for shareholders Investor guidebook Market data Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes No No No* Yes Yes * Translation for reference and convenience purpose only is available. • SMBC Work Style Reform Finance Based on MOL's initiatives adopted in the past (see page 40), Sumitomo Mitsui Banking Corporation approved MOL for SMBC Work Style Reform Finance as a growth enterprise that can be expected to encourage workstyle reform in the future (FY2017). THE INCLUSION OF MITSUI O.S.K. LINES, LTD. IN ANY MSCI INDEX, AND THE USE OF MSCI LOGOS, TRADEMARKS, SERVICE MARKS OR INDEX NAMES HEREIN, DO NOT CONSTITUTE A SPONSORSHIP, ENDORSEMENT OR PROMOTION OF MITSUI O.S.K. LINES, LTD. BY MSCI OR ANY OF ITS AFFILIATES. THE MSCI INDEXES ARE THE EXCLUSIVE PROPERTY OF MSCI. MSCI AND THE MSCI INDEX NAMES AND LOGOS ARE TRADEMARKS OR SERVICE MARKS OF MSCI OR ITS AFFILIATES. 76 77 Data SectionMITSUI O.S.K. LINES MOL REPORT 2019MITSUI O.S.K. LINES MOL REPORT 2019 Glossary (In alphabetical order) Shareholder Information Chemical Tankers Market Exposure Tankers fitted with multiple tanks to transport many different types of liquid chemical cargo at the same time. These tankers have complex design specifications, as they are equipped with indepen- dent pipelines, cargo pumps, and temperature-regulating functions for each tank, in addition to dedicated facilities for cleaning and other features. Ethane Carriers Ethane carriers are specialized for transporting liquefied ethane, which has been cooled to -92°C, and equipped with a reliquefaction system. LNG carriers transport cargo at -162°C, and LPG tankers transport cargo at -42°C, so ethane carriers fall somewhere between the two. FPSO (Floating Production, Storage and Offloading System) A floating facility for producing oil and gas offshore. The oil is stored in tanks in the facility and directly offloaded to shuttle tankers for transport to the shore facility. FSRU (Floating Storage and Regasification Unit) FSU (Floating Storage Unit) An FSU is a floating facility for storing LNG offshore. An FSRU has the same structure as an FSU with an additional function for regasification of LNG onboard, with which it can send out vaporized natural gas to land through a pipeline. FSRUs and FSUs are being adopted for a growing number of projects to establish LNG receiving terminals all over the world because of their advantages, including a shorter lead time and lower costs compared to conventional onshore receiving terminals. Highly Stable Profits Profits that are stably generated by contracts of two years or more, and projected profits from highly stable businesses. Highly stable profits are currently provided by the following segments: Dry bulkers, Tankers, and LNG carriers / Offshore businesses under medium- and long-term contracts (two years or more); Associated businesses; and Others. LNG Carriers Tankers designed for the transportation of liquefied natural gas (LNG). To transport LNG which has been cooled to -162 °C, LNG carriers make use of a wide variety of technologies in various ship parts, including specialized tanks that can withstand extremely cold temperatures and emergency shut-off devices to prevent accidents in cargo operation. If vessels procured for the medium- and long-term (owned or medium-and long-term chartered vessels) operate only under short- term cargo transport contracts, these vessels are exposed to market rate fluctuations as a result of the mismatch between the vessel procurement and operating periods. MOL defines the number of medium-and long-term procured vessels operating under cargo contracts of less than two years as “market exposure,” and monitors the ratio of its market exposure with the aim of controlling the risk of market fluctuation. Pool Arrangements where ship operators and owners pool certain ships together to conduct joint operations. RoRo (Roll-on / Roll-off) Ships Ships that are equipped with a ramp like ferries and have a vehicle deck to hold trucks, trailers, and other vehicles. Cranes and other loading equipment are not used in loading; instead, vehicles are driven onto the ship. In general, while ferries transport passengers and personal-use automobiles in addition to freight vehicles, RoRo ships mainly transport freight vehicles. Small- and Medium-sized Bulkers Panamax, Handymax, and Small handy dry bulkers that mainly transport general bulk cargo, such as coal, grain, salt, cement, and steel products. SOx The term “SOx” collectively refers to sulfur oxide emissions, including sulfur dioxide (SO2), which are air pollutants emitted during the combustion of fossil fuels containing sulfur, such as oil and coal. In the marine transport industry, regulations requiring a drastic reduction in the sulfur content of fuel will come into effect in 2020, in order to curtail the amount of SOx in vessel emissions. Subsea Support Vessels Vessels designed for installation and maintenance of subsea facilities during exploitation of offshore oil and gas fields. Visualization of Marine Operations Measures to provide visualization of the conditions of vessels and cargo at sea using ICT, thereby achieving optimal vessel operations, in conjunction with providing value-added services to customers. For example, big data on weather and sea conditions is analyzed and effectively utilized to achieve safer vessel operations and optimal routing. In addition, measures are taken to improve the safety of vessel operations and ship management efficiency, including remotely monitoring the operational status of engines and other machinery and making maintenance arrangements in advance. For further information, please contact: Investor Relations Team Corporate Communication Division Mitsui O.S.K. Lines, Ltd. 1-1, Toranomon 2-chome, Minato-ku, Tokyo 105-8688, Japan E-mail iromo@molgroup.com URL https://www.mol.co.jp/en/ Capital Head office ¥65,400,351,028 1-1, Toranomon 2-chome, Minato-ku, Tokyo 105-8688, Japan Number of MOL employees 1,026 Number of MOL Group employees (The parent company and consolidated subsidiaries) 8,941 Total number of shares authorized 315,400,000 Number of shares issued 120,628,611 Number of shareholders 85,217 Shares listed on Tokyo Stock Exchange Share transfer agent (Contact information) Communication materials Sumitomo Mitsui Trust Bank, Limited Stock Transfer Agency Business Planning Department 8-4, Izumi 2-chome, Suginami-ku, Tokyo 168-0063, Japan MOL Report (English / Japanese) Investor Guidebook (English / Japanese) Market Data (English / Japanese) News Releases (English / Japanese) Website (English / Japanese) (As of March 31, 2019) Stock Price (Tokyo Stock Exchange) and Volume of Stock Trade* Fiscal 2016 Fiscal 2017 Fiscal 2018 High Low ¥3,890 ¥1,990 High Low ¥4,170 ¥2,891 High Low ¥3,490 ¥2,163 Stock Price (¥) 5,000 4,000 3,000 2,000 1,000 0 Volume of Stock Trade (Monthly) (Million shares) 50 5 4 2016年 FY2016 6 7 8 9 10 11 12 2 1 2017年 FY2017 3 4 5 6 7 8 9 10 11 12 1 2 2018年 FY2018 3 4 5 6 7 8 9 10 11 12 2 1 2019年 FY2019 3 4 5 40 30 20 10 0 * The Company consolidated its common shares on the basis of one (1) unit for every ten (10) shares effective October 1, 2017. Figures for FY2016 are calculated on the assump- tion that the consolidation of shares was conducted at the beginning of FY2016. 78 79 Data SectionMITSUI O.S.K. LINES MOL REPORT 2019MITSUI O.S.K. LINES MOL REPORT 2019 

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