Mitsui O.S.K. Lines, Ltd. (9104) Earnings Call Transcript & Summary

Good afternoon. Thank you very much for joining us today on such short notice. We will now begin this press conference regarding the appointment of the Chairperson, President and Vice Presidents of Mitsui O.S.K. Lines LTD, and we do have this -- today's presenters coming into this venue. So let me introduce now who will be addressing today. To your left is President; Takeshi Hashimoto, Representative Director and President. To your right, is President designate, Jotaro Tamura. Today's program will begin with the remarks from Hashimoto, followed by remarks from Tamura, we will then move on to a Q&A session and a [ photo ] opportunity, and we are scheduled to conclude by 04:00 p.m. Please note that this press conference is also being streamed online, and also, please be advised that we will accept questions only from those attending in person. With that, we will begin first, President Hashimoto, will provide an explanation.

Good afternoon. Thank you for being here with us. I know this is a very busy season of the year. So we actually had a Board of Directors meeting in the morning today and we approved the organizational structure for the coming years, and we would like to make an official announcement. As the press release was out, I've already gave remarks on the page. So I'm not going to be repeating well -- as in my mind because it's stated already on the page. But I'd like to elaborate a little more about why I consider that this is that fitting timing for us to make such organizational changes. So as you know, BLUE ACTION 2035 is a long-term business plan. And the first 3 years of Phase 1 is coming to an end, even before that, the phase at 2021 was when I actually became the President. So the first 2 years, back then, there was this rolling planned system. So it was 2 single year business plan we formulated. And since then, we have shifted to this more of a long-term business plan based business conduct. So that was the background of the BLUE ACTION 2035. And Phase 1, as I said, is ending at this 2026 March. And I think this is a nice 1 closure we are coming to. And as you probably are aware, there were a lot of events but our business performance expanded significantly during my being a President and the roles and responsibilities of President kept expanding as our organizational group scale became larger. And then we are coming into this space that cannot simply be carried out by a single person. And I just became turned at 68 years old. And I thought that, well, maybe this is time that I pass this baton to a younger generation and make this an organization ready to build a future with these younger capabilities. And we do this -- have this Chief Executive Officer, Chief Operating Officer, Chief Financial Officer, 3 CXOs. So this is going to be a collaborative management structure led by these CEO, COO and CFO. This was my strong request that the structure will be set in that way. And it's coming from my the previous 5 years' experience. I just realized that in all these responsibilities that I was carrying out was really realistically very challenging in terms of time and also how many people would be needed to carry out all these. So would like to have this executive team a very strong 3 capable members leading the whole group and then this -- now President will be the head of the whole group as a part of this 3 collaborative management structure. So this CEO designate Tamura-san is a completely different person in terms of the background. He was long involved in the container business. He was a long involved in overseas business. We expanded organizations, and he was -- he led this expanded team. So I have a full trust that he will be very capable as CEO leading this an expanded organization. He has a great trust in internally and in externally, and he has great personality and great traits. So we're still in progress of making an execution plan for the Phase 2. And then I think he's the very fitting CEO to be leading the group. And I will remain as a Chairperson and I will be still directors Board member, but I will be more stepping back but I will do utmost to support the executive members of this group. So I would love to seek your continuous support for us to be building even bigger, greater future. Thank you very much.

Right. Next, President designate Jotaro Tamura will deliver.

Well, good afternoon. And today, following the resolution of the Board of Directors, I've been appointed to assume the position of our President and CEO. As of April 1 next year, my name is Jotaro Tamura, and I'd like to do a quick introduction of myself. I joined the former Osaka Shosen Mitsui O.S.K. Lines in 1991 and was appointed Executive Officer in 2022. And I'm now in my fourth year in the role at the age of 57. As Hashimoto-san kindly mentioned, for most of my career, I've been involved in managing overseas organization -- spending -- so I was overseas person spending 18 of my 31 years with the company stationed in London and Hong Kong. And over the latter 2 of my 4 years as an executive officer, I have been responsible for the Asia region, commuting from Tokyo to Singapore and other Asian locations while leading local organizations. In terms of business fields, approximately 2/3 of my career has been devoted to the container shipping business along with the involvement in the car carrier business and the iron ore and raw material shipping. From 2020 onward for 4 years, I was engaged in overall group management as a General Manager and Executive Officer of Corporate Planning. In that capacity, I supported President Hashimoto and also contributed to the formulation of our current group management plan at BLUE ACTION 2035. Other initiatives, I worked on during my time in the corporate planning include the 2021 revision of the corporate philosophy and a group vision, the group's values and code of conduct as well as the subsequent formulation of the environmental vision and corporate governance policy. On the business front, these initiatives include the tender offers for DAIBIRU and Utoc as well as the formulation of the Cruise business strategy and the acquisition of MITSUI OCEAN FUJI. And April next year marks the start of a new 5-year period designated as a Phase 2 in our management plan and receiving the baton of the presidency at this milestone carries significant meaning. And I take this extremely significant responsibility very seriously. Looking back, our company posted exceptional results in 2021 and in '22, which led to a rapid expansion of our balance sheet. In response, key management challenge at that time was the need to redefine our medium- to long-term management policy and I believe that the management plan launched in the fiscal 2023 enabled us to respond to this challenge relatively swiftly. During the 3 years designated as a Phase 1. We made very proactive investments to enhance the competitiveness of our core shipping business and to create additional pillars of stable earnings. And I myself have also been deeply engaged in these initiatives as the executive responsible for the Asia region. The next Phase 2 will be critically important period in which we convert the results of our large-scale investments into tangible earnings and we will place the greatest emphasis on executing its strategies across each business and each region to achieve this goal. At the same time, while maintaining a balance between the financial discipline and the shareholder returns, we will also focus on the next investment cycle during the Phase 2 period as a global company that develops a wide range of social infrastructure businesses centered on shipping. As stated in our group provision, we will further enhance our presence. We will continue to pursue value creation at a global standard. We will firmly uphold the 3 key strategies set out in our management plan, transformation of the business portfolio, addressing environmental challenges with a focus on a vessel decarbonization and expanding global business development through revitalization of regional organizations. In leading our global organization, I intend to fully leverage my experience to deliver concrete results. Our group operates more than 900 vessels, including dry bulk, carriers, tankers, LNG carriers, chemical carriers and car carriers, making us a truly comprehensive shipping company. We take pride in being a globally unique presence in the industry. We will further strengthen each of these areas of expertise to make them even more robust. In the container shipping business which I continue to oversee, I will continue to actively support the management of Ocean Network Express, ONE, from our position as a shareholder. Today, as part of the new management structure, the appointment of 2 new executive vice presidents were announced alongside my assumption of the Presidency. The 3 of us will serve respectively as CEO, COO, CFO, forming the core of the management team. Together, we will build a collaborative management style. So that's our thinking. Given the significantly expanded scale of our business compared to the past collaboration will all stakeholders is essential to maximize corporate value. And this requires a top management to continuously demonstrate balanced decision-making and execution based on a broad perspective and foresight. And at the same time, the ability to foster deeper teamwork within the management team will be more important than ever. And the 3 of us executives will take on the role of leading this teamwork aspect. I sincerely would like to ask for your continued support and cooperation going forward. Thank you very much.

Thank you very much. That was from Hashimoto and Tamura. And we will now move on to the Q&A session.

[Operator Instructions]

This is Kaiji Press [indiscernible]. And I have 2 questions, 1 question each to the gentlemen. First to Mr. Hashimoto. So you navigated the last 5 years and you implemented various initiatives and what is the most proud results that you brought. And if you have something that's still to be accomplished? And what would that be? And to Mr. Tamura for this new appointment, when were you approached? When were you announced and what came up in your mind when you first heard the news?

Thank you very much for your question. I will answer my -- the question that came to me. When I came to become President back in 2021. From the beginning of the 2020 was the pandemic. And there were a lot of confusions in the environment. But even the last 10 years right before the pandemic. There was no shipping business, no hard period, and we needed to do several structural reforms in that last -- in that 10 years. And people's mindset, as a result, wasn't necessarily a growth-centered mindset. There was rather reserved and then it was more of like a risk avoidance kind of mindset. It was, I guess, to a certain degree necessary, but then the trend was changing Abenomics in Japan, started showing results and then the share prices of the companies were coming up. The economy was better. But then our internal mindset or morale was more to do with cost reduction. And then -- so we weren't necessarily having this in a full spirit of expanding into new area or expanding our business to a next level. So mindset change internal -- internally was, well, I consider to be very vital. So from defense to offense. So that was what I was strongly thinking when I became President. And then with that conviction, I rolled out various initiatives, the compensation system changes, HR system changes and also, we changed the organizational structure. So we did numerous things. And I think that -- those things brought significant changes. Now we have really great motivation, morale motivation. And we do have very open discussion valued culture. And so that's something that I am proud of and I think that certain results were -- had been achieved or have been achieved and yes, that we do have a lot that we can grow or improve further. I might highlight 2 aspects. One, the last 5 years, we actually accumulated a number of investments of significant scale. And it's to grow our stable businesses. So chemical tank terminal businesses would be 1 type or cruise ship business. So shipping business FLNG or offshore power plant generation. So these are -- for these investments to bring in earnings and we need continuous effort to bring those investments into successful earning generating form. And I think when -- I think it will take a few years before these investments will start bringing in significant earnings but we can't really wait 5 years. So apologies. I can't really be going for another 5 years as a president. So I thought that this should be the timing to pass this baton to Tamura. But we expanded new business areas up until now. So I look forward to seeing the flourishment of these new businesses but how great success they're going to be, I know that I didn't really deliver till the very end because it still requires a few more years. And then I guess I needed it to realize at a much earlier timing. But what I learned and as we went along was that our human capital is the vital part. And then if you create a strong team, even you have a very complicated, difficult business, you will be able to overcome it. But you need to nurture people. You need to bring it best of everybody that's something that wouldn't happen overnight. And it requires very robust, sustainable efforts. So training, nurturing people so that we will be able to be ready for the bigger -- future is something that would be -- will continue to be a big challenge for our management team. And -- but -- so we are already clear what are the challenges we need to tackle. And then I think what we have left is how well we can execute. So I will stay as a member of the Board, I will be supporting in every possible way for him to lead the execution part.

All right. So I'd like to answer the question from my end. So when was I informed, what came up in my mind when I heard the news that I will be the next President. So from 2021 for 3 years, and I was the head of the business planning under the leadership of Mr. Hashimoto for 3 years from 2021. So I was involved in a daily strategic discussions. So I had the visibility of how he was formulating these strategies. And then 2021 was the timing but that's been the where I was fortunate to be in the position of. And -- yes, and then this timing was the very -- the official timing when I got this know the succession plan. And as you would imagine, I was very surprised. But how I'm interpreting it? Well, my stance has always been if I can be of any service, any contribution, I'm willing -- I would take any responsibility, I'm trusted upon graciously. So I responded saying that if I can be of any help and the contribution, yes, I graciously will take this on.

Any other questions, please? So we will go to the first row of the right block, please.

So this is [ Jan Marine ], the newspapers Hashimoto -- so this is the -- sorry, to Mr. Tamura. So I may be overlapping in what I'm asking but the challenge -- so in the profile statement, there was this -- the word, challenge. So you've been seeing the Asian market as a leader, and you probably know a lot of challenges needed to go through these challenging times as well. As a President now for your company to globally grow, what are the transformations you think or changes you think you will be needing to lead?

Well, thank you very much for your question. Well, I might be repeating what Hashimoto-san said. But then for a long time, there was this shipping business harder times, and then it changed and then now it's in a very favorable environment. So what are we going to do was a big question. But mindset-wise, we weren't experiencing this in a favorable environment. So we needed it to create everything from scratch with a totally different mindset of going aggressive going into new arena. So what do we need to do? How do we need to do was all these explorative things. And it wasn't just the Asia region that I was leading but in every region, until then, I was totally headquartered in Tokyo been a top down and giving instructions but we decided to change it completely. But it took time for us to transition. But I think the spending those 3 years, we managed to transform ourselves. So here onwards, it's not just going to be the challenging spirit that we're going to be exercising. We need to really bring in results, concrete results. We need to focus on how we can effectively execute what we planned or what we envisioned. So as President, yes, headquarters is going to be very important functionality. But now we're going through this awakening period of all these regional organizations, and I would like to really make things happen with all these regional organizations.

Okay. Next question will be from the left block.

Yes. This is Nikkei Newspaper. Two questions, one for each. One question to Mr. Hashimoto. It'd be great if you can elaborate more what kind of person Tamura-san is? And a question to Mr. Tamura. You -- okay, so it was mentioned that your business has been diversified with a lot of an investment you did in Phase 1. But in the Phase 2, I guess, you need to see which one would be a long-standing one, which one you need to recede.

Okay. So I don't know how credible mine describing him would be or -- but how I'm a good person to describe. But he -- for method of things, he takes a very logical approach, break something big down into elements, components and you would like to be able to have this analytical eyes and be able to construct the solution mechanically or systematically. So he has a very logical approach. So he has a very clear cut of a building strategies and execution plan, I think that helps him governing -- garnering trust from people. But at the same time, he's very passionate and then a very quiet but very passionate flame at the core. And when you are a very logical capable person, you might appear to be as someone who's a cold or robot-like, but no, he has this passionate side as well. And I think that's one of the many balances that he has at a great level. Another thing the -- my experience over 5 years of being President. What's really critical is how well you can communicate to outside world, particularly in English, it's been more than ever important. And one, because our customers, clients, business partners are global, and we need to have this top -- at the top -- the top one-on-one. And then that's really important but it's not necessarily just that. We have so many global talents working in our group, and we have business leaders and we have increasing percentage of non-Japanese leaders and employees, and then you need to really motivate those colleagues. And if you can't communicate effectively, it wouldn't happen. And so not just the language capabilities and you need to be able to effectively influence or to garner a mutual understanding in both languages. And then he can even speak Chinese. And then we do business in China, Taiwan, and also in the Southeast Asia, where we have a lot of Chinese-speaking partners. So him being a great communicator in all the 3 languages in the English, Chinese, Japanese are really great trade and then I look up to him. I'm envious in a way.

Okay. So I'd like to answer my question. So how are we going to be having this new select and concentration. So how -- what is the approach of us getting into Phase 2? I guess there are 2 aspects of external environment-related and internal environment. So -- and then if we think that something keeps having this potential to succeed that we need to keep pushing and external environment from the beginning of this year. It's particularly prominent at this geopolitical risks coming about. And the trend -- global trend changed towards environmental topics. So would like to really be attuned to what's happening outside the world and fine tune and orchestrate and adjust what we intend to do and how we do it. And anything we do, it's fitting to our strength, then that should be something that we need to continue. But I'm sure, as you pointed out, that we will find that certain things and are not going in the way we originally thought. So yes, so my answer is that we will closely monitor what's happening outside and inside of our organization and we continue to make necessary decisions as we go along without really staying complacent with where we are.

Okay. Another question, please from the back end on the left-hand side, please.