Mitsui O.S.K. Lines, Ltd. ($9104)

Thank you, everybody, for being here with us. We would like to get started. We will explain today the Phase 2 of the MOL Group's management plan, BLUE ACTION 2035, which aims to transform the group into a global social infrastructure company. And then this is the briefing session. I will be the MC for the day, Investor Relations Department Head, Ishibe. And the main speaker would be the Chief Executive Officer, Tamura, from the 1st of April 2026; Chief Operating Officer, Umemura; and Chief Financial Officer, Hamazaki. And the first 40 to 45 minutes will be the presentation and the remaining 40 minutes will be Q&A. And we expect the ending time to be around 5:30 p.m. And the Q&A will be with the names that show up on the Zoom. If your current label is not your name, it'd be great if you can change that to your name so that we will be able to identify you with your name. In April 2023, we launched our 13-year group management plan, BLUE ACTION 2035, and have expanded our field as a social infrastructure company originating from the ocean. And we positioned the 5 years from 2026 to 2030 as the next stage Phase 2, and we'll continue to take on challenge toward realizing our group vision for 2035. This is the agenda. First, we will provide an overview, including a review of the Phase 1 and the positioning of Phase 2, followed by a detailed explanation of the Phase 2 plan. So the first part will be from the CEO, Tamura-san; and the cash allocation, the shareholder return and the 3 main strategy will be from the CFO, and the detailed execution plan of each business segment will be from Umemura-san. So Tamura, CEO, please.

Well, to everybody who have joined this session, thank you very much for being here. My name is Jotaro Tamura, who has taken up this position of CEO from 1st of April. Before going into the main position, I would like to make a brief remark on the current situation in the Middle East and the international situation, including around the Strait of Hormuz. It is becoming increasingly unstable and the structure of supply chains, particularly for energy is being recognized as a major issue. And as a social infrastructure company rooted in the ocean, and for Japan, which depends heavily on imports for its resources, energy security is an extremely important issue, and we strongly reaffirm that our group plays a vital role in the global energy supply. So it is precisely under these circumstances that we as the social infrastructure company rooted in the ocean are more mindful than ever of our responsibilities in our daily operations. So we will continue to prioritize the safety of our seafarers, cargo and vessels and as one group ensures the stable delivery of essential goods that support energy supply and everyday life. And we were committed to working closely with the relevant stakeholders and governments to fully fulfill our role in contributing to the stability of society as a whole. And BLUE ACTION 2035, which we will present today, it's our group's management plan to sustainably enhance corporate value by achieving both economic and social value even in an era of high uncertainty. With that, I will now move on to the explanation of the details. First of all, this slide, under BLUE ACTION 2035, we manage targets and performance for each phase using our core KPIs and continuously monitor progress toward achieving our goals for fiscal year 2035. In Phase 1, we largely achieved both financial and nonfinancial core KPIs and significantly advanced our transformation toward management that balances growth and stability. And in addition, during the 3 years of Phase 1, and supported by favorable market conditions, we achieved the profit target set for the final year of the period for 3 consecutive years starting from the first year. If you go to the next page, Slide 5. In addition, in Phase 1, we positioned asset rebalancing as a key theme. We classified our businesses into market-driven and stable earnings types based on their exposure to market conditions and advanced the transformation of our asset composition. Taking into account the high market volatility inherent in the shipping industry, we aim to increase the proportion of stable earnings business in order to achieve an optimal balance that delivers high returns in a strong market, while maintaining profitability for the group as a whole even during downturns. And in the initial Phase 1 plan, we had set an investment plan of JPY 1.2 trillion. However, by proactively capturing opportunities, we executed investments totaling JPY 2.0 trillion, including JPY 1.6 trillion in stable earnings businesses. As a result, we advanced rebalancing to 37:63, nearly achieving the plan in a 40:60 ratio while also bringing forward the expansion of total assets, thereby advancing both the transformation and growth simultaneously. Page 6. Meanwhile, as we executed the Phase 1 plan, there were changes in the external environment that differed from what we had anticipated 3 years ago. As I said at the beginning, geopolitical risks, including the current instability around the Strait of Hormuz as well as concerns over economic and energy security are causing instability in the global environment and increasing uncertainty. In addition, delays in the energy transition and the rapid advancement of AI could also impact our growth strategy. And if you go to the next page -- well, sorry, still on this page. Under these circumstances, in Phase 1, we advanced investments aimed at securing stable future earnings through portfolio transformation, enhanced the sales capabilities of our overseas organizations, and created growth opportunities through regional strategies and accumulated achievements and expertise toward decarbonization through our environmental strategy. In the next stage, Phase 2, we will accelerate the realization of returns on investments, adjust the pace of investments that had been executed ahead of schedule and strengthen shareholder returns. While uncertainty is increasing due to changes and instability in the external environment, we will view changes in the business environment such as supply chain restructuring and energy transitions as new opportunities and continue to meet societal needs. In Phase 2, we will shift the focus of management from transformation and expansion to delivering results. Accordingly, we have identified 3 key priorities for Phase 2 aimed at delivering results as shown on the next slide. Slide 7. The first of the key priorities is enhancing our earnings power, which you see on the left-hand side. We will strengthen the profitability of the entire group by leveraging and enhancing the strength of each individual business. So specifically, we will focus on realizing the full effects of our investments, creating synergies across businesses and regions and undertaking a disciplined risk taking in business exposed to market conditions. The second is a balanced capital allocation. We will pursue growth investments, financial soundness and shareholder returns simultaneously, thereby improving capital efficiency. Specifically, we will work on balancing investments with the maintenance of a sound financial base, strengthening shareholder returns and prompting asset recycling. The third is building a solid management foundation. Through addressing sustainability issues and enhancing governance, we will strengthen the foundation for sustainable business growth. In particular, we will focus on maximizing the capabilities of our people and organization and then driving business transformation through digitalization and the adoption of AI. So by setting these 3 priorities for Phase 2, we will translate the achievements accumulated in Phase 1 into tangible results in the next stage, aiming to further enhance corporate value. Next we go to Slide 8. From here, I will explain the details of the Phase 2 plan, covering the overall framework of BLUE ACTION 2035, the profit plan, shareholder return policy and cash allocation, the 3 main strategies and the management foundation. Page 9. This is the overview. We position BLUE ACTION 2035 as a road map to create economic and social value in an integrated manner and to move toward realizing our group vision. In Phase 2, we have incorporated sustainability issues together with governance into our management plan as part of our management foundation. Through the 3 main strategies and the strengthening of our management foundation, we aim to create both economic and social value and become a company chosen by all stakeholders. So this is the updated overview of BLUE ACTION 2035. The overall structure remains unchanged from the original plan formulated 3 years ago. The key update this time is the Phase 2 priorities shown near the center of the diagram, the 3 things. In Phase 1, portfolio transformation centered on an asset rebalancing was positioned as a key theme. However, as mentioned earlier, Phase 2 focuses on priorities aimed at delivering results. Under the Phase 2 priorities, we will advance initiatives related to our management foundation comprising 3 main strategies: portfolio, regional and environment strategies as well as core sustainability issues and governance, aiming to realize our vision for 2035. Slide 11. Again, core KPIs. The core KPIs that quantify our desired state for 2035 consist of financial and nonfinancial KPIs. As in Phase 1, the financial KPIs are pretax profit, net gearing ratio and ROE, while the nonfinancial KPIs cover environment, safety and human capital, and the digital transformation, DX. For pretax profit based on investments made in Phase 1 and plans beyond Phase 2, we have raised the 2030 target from JPY 340 billion to JPY 420 billion and the 2035 target from JPY 400 billion to JPY 500 billion, aligning with our asset size and the portfolio. And from Phase 2 onward, we will place a greater emphasis on improving capital efficiency, setting our ROE target at over 10%. Among the nonfinancial KPIs, we have also reviewed the human capital indicators. Slide 12. This slide shows the breakdown and the pathway for business toward achieving a pretax profit of JPY 420 billion and ROA of 5.5% in the fiscal year 2030, the final year of the Phase 2. From fiscal year 2026, we will establish a new chemical logistics business consisting of chemical tankers, methanol carriers, product tankers and tank terminals while reorganizing crude oil tankers, LPG and ammonia carriers, LNG and ethane carriers, and wind and offshore into the energy business. This profit plan is based on the assumption that instability around the Strait of Hormuz will settle by the end of April. However, we will monitor developments and update it as necessary at the time of our earnings announcement. And we will also provide details on a pretax profit, profit before tax for container shipping business in the fiscal year 2026 at the end of April. Slide 13. To achieve the Phase 2 priorities of enhancing earnings power and a balanced capital allocation, we will revise our business management approach. Specifically, we will shift from the previous 2 categories, market-driven and stable earnings, to 3 categories: market-driven, mainly container shipping, and hybrid, primarily other shipping businesses, and stable earnings, including LNG carriers and non-shipping businesses. Further details will be explained in later slides. The purpose is not the classification itself, but rather to institutionalize risk return control as a framework to improve overall ROA. Based on this new classification, we will work to expand scale and improve profitability while maintaining the current asset and profit ratios. And so again, we will work to expand the scale and improve the profitability while maintaining the current asset and profit ratios. In particular, we plan to increase profit before tax in non-containership business from JPY 204 billion in 2025 to JPY 260 billion by 2030. Slide 14, please. In Phase 2, which is positioned as a phase of delivering results, cash generation capability is also an important indicator. We have defined base operating cash flow as an indicator of fundamental cash generation capability and present its trajectory. We will realize the results of investments made in Phase 1 and steadily expand base operating cash flow, particularly in hybrid and stable earnings businesses, transforming into a structure less dependent on market-driven businesses. Excluding one-off items such as special dividends from ONE, we plan to increase base operating cash flow by approximately JPY 110 billion from fiscal year 2026 to fiscal year 2030. So compared to '25, JPY 120 billion more. So long contract equipped the new vessels will come into operation is one reason and the tank terminal business expansion is another and overseas real estate business contribution and the cruise business expansion. So these initiatives planned for Phase 2 will materialize in numbers are those reasons. From Page 15, the CFO will explain the details.

Right. So this is Hamazaki, the CFO, and thank you for being here with us. Regarding the shareholder returns, in the Phase 2, we will introduce a progressive dividend starting at JPY 205 per share and implement flexible share buybacks targeting a total payout ratio of 40%. 2026, so we actually have this assumption of the earnings going to be less than 2025, but JPY 200 is how we'd like to get started with the Phase 2. Hence, we have set the progressive dividend starting at JPY 205. So this was JPY 5. And dividends will be determined based on a level that can be stably sustained in line with the accumulation of stable earnings businesses. Targeting a total payout ratio of 40%, we will flexibly conduct share buybacks for the difference between dividends and total returns, thereby returning upside from market-driven and hybrid businesses to shareholders. And shareholder buyback is not just the means to return to the shareholders, progressive dividends will enhance dividend visibility while share buybacks will improve capital efficiency. And we will be able to achieve both with confidence is how we are seeing it right now. So this shows the cash allocation assumed for Phase 2, although fluctuations may occur year-by-year, and a policy that emphasizes the financial soundness, we will accumulate base operating cash flow and further promote asset replacement, shifting away from Phase 1's investment-first approach and not relying on new external funding. At the same time, when attractive investment opportunities arise, we will make growth investments using external funding selectively. So JPY 700 billion was the annual average of investment and the follow-on investment and shipment. So JPY 830 billion is here and JPY 300 billion is the annual increase in the Phase 2. Phase 1 follow-on investment will be cashed out mainly in '26 and '27. And as these vessels come in business, the base cash flow will increase. And by strongly focusing on improving ROA and advancing business and asset replacement, we will ensure the sustainability of both growth investments and shareholder returns. So from here, I will explain the 3 main strategies in more details. We have reorganized the fundamental approach to our portfolio strategy. These are, strengthening competitive advantage; two, balancing earnings stability with the market upside; and three, creating horizontal and vertical expansion and synergies centered on strong businesses. To achieve this, in the Phase 2, we will further strengthen investment selection, enhance business monitoring and promote business and asset recycling. This slide explains the 3 business categories. Market-driven businesses generate high profits in favorable markets, but also experience significant volatility. Stable earnings businesses expand steadily with reduced volatility through long-term contracts and fixed income. Hybrid business sit in between the 2, possessing some resilience through high entry barriers and medium- to long-term contracts while strategically managing the market exposure to capture upside during favorable conditions. While Phase 1 focused on strengthening stable earnings businesses and rebalancing the portfolio, Phase 2 will additionally enhance strategic risk taking and upside capture in hybrid businesses. By combining these, we achieve diversification across different market cycles, preventing a downside risk, while generating a significant profit during favorable conditions. Slide 19. We will also pursue horizontal and vertical expansion and synergy creation centered on our strong businesses, aiming to build a unique portfolio unmatched by competitors. In particular, the trust and the capabilities we have built in maritime transport are key and a close collaboration between our regional organizations and headquarters is essential for execution. Here, we present a diagram centered on the LNG value chain and chemical logistics as a concrete example. So leveraging the strength of each business and regionally-rooted networks and the group-wide connections we have built, we aim to participate in the value chains for decarbonized energy, a new growth area. And next is Slide 20. The second of the 3 main strategies is regional strategy. In our regional strategy, which predates BLUE ACTION 2035, we aim to capture regional growth worldwide as our own growth. In Phase 2, based on our track record, expertise and regional characteristics, we will focus on key business areas where our strength can be leveraged. Specifically, in Europe and in North America, we will pursue business development in decarbonized energy and vertical expansion from maritime transport into upstream and downstream areas supported by advanced environmental technologies, numerous partners and active innovation. In regions such as Asia, Africa and Latin America, where population growth and high economic growth are expected, we will expand the shipping operations and invest in infrastructure-driven opportunities. Personnel from overseas organizations, including a group of companies that strengthened in Phase 1 will take the lead in advancing regional strategies in close coordination with the headquarters. Slide 21. In particular, we regard the Indian Ocean region as our top priority area given its strong medium- to long-term growth potential. While we will not go into specific project details today, we have already built a pipeline of projects across various business areas in the Indian Ocean region, spanning from East Africa to South Asia and Southeast Asia. We will continue developing these businesses, aiming for further expansion and early profit contributions from Phase 2 onward. Slide 22. The final of the 3 main strategies is environmental strategy. We view decarbonization not merely as a regulatory compliance, but as an opportunity for service differentiation and growth. By adopting low and zero carbon fuels and improving fuel efficiency, we will differentiate our transport services and establish a competitive advance. At the same time, we will leverage our broad business platform to capture decarbonization as a new business opportunity. These 3, portfolio strategy, regional strategy and environmental strategy, constitute the core strategies set forth in BLUE ACTION 2035. And Slide 23, next. Back to Tamura-san.

Next, I will explain the management foundation which, like the 3 main strategies, is positioned at the core of BLUE ACTION 2035. We have reorganized our sustainability issues to focus on those that contribute more significantly to value creation, identifying 4 key areas: environment, safety, human capital, and digital transformation, DX, as our material sustainability issues. Within these 4 themes, we have also identified specific priority areas to focus on. We have established 4 theme-specific visions linked to these sustainability issues within which we manage KPIs and actions. Slide 24. From here, I will outline the theme-specific visions associated with the 4 sustainability issues. The first is environment. As explained in the environmental strategy slide, we will continue our current initiatives categorized into reducing our own GHG emissions, greenhouse gas and contributing to society's emission reductions, steadily progressing toward net zero by 2050. Through the introduction of alternative fuels and improvements in fuel efficiency, we will significantly reduce our own GHG emissions and expand low and zero carbon businesses, achieving both our group growth and societal decarbonization. Slide 25. Next is safety. Safety is an absolute prerequisite for business continuity and the highest priority for our group. Through safe operations, we will continue to protect people, assets and the environment, contributing value to society and our stakeholders. To achieve this, we will strengthen our safety foundation, including awareness and organizational systems and further promote initiatives such as empowering our people, leveraging technology and enhancing risk management. Slide 26. The third is human capital. We will leverage the diverse talent across our group, including new members from Phase 1 and global personnel to maximize the capabilities of our people and organization in alignment with our business strategies. Under the human capital vision linked to this sustainability issue, we focus on 3 key themes: diversity, co-creation and a meaningful work, and we'll continue initiatives aligned with these areas. Slide 27. The digital transformation vision linked to the fourth sustainability issue aims to enhance profitability, while contributing to both solving societal challenges and achieving corporate growth. Specifically, we will advance initiatives in 3 key areas: AI-driven transformation, maritime digitalization and global core creation infrastructure, maximizing the use of AI, not only for operational efficiency, but also in management and business operations. We will also make onboard operations visible and connected, enhancing operational efficiency and stability, thereby strengthening our competitive advantage. In addition, we will develop information infrastructure that enables unified data and systems globally, facilitating a faster decision-making across regions and businesses. Slide 28, please. Finally, governance, which together with the sustainability forms our management foundation. As we expanded our business scale in Phase 1, we have developed governance structures suited to our group. We will further evolve our Board of Directors into a strategy-focused and a supervisory body to strengthen corporate governance. In addition to continuing Phase 1 initiatives, we will strengthen our execution structure to drive growth even amid increasing external uncertainty. The following are supplemental materials. As time is limited today, I will focus on key points, particularly the winning strategies of selected businesses and Umezak-san (sic) [ Umemura-san ] will explain this. Right, Chief Operating Officer -- sorry, Umemura, apologies for the mistake.

So first is the Dry Bulk business. Towards 2030, we aim to further strengthen our sales capabilities, both domestically and internationally, enhance service quality and improve both market resilience and upside capture capability. Within the Dry Bulk segment, we will introduce our strategy and a winning approach for the small- and medium-sized bulker businesses. In this segment, we will capture new transport demand arising from population growth and energy transition, seizing global growth opportunities. To achieve this, we have expanded our overseas presence by combining our strong presence in Asia with a global network of G2 Ocean jointly operated with Gearbulk. By integrating capabilities to handle over 160 types of cargo across MOL, Dry Bulk and Gearbulk, we differentiate through high value-added maritime transport, while leveraging cost competitiveness through integrated group operations. This is our group's winning strategy for the small- and medium-sized bulker business. Slide 31. Next is the Energy business. Toward 2030, we aim to capture the energy transition and achieve sustainable growth by enhancing the profitability of existing businesses and expanding low and zero carbon businesses. Within this segment, we will introduce our strategy and a winning approach for the LNG value chain, which we are strong. In the LNG value chain, we are growing our business by leveraging strong market growth, our leading global market share, industry presence and a competitive fleet structure. We are expanding ethane and LPG fleet through horizontal deployment of our global network and JV models, joint venture models, building stable earnings via FSRU projects through vertical integration and entering new floating facilities such as LNG power vessels and FLNG. We will enhance integrated marketing and engineering initiatives like Wind Challenger, strengthen cost competitiveness and further expand vertically within the LNG value chain. Through these efforts, we will establish a winning position across the entire value chain. Slide 32, please. Next is the Chemical Logistics business, which is newly set. Toward 2030, we aim to enhance our group's competitiveness by organically integrating maritime transport and onshore storage and to become a leading company in the chemical logistics. Within this segment, we will introduce our strategy and winning approach for the tank terminal business. In the tank terminal business, collaboration between MOL Chemical Tankers and LBC, which joined the group in Phase 1, is key. In addition to improving efficiency through joint sales and operations, we will collaborate with upstream development and maritime transport to pursue business development in next-generation energy and decarbonization of related storage. In addition to the existing chemical business built by MOL Chemical Tankers and LBC, we will capture opportunities from the energy transition by expanding into high-growth Asian markets, broadening the handled products and improving profitability through operational process enhancements. This is our winning strategy for the Tank Terminal business. Slide 33. Next is the Product Transport business. Toward 2030, we aim to grow our business globally by meeting logistics demand in growth regions centered on our competitive container and car carrier businesses. With this segment, we will introduce our strategy and a winning approach for the car carrier business. In this business, we combine stable longer-term demand for maritime transport with our strength, one of the world's largest fleets, a service network spanning 5 regions and 29 locations and a differentiated end-to-end solutions, including eco-friendly fleets and finished vehicle logistics to build a hybrid earnings model. We will provide stable transport based on long-term contracts with key customers, clearly differentiate through low-carbon transport and deepen customer solutions through integrated services. This is our group's winning strategy for the car carrier business. Slide 34. Finally, the Wellbeing Life business. Toward 2030, real estate aims to improve capital efficiency, ferries aim to capture modal shift opportunities, and cruises aim to enhance brand value, all contributing to increasing group corporate value. Today, we will introduce our strategy and a winning approach for the real estate business. Our real estate business is led by Daibiru, focusing primarily on office buildings, both domestically and internationally. In Phase 1, we actively invested not only in the domestic, but also overseas projects, aiming to diversify and improve profitability. In Phase 2, we will promote greater liquidity in real estate through initiatives such as entering the asset management business and implement measures to further improve capital efficiency and ROA. As part of our capital efficiency enhancement measures, including asset replacement and the generation of capital gains, we plan asset recycling totaling approximately JPY 230 billion over 5 years. We believe that by maintaining a real estate business that operates under a market cycle different from shipping, the MOL Group can strengthen overall management stability and more proactively capture business opportunities in shipping. In addition to transforming the business model of the real estate business itself and enhancing property value, we will strengthen integrated group-wide sales activities to define a clear winning strategy for our real estate business as the MOL Group and execute it.

Right. So the very last part, again, from myself, Tamura. Slide 35. This is a supplementary slide showing the relationship between the Phase 2 actions focused on strengthening earnings power and reducing capital costs and corporate value enhancement. So we're strongly mindful that all initiatives in Phase 2 will create both economic and social value and lead to enhanced corporate value, and we will continue our efforts towards realizing our group vision for fiscal year 2035. So I will explain our value as a social infrastructure company finally. As seen in the changing external environment, global stability is being affected by factors such as the situation in the Middle East, and everyday life, not just in Japan, but around the world, is heavily affected. As a social infrastructure company, our group is committed to the mission of realizing a sustainable ocean and a global environment, enhancing well-being and providing infrastructure that supports people's lives and industries. In any era, our group will continue to respond flexibly to changes in the external environment and fulfill our mission of providing infrastructure that supports people's lives and industries. Our corporate philosophy, from the blue oceans, we sustain people's everyday lives and open the way to a prosperous future, embodies our commitment and a determination to this mission. Through contributing to society by our business activities, we will build greater trust with our stakeholders and strive to remain a company that is chosen now and into the future. This concludes the explanation of the MOL Group's management plan, BLUE ACTION 2035 Phase 2. Thank you very much for listening and for your attention.

Thank you very much. And we'd like to move on to the Q&A session for the remaining time. [Operator Instructions]. All right. So we'd like to now go to Hirokane-sama.

So this is Hirokane from Nomura Securities. There are 2 questions. Number one, the Middle East situation. So with this circumstance, some business environment can be hoped to go back to how it was. And maybe you would see something not going back forever. And how are you interpreting, as a CEO, of this environment? And how do you think that you can leverage the strength of the company? Maybe Umemura-san will be a suitable person to respond, but because this is a very critical challenge, I would like to ask that as the first question. Second, regarding this business plan, you are providing numerical KPIs including the cash flow. And then we will be monitoring if you're going to be on track to these numbers. But any approach so that you will keep having these numbers as relevant. So how are you going to revise? How are you going to be agile in revising the plan? How do you intend to leverage this plan?

So the first item, we can have Umemura answering the question. How the Middle East situation is affecting our business and then how can we leverage the strength in that circumstance. Second is regarding the numerical KPIs that has been announced. So numerical targets actually, not KPIs. As we progress alongside the plan, you would assume that some revisions will become necessary. So what is our approach to making revisions and updates to these numerical targets? So Umemura-san, please, for the first question.

My apologies, I wasn't unmuting. So the business environment and the Middle East situation and the impact to our business performances, well, I guess we will talk about it in more details at the end of April when we do this financial briefing. But there are 2 businesses as maritime. So it's the contracted vessels business. So we have customers using our vessels. The second type is the fare incurring. So we provide the service of delivering goods. And for the first part, the contracted vessels, it's a long-term contract that comprise the business. So this Middle East situation is not going to affect this long-term contracts. So this first part is not going to be affected majorly by this situation, but this fare incurring, this delivery service business. So this has, as we speak, been discussed internally, how we should estimate the impact of the situation be for this business. For goods delivery, the fuel prices, carried by our end. And there are various costs, which will increase, be something that we will bear. And then how the actual movement of the goods be possible or be done and how the maritime situation would be is something that we just need to keep monitoring the changes and give a forecast as we discuss intensively. But we do have 900 vessels around the world and global responses are very much possible with that network. And we would like to make sure that we continue to commit to the needs of our clients and customers.

Okay. Next, the second question, Tamura-san, please.

Thank you very much for your questions. I guess my answer is going to be connected to the first question as well. This plan for the next 5 years, the assumed business environment, out of them, the biggest impact will be the geopolitical situation. And how do I interpret that impact to the maritime businesses? Well, it depends on the type of the vessels, how much or the significance of the scale of the impact. But all in all, the volatility be higher. So it will be drastic ups and downs is what we expect regardless of the type of vessels -- the type of vessel businesses. And sometimes that will act as a follow-wind for our maritime business, but passing on the price increase of the fuels and other increasing cost will be positive for us. And our strength -- the diversified portfolio, which we consider to be our strength, will become even more meaningful. Even in the maritime business, we are diverse in terms of the type of vessels and the businesses. And when the volatility heightens, actually opportunities for us heighten as well. And we see this as a good potential of increased opportunities in the next 5 years. So we're going to pursue all the upsides and opportunities. But at the same time, because of this volatility, it will be negative to the stability of our business. So that will be increased challenge. But we are fortunate to have this very stable business being combined with more volatile businesses. So it's good that we can take advantage of the opportunities which arises with this volatile situation, and we are also helped by this stable businesses being a part of our business portfolio. So the look of our portfolio, I believe can be acting as even better than ever strength. And we will fine-tune our business navigation. So it requires careful decision-making. But where we will find the growth opportunities, which regions and which type of vessel businesses, I think we need to sharpen our edges to do excellent work there.

Right. And additional questions. So you said that the energy businesses, you will diversify the sourcing or having more inventory. And you have acquired the companies for tanks, and you do have this chemical value chain, which is quite of scale. And I guess these will help your business in this climate?

Yes. So short term, the volume of goods that we deliver can go up and down. But once this intense situation will be settled, this diversification can help. Then during the pandemic, it was more of a manufacturing, but the energy resources, procurement-wise, more inventory -- there will be a rebound of the situation and the more inventories will be stored everywhere, and then that would impact our business in a favorable way is what we think.

That was Hirokane-san. And let's go to Tsuchitani-san from the Tokai Tokyo Intelligence Lab.

I have 2 questions. It's a very detailed question, but if you go to Page 12, you have this domain-by-domain profit before tax. I would like to ask on each of them. But I guess container part, the market environment driven. I think you do have this basic increase of profit trend. And I guess the increases include the extraordinary profit as well. Is that even bigger extraordinary profit that you are assuming for the Phase 2 than Phase 1? So that's one. And regarding the market exposure is the second question. So Dry Bulk. I heard what you just said that you will be able to benefit from all these situations. And I think you actually were clever in setting your foundations. But how does this model be different from your business model in the past? So can you elaborate on winning the upside, but avoid the downside? And also, I would love to hear a little more about this market exposure of the energy.

Okay, thank you very much. The first -- so Page 12, the container part. Yes, we see this increase in profit before tax. So is this including the selling of the vessels? And then how are you assuming the market situation to be? So I would like to have Tamura be explaining this. And the second is regarding the market exposure, the Dry Bulk. You heard the strategy in a positive way. And then how is the business model be different from that of in the past? And how about this market exposure of the energy as well?

Thank you very much for your question. So first, regarding the container business forecast or assumptions for the market environment, how are you projecting was the question. And these container business numbers on Slide 12, so these are based on our own unique assumptions and breakdown. This is our unique business, ONE terminal business, which we haven't given to ONE, and also the leased vessels that we are giving to ONE. And then also the ONE is affiliated in the profit also. So these companies have their own forecast. I know that this is a very tricky part. But basically, towards 2030, the market environment -- our assumption is that '25-'26 be assumed as more towards the bottom of the cycle, so that '26 onwards will be recovering. So BLUE ACTION Phase 2 end 2030 is one benchmark. So ROE target has this another big component of ONE contribution. And the container business actual market environment is volatile and does fluctuate even within a year and geopolitical situation is exacerbating it. And then there's a good chance that the geopolitical environment continues to shake it. And market environment does change constantly. And we think that '25-'26 will be almost near the bottom and then towards 2030 will be recovering. And the market makeup wise, the demand and supply balance, '28, '29, the new vessels launches are quite heavy in '28 and '29, and that's very much being recognized. So what would be the profit around '29 might be your interest. And this too, running to fiscal year 2030, the average will be ups and downs; '29 will be averaged out. So those scrapping of the industry, which has been behind the schedule, and recent drastic ups and downs are making it difficult for us to logically explain with just the regular absent demand and the supply situations and bottlenecks can be of the terminals or railways or on-land transportation. So not just the simple demand and supply balance. And we don't think that the bottom is going to be lower, but there will be always an absent down, but it will be more or less stable. And we would like to continue to discuss with the ONE management team how the ONE will invest. That will be the answer for the first question.

Thank you very much, Tamura-san. So projection of the profit before tax and the selling of the vessels are not included. The dry bulk exposure, how are we going to capture the exposure and how we're going to win there was the question. And then even in the past, we actually got this exposure and then there were ups and downs. But this time, how carefully and thoroughly we can do this. Exposure management is going to be the determinant and how much we can win. So it's going to be very thorough and then the detailed management we will be doing. In the past, we might have had exposure, but how we were interpreting the exposure or the management of it was not perfectly done. I mean, as long as we try to win the upside, that we need to be ready to have this downside risk. But then we do have this good accumulated profit, which will allow us to tolerate this downside risk. So with that being the foundation, we're going to have a dedicated team, which will be managing the exposure in a detailed manner. And understanding the markets even further is going to be really critical. And for that, actually, in the last few years, we created this global sales team. And Singapore actually has one of the sales team and we're getting a much bigger volume of information because of the base of the sales. And then tanker business, too, we would like to actually take the exposure, but specifically regarding the tanker, we're going to prioritize the stable businesses more than the risky ones. But at times, we would like to be ready to take upside of the exposure. So we already have this organizational foundation. I think this too will be overseas mainly, but we would like to take this upside of the exposures there.

So thank you very much, Tsuchitani-san. And Himeno-san, please, next.

This is Himeno from JPMorgan. So one is the shareholder return policy. So payout ratio, 40%. So dividend percentage was 40%, but now it's a total payout ratio of 40%. And you said that the ROE priority is one of the reasons. But why 40%? Why not 45% or 50%? Has such discussion happened internally? And this percentage, 40%, ONE will give 30% to the 3 parent companies. And then are you giving out this request to increase that 30%? Second is the balance sheet control. And the ex-CEO, Hashimoto-san was communicating using this term, balance sheet control. And do you incorporate any of the balance sheet control element in this time, the midterm business plan, cash flow plan, the fundraising, the selling of the assets, and then you actually had this JPY 1 trillion allocation. So I was thinking maybe that would be the balance sheet control element. But then if you do have more details that you can share, that will be appreciated.

Okay. Thank you, Himeno-san. There are 2 questions. One is the shareholder returns. Right. So 40% of the total payout ratio. So we did explain that, that's because of this ROE focus. But why the percentage is 40%, not in other percentages. And ONE, the payout ratio is at 35% -- sorry, 30%. So for us, has there been any discussion of matching the 30% to the 40%? And next is the balance sheet control. Have we incorporated any of the balance sheet control in this midterm business plan? ONE part, yes -- okay. First point and second point will be explained by Tamura. okay. First point and second point both will be explained by Tamura.

Okay. So let me respond, and then Hamazaki will add anything that I miss. First, the philosophy around the shareholder returns. So 2021 onwards, we studied how things have been since 2021. I think our capabilities have been stronger, and then 25%, 30% had been the history. So it was a gradual increase. So how much can we realistically be trying to achieve in the next 5 years. So we discussed extensively internally and concluded with this percentage, 40%. And of course, 35%, 40%, 45%. So I know that there are various percentages that can be set. But this is as a result of a comprehensive discussion, I think looking at how we are right now, how we should be after 5 years in terms of capabilities. So we consider the various scenarios. And I think this total payout ratio that we aim to share to the outside world should be 40% was the conclusion. Regarding the ONE, currently, we are discussing -- so the shareholders and ONE are discussing as we speak. And 40% is what we are requesting and they are constructively considering. So I think we are heading towards the 40% kind of world, but it's still under discussion. And second, Page 13, if you see the left bottom, there is this asset breakdown and how the total is trending towards how we project it to trend towards 2030. And the JPY 7.7 trillion is the level. So '26 to 2030, so JPY 6.7 trillion becoming JPY 7.7 trillion. So it's an incremental of JPY 1 trillion. And if we see the growth of the last 3 years, the 5 years of growth is much more gradual. But Phase 2's main theme is continuing of growth investment. And then also the financial stability and then the enhancement of shareholder returns. So we knew that we needed to balance these 3 things. And then for us to achieve all of these 3 in a balanced way, what should be the asset volume that we should set as the target for 2030. So again, for these 2, we discussed extensively and set this as the target. So this JPY 7.7 trillion, the scale of the asset is one of the many of the things that we thought to be quite critical.

Okay. So a little additional from me. Cash allocation page, if you can go to the cash allocation, Slide 16. how are we going to create the balance sheet in the next 5 years? And I think the cash allocation is a very critical part, but this is 5 years total. And one thing to be careful is this dark green part, the Phase 1 decision made follow-on investment is the dark green part. And as I said earlier, this is going to be cash out happening mainly in '26 and '27. And the Phase 2 growth investment is going to happen as well. And that will be to improve our portfolio. So that will be including the acquisition. And as Tamura said, the shareholder returns is to be enhanced. So all are included in here. And CEO talked on Slide 13 about the asset as well. Can you actually show the Slide 13, how the asset total will trend, and then this is broken down by portfolio. This is the left-hand side of the balance sheet. But the right-hand side of the balance sheet is also important in the financial. So let's go to Slide 11, the KPIs or financial KPIs. Net gearing ratio right now, at the end of '25 with a large M&A, that was the Phase 2 investment coming ahead of the schedule. So we leveraged the debt, and we need to bring back the financial discipline. So that's a theme. So that's what we intend to do in a gradual manner. So at the end of '25, what was the right financial makeup is one discussion point. But now, with the various assets, the equity ratio is around 40%, but we think that this needs to be heightened. So net gearing ratio is to be improved as well. So those were the thinking that went behind these numbers.

Okay. Let's go to another question from Miyazaki-san.

This is Miyazaki from Goldman Sachs. Two questions from myself. One will be the profit before tax. The 2030, why the target has been heightened? And then why profit before taxes is KPI. Conventionally, in your financial disclosure, I think the profit that you are sharing was a recurring profit even for the segment. So why now all the profit targets are profit before tax? And the second is the recycling of the owned asset. What would be the criteria you will be applying in deciding which one to sell when real estate -- for instance, what type of real estate within the real estate can be the subject for vessels? I guess partly it depends on where you find yourself in the cycle, but what will be the maybe profit before the tax and what will be the threshold for you to start considering the selling?

Thank you very much, Miyazaki-san. So first question from Miyazaki-san was about this profit before tax for 2030 be lifted. Why? Second, why the profit before taxes be our KPI now? And the second was about asset recycle. The real estate recycling decision criteria. Both will be answered by Tamura first, and then again, any addition will come from CFO later.

All right. Thank you very much for your questions. First, the why profit before tax has become our KPI? If you go to the original BLUE ACTION, it was always the profit before tax. So that's when we decided to use our profit before tax. And then ROA is one KPI, and I think the vessel sales, the profit, which is in this special extraordinary income should be included was the thinking that we had in why it was set with the profit before tax rather than recurring profit. And then 2030 snapshot, like the target for 2030 be hiked because -- straightforwardly, because the investment of the Phase 1 became more than originally anticipated. So the orders placed during the Phase 1 of vessels, which is the major part of the investment that we did, and there is inflation happening since then, the vessel prices are hiking, and then those that we placed an order back in 2021, '22, '23 are now in this very competitive pricing. So the profit coming from these will continue to accumulate in a very stable manner. And with that in mind, we thought that, that profit before tax for 2030 can be lifted. And the second question, the asset recycling decision criteria. So it depends on type of vessels or the type of real estate. So I can't really talk about the specific ones. But if you see overall, we will always have like priority list that we'll continuously discuss throughout the 5 years. And then how do we set the priority. First, we're going to identify where we can leverage our strength and then where are the areas or the subjects that we are not necessarily having strength leverageable. Yes, so anything to add, CFO?

Yes. So let me add some more. So if we go to Slide 17, this is the Phase 2, every characteristic mentioned. So we're going to improve our portfolio. We're going to be improving the ROI. So the cycle of portfolio improvement is a very key component of the Phase 2. And the right-hand side, the business asset recycling. So we will have a good cadence of reviewing and we might find one project or vessel, should we continue, should we sell, we will keep coming back to that discussion. And the profit before tax being the numbers that we look at in the discussion is important. So we're going to be achieving ROA with the capital gain being in that. So that's why the numerator is the profit before tax. It's showing our commitment to achieve the ROA even with no capital gain being in the formula or calculation.

And next is Osaka-sama, please.

All right. So this is Osaka from Morgan Stanley. With the limited time, just one question. Slide 16, cash allocation, the CapEx, so JPY 1.5 trillion, which exclude Phase 1, can you elaborate a little bit on how much of that has already been decision made? And how much of this would be maintenance investment? And the right-hand side, the energy is here as the biggest chunk. It would be great if you can give a granular explanation on this.

Thank you very much, Osaka-sama. So cash allocation on the right-hand side, Phase 2, decision-making breakdown is what you see and then what's already been set in stone or what are visible on the horizon. Tamura will explain first.

Thank you very much for your question. So if you see this right-hand side, this is by business unit. And Phase 1, Phase 2 -- sorry, apologies. So the ones which we already made a decision in the Phase 1 and those which will be making decisions in the Phase 2 are mixed on the right-hand side. So how does this look if we exclude the Phase 1. But this balance is, in a way, a benchmark. So the biggest part continues to be the energy and chemical logistics, so yellow and the green parts. At this moment, for these 5 business units, we are thinking that breakdown of the total be more or less equally to the 5, while the energy and chemical logistics being the biggest. But then business environment volatility is going to be more dramatic, or we assume. So we'd like to closely monitor how the environment is changing, or how we project them to become, and we fine-tune the balance among these 5 is what's very critical is what I'm thinking right now.

All right. Any amount that's already been set in stone? Decisions already made?

We don't have anything set in stone. Fiscal year '26 is the beginning of the decision-making being done for the Phase 2. And the investment pipeline, yes, we do have. And these numbers are coming. So JPY 2.3 trillion is with the Phase 1 and the pipeline of the Phase 2, but none of these pipelines are set in stone or decision has already been made.

Yes. So you can do this as subtraction, but then that would be how much we intend to spend, but no decisions made on any of the projects included in that pipeline.

Thank you very much, Osaka-sama. And I think we can take only one more question. So that will be from Tabata-sama.

This is Tabata of Elliott. So 2 questions from myself. One, PBR. So in your IR report, PBR target is between 1.2 to 1.5. In this Phase 2 of the midterm business plan, my question is, did you have that as an assumption? And this Phase 2 running up to 2030, what is the level of valuation you are aiming to achieve? And towards the end of this presentation, you talked about this enhanced corporate value, and you are mentioning a PBR. So I thought you should have some target regarding the PBR as well. Second is regarding the cash allocation. So cash in page has this JPY 1.7 trillion. And there is mentioning that the external asset, the leverage is going to be in a limited way. So how much will come from external and how much will come from the switching of the asset? And the real estate switching of the asset is JPY 230 billion. So JPY 1.7 trillion minus JPY 230 billion. So that's JPY 840 billion. Is that coming from the selling of vessels? Is my thinking correct?

So first question. So yes, we actually have this mid- to long-term goal of the PBR in the integrated report to be 1.2 to 1.5. So your question was, did we have that as an assumption? And what is the valuation that we are trying to achieve? And the second was regarding the cash allocation. If we go to Page 16, left-hand side, cash in, other than the working cash flow, there is this external component as well as this real estate. So in the remaining JPY 840 billion, is that mainly coming from the sales of the vessels?

Thank you very much for your question. So Phase 2 goes up to 2030, and we have laid out a plan. But if you look at Phase 1, the investment, the results of these investments will be coming gradually from '26 to 2030, and those will contribute to those targets. And the investment -- particularly of the vessel, the lead time is quite long, 2 to 3 years from the placement of the order. So there's always time lag in terms of when it's going to start contributing. And then I don't think these numbers were expressed until now. Now it's there. With this plan that we've laid out today, the time lag will now be billed. And I think the valuation will be more accurately reflecting what's out there. And the PBR 1.2 to 1.5 laid out in the IR report. So that's a mid- to long-term goal. And I think by achieving this, what we laid out in this presentation, it's going to help bringing the PBR to 1.2 to 1.5. So we would like to really focus on achieving what we laid out in this Phase 2 plan. That's my answer for the first question.

And second question will be answered by Hamazaki-san.

So if you show the cash allocation page, this is the cash allocation for the next 5 years. And cash in part, you see this JPY 1.07 billion (sic) [ trillion ] and there's a gradation, the 2 colors and then how that's done. So asset switching will be the main part of the lighter blue and the darker is cash in, cash out. There's another circular icon in between. And currently, what's already set in stone are the darkest green, the Phase 1 investment. So that lighter green investment, which is our Phase 2, will gradually be decision made and the cash will keep coming in while doing so. And asset replacement, sometimes it's possible, but it might not be coming in time. And then we will actually leverage this external financing. And we do have this real estate component and the vessel sales. The breakdown between the 2 is not here, but then we need to see the progress of investment, and we will just proceed with asset replacement seeing how the progress goes.

Thank you very much for the questions. I guess, we've already exceeded the scheduled end time and we need to conclude now. And with the limited time, there might have been questions that we couldn't respond. So please contact our IR team, and we'll make sure that we respond to any questions that you might have. Thank you very much once again for participating. [Statements in English on this transcript were spoken by an interpreter present on the live call.]