Nippon Yusen Kabushiki Kaisha (9101) Earnings Call Transcript & Summary

Thank you for waiting. It's time to start. Thank you for joining us despite your busy schedules. We would now like to start the Nippon Yusen Kaisha or NYK Line fiscal 2023 results briefing. I'll be serving as a moderator today. I'm the Head of the IR Group. My name is Okada. I now introduce the members attending President, Representative Director, Chief Executive Officer, Soga. Next, Executive Vice President, Executive Officer, CFO, Kono. And then Managing Executive Officer, Chief Executive of Liner & Logistics Headquarters. Banno. Today, President Soga will first explain the outline of the fiscal '23 results. After that, we will have time for questions and answers. The way to ask questions will be explained later. Today's presentation materials are available on our website, so please access them. Now today's briefing, including the Q&A session, will be streamed on demand. So we ask for your acceptance. So let us start the presentation. Mr. Soga, please.

I am Soga, President of NYK Line. Thank you very much for taking time out of your busy schedules to attend this briefing today. Today, I will first provide an overview of the full year financial results for fiscal 2023, followed by an explanation of the full year forecast for fiscal '24. I will also report on the progress to date after completing the first year of our medium-term management plan. After that, we will open the floor for questions and answers. The presentation materials will be projected on the screen. But if you have downloaded them from our website, please have them ready for your reference. First, I'll give you an overview of the financial results for the full year fiscal 2023. In summary, we faced yen depreciation, soring material costs, the Panama canal now issue the Red Sea issue. But despite these many issues, we managed to finish the year exceeding our initial forecast. I feel also that we made a relatively good start in terms of our performance in the first year of the medium-term management plan. Please turn to Page 7. The blue column in the center shows the results for fiscal '23. Revenues were down by JPY 228.8 billion year-on-year to JPY 2.3872 trillion. Recurring profit was down JPY 848.4 billion to JPY 261.3 billion and net income was down JPY 783.9 billion to JPY 228.6 billion, resulting in lower figures at each of these stages. I would like to point out, however, that this is the third highest earnings after 2 strong years of over JPY 1 trillion profit. Please go back to Page 4. This is the curve of sustained growth in net income that we presented in the medium-term management plan. And you can see that both the actual results for fiscal '23 and the budget for fiscal '24, which I will explain later, are moving in line with this curve steadily. In fiscal '23, ONE's container business managed to end slightly higher than expected and the automotive and energy divisions maintained strong performance, leading to results being higher than initial forecast. As extraordinary factors such as the logistics disruption during COVID have calmed down, we believe that we are steadily strengthening our earnings power. Next, please refer to the table on Page 8 for results by segment. Again, the blue columns show results for fiscal '23. In Liner and Logistics business, which include Liner Trade, Air Cargo Transportation and Logistics, recurring profit for Liner Trade was down JPY 722.7 billion year-on-year to JPY 67.8 billion. Air Cargo Transportation recurring profit was down JPY 55.7 billion to JPY 5.7 billion, and logistics was down by JPY 28.3 billion to JPY 25.9 billion. They were all impacted by rising interest rates and inflation, mainly in Europe and the U.S., leading to lower cargo demand and lower rates. However, in Q4, tension in the Red Sea caused rates to rise and the contract logistics business in the Logistics segment remained strong throughout the year. These factors led to the higher-than-expected recurring profit. Equity in earnings of affiliates from ONE was JPY 53.4 billion in fiscal '23. Recurring profit in the bulk shipping business, which consists of automotive, dry bulk and energy divisions fell JPY 40.1 billion year-on-year to JPY 170.2 billion. Of these, in the dry bulk division, cargo volume itself was firm, and there were ups and downs in the market conditions. But compared to the previous year when market conditions were favorable, the full year average was lower than the previous year. Only the capesize saw an upturn in market conditions in the second half and its full year average was higher than the previous year. On the other hand, the car carrier business saw a recovery in transport volume and the VLGC business saw a significant improvement in market conditions as capacity tightened due to an increase in long distance transport and the LNG carrier business had long-term contracts generating stable earnings. So the bulk shipping business as a whole maintain high and stable earnings throughout the year, although profits were lower compared year-on-year. Please go back to Page 3. Again, overall recurring profit was down JPY 848.4 billion year-on-year to JPY 261.3 billion and after extraordinary profit and loss and taxes net income was JPY 228.6 billion. Based on these results, the company plans to pay a year-end dividend of JPY 80 per share, an increase of JPY 10 from the previous forecast combined with the interim dividend of JPY 60 per share already paid, the annual dividend of the JPY 140 per share. In addition, the acquisition of own stock which began in August of last year, reached the planned total of JPY 200 billion by March 7, and all of such shares have been retired as of April 30. Please turn to Page 9. As shown in the table on the left, the recurring profit fell by JPY 848. 4 billion, although weaker yen and lower bunker oil prices pushed up profit by JPY 20 billion. The drop in the Liner Trade business mainly ONE, led to the decline. So this has been the summary of the financial results for fiscal 2023. Next, I would like to explain our full year forecast for the current fiscal year fiscal '24. Please turn to Page 10. The forecast for fiscal '24 is revenues of JPY 2.220 trillion (sic) [ JPY 2.220 trillion ], recurring profit of JPY 250 billion and net income of JPY 245 billion. So both revenue and recurring profit will fall, but we expect an increase of JPY 16.4 billion in net income. Based on this and following the targeted payout ratio of 30%, the annual dividend forecast is JPY 160 per share, consisting of an interim dividend of JPY 80 and a year-end dividend of JPY 80. Also following the previous fiscal year, we will again buy back a total of JPY 100 billion of our own stock in this current fiscal year. Next, we will explain the full year forecast for each business segment. Please turn to Page 14. The blue column on the right is the forecast for FY '24. First, for Liner Trade, we forecast recurring profit of JPY 76.5 billion, an increase of JPY 8.7 billion from the previous year. As for the environment surrounding container shipping, the peak for new build vessel deliveries is expected in FY '24. And the supply-demand balance is expected to soften. On the other hand, at least during the first half of the year, due to the situation in the Red Sea. The supply-demand balance is expected to tighten to some extent as vessels continue to divert to the Cape of Good Hope route. Freight rate levels are expected to remain largely unchanged from the previous year on a full year average basis, although there is some seasonality. Next, regarding Air Transportation, the transfer of all shares of Nippon Cargo Airlines to ANA Holdings is under review by antitrust authorities in various countries. Assuming that the transfer will be completed on July 1, we are projecting a loss of JPY 500 million for the first quarter only. Although cargo demand from Asia to North America is expected to be firm, a temporary cost increase is expected in the first quarter due to the postponement of some equipment maintenance scheduled in the previous fiscal year. Next, in Logistics, we forecast recurring profit of JPY 15 billion, a decrease of JPY 10.9 billion from the previous year. While the Logistics division is expected to perform solidly, the porting division is expected to see a decline in freight rates for both ocean and air cargo resulting in an overall decrease in profit. Next, for Bulk Shipping, we forecast recurring profit of JPY 163 billion, a decrease of JPY 7.2 billion from the previous year. In the automotive transportation division, while the number of units transported is expected to remain mostly flat. The supply-demand situation for shipping capacity is expected to remain tight. As a result, we expect a stable profit. We will closely monitor the situation in the Middle East, including the Red Sea, which could affect our business performance. In dry bulk, we expect a decrease in average freight rates and volumes for the multipurpose carriers. On the other hand, market conditions for other vessel types, such as capesize are expected to remain or exceed last year's levels. In the Energy Business division, LNG carriers and offshore business are expected to remain firm, supported by medium- and long-term contracts. VLGC is expected to remain strong to some extent, although not up to the level of the previous fiscal year. VLCC is expected to improve as the supply and demand for vessel capacity tightens due to the retirement of older vessels. We expect stable profit for the Energy Business division as a whole. So far was the explanation of the FY '24 forecast. Next, I will explain the progress of the medium-term management plan announced last March. Please see Page 17. First, let me cover the progress of each financial indicators. The middle of the table shows the FY '23 results. We are making a steady progress towards the FY '26 targets the final year of the medium-term plan for reducing shareholders' equity ratio, improving ROIC and ROE. The decrease in interest-bearing debt and the increase in the equity ratio in the FY '24 forecast temporarily reflects the extraordinary gain on the sale of NCA shares and the reversal of loans. Overall, we are still moving toward our target for FY '26. Next, please see Page 18. This is the progress of the investment policy set forth in the medium-term management plan. we had planned to invest a total of JPY 1.2 trillion over the full year period, but now the total amount has increased to JPY 1.3 trillion. Out of this, the projects that have been decided to be invested as of the end of FY '23, totals JPY 750 billion. The 4 quadrants in the center and the amount of investment planned over the full year period are the same as in the medium-term management plan document. The percentage figures next to each amount indicate the progress of the investment decisions made so far. We have already decided on about 70% of the JPY 560 billion plan for the core businesses. About 70% of the JPY 460 billion plan for the development of new technologies and services. About 40% of the JPY 100 billion plan for the development of new businesses, and about 40% of the JPY 30 billion planned for the development of new markets and customers. Specific examples of major investment targets are shown on the slide. Although there are some strengths and weaknesses, we believe that we are making good progress overall. Next, please see Page 19. This is the progress of cash allocation. The left-hand side shows the 4-year plan presented in the midterm plan. And the right-hand side shows the current 4-year plan, reflecting the FY '23 results and the FY '24 budget. The operating cash flow is expected to exceed JPY 1.1 trillion, approximately JPY 280 billion higher than originally planned. And the cash outflow reflects the additional JPY 100 billion for the share repurchase and the additional dividend payment. In terms of shareholder returns, when the midterm management plan was announced, the total of share buybacks and regular dividends was expected to be JPY 430 billion over 4 years. But this time, the total is being increased to JPY 570 billion. Since we still maintain JPY 140 billion as the overall management allocation, we will make decisions from this fiscal year onward to allocate this amount to additional shareholder returns and further investment for growth, while considering the balance between these 2 and the improvement of capital efficiency. Page 20 shows a summary of what I have just explained. So I will skip this page. Finally, on Page 21, I would like to talk about our policy for achieving PBR of onetime or higher. Although we believe that the implementation of each of the measures set forth in the medium-term management plan will result in the increase of PBR. On this page, we have summarized the measures to achieve this target. The keys are to increase ROE and decrease cost of equity. It is self-explanatory. First, to improve ROE, we are implementing the measures shown on the slide to increase the numerator and decrease the denominator. On reducing the cost of shareholders' equity, we translated this to reducing business volatility and we are currently implementing each of the measures listed here. Through these steady efforts, we will optimize our financial statements and add public disclosure of nonfinancial indicators. We intend to manage our business with focus on the cost of capital and share price towards achieving a PBR of 1 or higher. This concludes my explanation. Thank you for your attention.

We will now have a Q&A session.

First question about cash allocation on Page 19. So operating cash flow, you raised that the figure. So what's the assumption or the change in the assumption that led to this rise. So is this something that can be explained by what has already been achieved and what is expected for this fiscal year? And then you already have the results. So the financial cash flow, JPY 610 billion, that hasn't changed -- financing cash flow. So you have more leeway to borrow. And so what would be your view about that? Then second, about the actual results and about the Bulk Shipping, Q4 profits was the same level as Q3. But at the time of Q3, there was a JPY 10 billion evaluation loss of the [ full ] contract and the Q4 -- when you take that into consideration, your profit level is not so high. What's the reason for dry bulk automotive tanker? Are there some factors. That's the second question. And also plan for this fiscal year, the profit for Liner Trade slightly up. So looking at the ONE plan, what are the actual factors that are leading to this expected growth? That's all.

Thank you very much for those questions. You gave us 3 questions. About the cash allocation, what's calculation behind this, what's the assumption, was your question? And then financing cash flow, what is our view about that? And then about the Bulk Shipping about the Q4 results by type of operation or overall, what's the situation? And also in the '24 plan, we -- what's the background to Liner Trade, a slight growth. So those are the questions. So first about the cash allocation. So Executive Vice President and CFO, Kono will respond.

Thank you for the question. So for operating cash flow. So based on the results, and dividend from ONE for fiscal '24, JPY 1 billion is what we forecast. So that part is included. Beyond that, next fiscal year onwards, those numbers hasn't changed from the assumptions in the medium-term management plan. And for ONE, so in 3 years, JPY 3 billion is the target. So next year and year after that, the JPY 2 billion, that's actually not included in the cash flow. As for the financial cash flow, as you point out, for this fiscal year, capital ratio is higher as the President explained, NCA transfer of shares would lead to repayment of loans and that would raise the shareholders' equity ratio. And with the progression of investment and also looking at the indicators already explained that for the medium-term management plan, we have these financial indicators, especially about the leverage, the equity ratio. So we'll keep that in mind. And that's how much borrowing will we make? We will think about that in a flexible way. So it's not that we will stick to the JPY 610 billion figure. So with those assumptions, we are looking at this issue. That would be my response.

To respond to your second question, let me address that Q4 first Bulk Shipping results, not growing so much, you said but the background is actually automotive. That is a big factor. Dry bulk capesize was higher despite the seasonal factors. So dry bulk business actually wasn't so bad. Actually, it was higher than expected. For automotive, why was that affected this time, you can't pass through Red Sea. So we have to go through a Cape of Good Hope. And recovering that cost, we were able to achieve that starting from March. So January, February, the cost increase preceded the increase in revenue. So that was reflected in our PL. So overall, it's growing, but the growth is less than how it should be. To respond to your third question about this fiscal year's plan, about the Liner Trade, especially ONE, I'd like to ask Mr. Banno to respond, Managing Director, Banno.

Thank you so much. about ONE numbers, you can see this fiscal year, a slight improvement over the previous -- previous fiscal year. So looking back last fiscal year, up until the second quarter, there was still -- up until the first quarter, there was the impact of COVID and rates were higher, but then it came lower and Q3, it went down further and we generated a loss, but Q4 rates rose again. So there was ups and downs throughout the year. Now for fiscal '24, so there has been the Red Sea impact, and so rates are starting higher. So the Red Sea impact, how long that will continue, not clear. But as of now, we expect that to continue for the first half, and we expect that relatively a higher rates for the first half. And after that, it will decline. That is our assumption. So average for the year, rates will be higher compared with the previous fiscal year -- last year. So that's the assumption for our calculations. That's all.

Well, for your profit, what's the factor that it will increase?

So Nippon Yusen to ONE is lending the container vessels. So this leasing rules have already been determined. So it's not the spot, but looking at the historical average. Based on that, we received the charter fee from ONE, and we changed that annually. And as you know, past 2, 3 years, the charter market was very high, and that effect is having a strong impact now.

We would like to accept next question.

I have 3 questions. First question is the forecast of the Bulk Shipping, you are forecasting JPY 7 billion or so decline. And when you look at the segment, what would be the ups and downs? That is my first question. And in the automotive business, when I look at the data of Clarksons in April, the charter fee on month-on-month basis have declined by 4%. If you have any information on the background of this, can you share that with us? That is my first question. The second is the performance of ONE. The freight assumption, you have talked about the forecast being flattish year-on-year. And once again, the assumption of freight for ONE, including annual contract and spot rates. Can you talk about that as well. The freight rates -- I believe your assumption is for the freight is not to fluctuate, but your forecast of the revenue is to increase by 20%. That means your assumption is to increase the volume and the market is not that strong, but you are to increase the volume by double digit. And is it really possible to reduce the freight at the market level. The -- what is the probability of the top line growth of the volumes? And also recently, you have executed several M&As, if you have any quantitative explanation for that, please mention.

Thank you for your question. You raised 3 questions. One is the slight profit decline of the Bulk Shipping. Another is the assumption of the freight of ONE and assumptions of the revenue and the relationship. Third is logistics-related M&A examples. So those were the 3 questions. With regards to the Bulk Shipping. I myself will answer the decline of profit by JPY 7 billion. Looking at the overall performance, we believe it will be flattish. For dry bulk, the -- compared to FY '23 performance, we expect some improvement for LNG and other energy carriers, the forecast is a small negative. That is because in FY '23, unexpected valuation gain was booked. It was a small amount, but that will not appear in FY '24. So energy business performance in FY '24 will be slightly higher than FY '23. Car carriers, we expect a small decline, very small decline. The background is that there are new ships being built and delivered, including LNG carriers. And partially, there is a contract renewal of several vessels of -- long-term chartered vessels and that cost is slightly higher than the previous vessels. So on average, it is very small. The increase is very small. But there is some impact. So for car carriers compared to FY '23, there is a small negative in FY '24. And all in all, the decline of the profit will be around JPY 7 billion. That is our forecast. Per type performance and target hopefully, we would like to disclose them. In the future, we are currently discussing so that we can start to disclose the performance per vessel types. And as soon as we are ready, we would like to disclose. And especially for the Bulk Shipping according to Clarksons report, the charter fee is declining some currently. I'm not aware of the direct background, but there are several hypothesis. One is that in Israel, there are car carriers, dozens of them owned by Israel company and the destination of those car carriers are limited, especially they cannot go to the west. So they are moving towards reducing the freight rates. That is one factor. Another is China outbound EV export currently from Chinese manufacturers. The charter vessel requests at 1 point was booming, but it is slowing down. That is another hypothesis This is not a direct reply to your question, but that is what we are thinking. The second question related to the assumption of the freight rates of ONE and the relationship of that with revenue and M&A, Mr. Banno will reply to these questions.

My explanation may not have been sufficient, but ONE's overall net profit is shown on the slide. JPY 974 million was last year. And this year, it's JPY 1 billion. So there's a small improvement about almost flat. That is the overall results. And the freight rate level in the assumption, they differ between long-term contracts and spots. And for long-term contract in Red Sea -- related to Red Sea, the current freight is quite high, but the freight increase is not that significant compared to last year. So the level is same as what Mr. Soga explained. On the other hand, the spot rate last year and also this year, from April, it has been flat, but due to Red Sea, it suddenly surged in January and February. And for this fiscal year, it is going to be in the declining trend from that point. That is our forecast. We have a detailed forecast per trade. And all combined, the assumption for this year is slightly better than last year. But overall, the difference is very minor.

Revenue -- the question was referring to the overall revenue. I'm asking about ONE. The assumption of this revenue of ONE is to grow by 15% to 16%. The freight will be flat. So therefore, ONE is assuming that the volume will grow by 15% to 16%. And the overall market will not grow that much. That means ONE's share has to expand. But without changing the prices, is it possible to gain share?

Regarding the lifting, we are painting a picture of a slight improvement. So that reflects to improvement of the revenue. I have been talking about freight rates. And on the other hand, there's cost side. When we go around the Cape of Good Hope, there's additional cost involved. And so that cost has to be covered and that's the basis of the freight rates. So on a net basis, it doesn't change much, but on gross basis, additional charge is made to go around the Cape of Good Hope. So the lifting increase assumption is not that significant. We do expect a small increase, but it's not as large as 20% or 30% volume increase. The third question related to M&A. The quantitative explanation was the request for YLK. In March of last year, midterm plan was announced and YLK is positioned as an important business. So expansion and growth is the purpose of the investment and that is clearly described in the midterm plan. But that is not just limited to YLK. In cash allocation, we have management account and that budget can be flexibly used to M&A. And in that YLK -- for the first year, YLK was the major recipient of that investment. It was not that large in -- in February of 2023, we executed a fairly large M&A in the U.S. And FY '23, most of the M&As were in Europe. And YLK's business strength, such as the automotive logistics companies the M&A purpose is to further strengthen the strength that YLK has. And there's also new business incorporated in YLK fulfillment, which is a parcel logistics business and related companies were acquired. In some areas, we are expanding our strong point. And also in other areas, we are entering into a new business segment. So little by little, we are expanding our business domain, and that is the characteristic of our M&A.

[Operator Instructions]

One question about stock buyback and shareholder return. When you have higher cash flow and profits, you have always said that you will consider additional return. And the content of that, it could be stock buyback or higher dividends. So you said that there were many options. I think that's your approach this time. The additional return has been conducted in the form of share buybacks, but increasing dividends and share buybacks. How did you consider those options? And also in the future, when you consider additional shareholder returns, what will be our approach to determining the way to conduct those returns?

Thank you for the question. So additional share buyback has been announced this time, and that's precisely because we have been working on shareholder return and the capital efficiency and the capital cost, we want to lower that. So that's half of the reason why we did this. So in conducting this the methodology is -- quite simply, it's between doing share buybacks or paying special dividends in addition to the ordinary dividends, those are the 2 choices. As of now, the way things are, the value per share we want to increase. That's our focus. So additional dividend -- well, rather than that, we would do more share buybacks. So we will provide the ordinary dividend payout. And if there's to be an increase, it will be share buybacks, which is better and including the impression that we will make on the shareholders we will be looking at the circumstances and make decisions case by case. The shareholders' equity level, we want to take it to a certain level. So from that perspective, we might do share buybacks or we might do additional dividends. So as for those methodologies, we would be flexibly thinking and determining the options to take.

Next, we would like to reply to a question we received on that. Let me read this out. In order to reduce the shareholder equity cost, you are to reduce the volatility of the businesses. How are you planning to deepen the understanding of the investors. For example, JPY 1.3 trillion business investment, to what extent your profitability will stabilize through making this business investment?

Thank you for this question. The important point that you have mentioned, just so is 1 of the challenges that we believe to be very important going forward. As shown on this slide, as I have explained, how can we reduce the volatility? And in addition to that, we need to present how can we create a business with a stable return. That will lead to gaining trust from the investors. Here, we have described qualitatively on the measures that we are executing. Going forward, we are planning to quantify these measures. And your point is exactly correct. Anything to add from CFO, Kono San.

For this point, currently, Well, this time, we made a qualitative explanation, and we are to use ROIC to improve the business efficiency. How can we generate return? And how can we stabilize and show them, including the scale? Internally, we are having various discussions and how we can present them. Well, that will lead to the assessment of the business divisions. So we are currently discussing how we should describe. Once we sort them out, we would like to incorporate them in our future presentation and prepare material so that those points will be easy to understand. At the same time, currently we have a project to switch core system. And ROIC will be made visible on a real time when that new system is launched. Using such tools as a performance or business results, and also externally, we will be able to explain using those tools.

I'd like to move on to the next question. [Operator Instructions]

So this is an additional question. So in this fiscal year's plan, Logistics business, so profitability will deteriorate. That's in the assumption. Up to the Q4, what's been the situation? And what's the current situation for the air transport and container. Looking at the freight rates there, I can't understand why that is so. So how should I understand this? Second question about the air transport. So I think it's difficult because you need approval from the authorities. But how should we understand the delay. And I think, well, should we expect that there is further risk for further delay of that transaction?

Thank you for the question. As for the logistics, your first question is true. This fiscal year, the numbers were quite low. So I can understand that you feel it's strange. And I'd like to ask Managing Director, Banno, to explain the background.

Thank you for the question. For the Logistics division business, so fiscal '23, first quarter COVID impact still remained and we were able to generate high profit at that time. After that, it was a bit sluggish. But from autumn to end of the year contract logistics in the U.S. Compared to our expectations, there was a more cargo movement. And so we were able to generate high revenue there. So that's been the result of '23. For this fiscal year, we will -- we cannot generate high profit from forwarding due to corporate factors and contract logistics. Last year, it was better than expectations, but this year, we can't expect a replay of that 2 years in row. So how much -- it all depends on how much consumption will grow in the U.S. but we cannot expect such a big growth like last year. So with that assumption, you see this kind of big difference.

For your second question, for the NCA transfer, the Nippon Cargo Airlines transfer. So there's been the authorities review for anti-monopoly law, that's prolonged. So the background to that and the impact going forward. So Kono is deputy to corporate planning headquarters. So he will explain.

Currently, July 1 is being planned for that execution. So we're moving towards that date. It's more work on the ANA holding side rather than us but they are working to get approval from the various authorities, invest jurisdictions. So as of now, the assumption is July 1. On the other hand, is there a possibility for further delay. The answer is not 0, we have to say. But will that change the terms and conditions? No. We have confirmed that with ANA Holdings and there's no change in our intent or intentions on both sides, not at all. So in terms of timing, we're saying as of now, July 1, if in the [ unrest ] it changes, the numbers will not be affected even if the date should change. That's all.

Next question, we will reply to the question we received through chat. I will read out the question. Carbon pricing was introduced in EU and belatedly, it will be introduced in Japan. What is the impact to your company's industry will you accelerate your initiative of decarbonization.

Carbon pricing, the initiatives of our company, that was the question. Mr. Kono, who heads the ESG strategy will explain.

Thank you for the question. This year, from January 1 in Europe, ETS, the purchase is mandated. So European vessels, 50%, GHG emission for that amount, the carbon credit has to be acquired, purchased. This is not about us, but ONE. ONE is a container shipping business or automotive shipping business, for the fair revenue, we will partially add a surcharge on the freight. And additional surcharges already introduced, and that is covering the cost of carbon credit. So impact to our company is neutral and also our Liner Trade or Charter Trade or Bulk Shipping. The chartered charter company or the ship operator or the cargo owners to them, the actual carbon credit cost will be settled. So basically, there is no major impact to our company. So this is a carbon credit levied across the board. But when it comes to transferring this cost to fuel or by saving the cost of fuel, it's possible to suppress the payment for carbon credit. That amount -- they can work as a discount to customers' payment. And that can be the source of our competitive advantage. So in November of last year, we announced a new GHG reduction target by 2030. 45% total volume reduction with 2021 as the base year. That is the target we have set and we are working to achieve this. In FY '23 the emission numbers are currently calculated so we don't have the final figure. We have the understanding that the reduction is not that significant. So GHG budget for this fiscal year is set in order to accelerate further carbon emission reduction. With each business divisions, we are having discussions to further pursue the carbon emission reduction.

So we are near in closing time. So the next question will be the last. This is from the Q&A chat box. So it's an additional question from a person who asked previously. So we're participating in the GX League of METI. So as the GX League, what are going to be the concrete initiatives? That's the question. So I'd like to have the response, please.

Thank you for the question. GX League, if you don't take part in that, then for carbon pricing and other issues, we will not be able to enjoy the benefits. So of course, we joined the GX League and engagement activities. But we are shipping company. So what kind of contribution can we make to this league is what we think about. And we think that reducing CO2 -- reducing GHG on our own, is important. So how far can we go? And what will be the technology? What would be the fuels to be used by the vessels. How can we have that transition? Based on the current R&D conditions, we would like to report to this initiative. That's one thing. And then the cargo owners who will be our customers are also members of the GX League. So our customers, they have this environmental supply chain and how can they reduce GHG emissions, how can they change the supply chain? Well, part of that will be the logistics company, part of that will be the shipping companies. And so other members of the GX League who are our customers, we share the same objectives, and we will identify what will be our roles. And normalization or cleaning or the greening of the supply chain, we will do what we can towards that goal. That will be an approach. That would be my response.

The time is up. So with this, we would like to close the FY '23 full year results briefing. Thank you very much for your participation. [Statements in English on this transcript were spoken by an interpreter present on the live call.]