Mitsui OSK Lines: Financial Highlights: Second Quarter Ended September 30, 2021

Company performance
(1) Analysis of operating results

We recorded sales of 597.0 billion yen, operating profit of 20.3 billion yen, ordinary profit of 271.8 billion yen, and profit attributable to owners of the parent company of 274.8 billion yen. We recorded € 243.6 billion of equity in affiliated companies’ net income in non-operating income, mainly due to the improved results of OCEAN NETWORK EXPRESS PTE. LTD (ONE), subsidiary accounted for by the equity method. The amount of equity in affiliate net profit that we recorded that was attributable to ONE was 234.5 billion yen.

The following is a summary of business terms including income and ordinary profit / loss by line of business.

(A) Dry bulk company
In the Capesize bulk carrier market, while there was a sustained flow of iron ore shipments from Australia and Brazil with minimal weather disruption, the supply of ships was restricted due to the controls. borders in response to COVID-19 and increased congestion caused by typhoons in China, leading to an upward trend in charter rates. In the Panamax bulk carrier market, the charter rate remained at a high level, with supply becoming tight as was the case for Capesize bulk carriers due to stricter regulations to control COVID-19 in China and elsewhere. other countries, and heavy shipments of grain and coal. In these market conditions, as well as the measures we have taken such as the launch of MOL Drybulk Ltd., which was established in April 2021 in order to improve the efficiency of vessel allocation and profitability, the Dry bulk activity as a whole has recorded a significant year after year. annual improvement in profit during the first six months of the year.

(B) Energy and offshore activities

In the Very Large Crude Oil Carrier (VLCC) market, the charter rate has remained below pre-pandemic levels due to continued production cuts coordinated by OPEC Plus and the prolonged weakness of demand for oil. The product tankers market showed signs of improvement such as the recovery of economic activity in Europe and the United States thanks to the spread of vaccinations, but was affected by the drop in export shipments in due to several major hurricanes along the US Gulf of Mexico coast and the start of the maintenance season at refineries in Japan and South Korea, and therefore had to face difficult market conditions from mid-August. In the case of the chemical tanker market, as Atlantic routes remained in the doldrums caused by the cold snap in the Gulf region of North America in February, fares on South American and Pacific routes improved. Under these market conditions, the oil division as a whole suffered a decline in profits compared to the same period a year earlier, when charter rates were strong, despite stable contract execution at long term and cost reduction efforts.

The LNG division continued to generate stable profits mainly through existing long-term charter contracts.

In addition, a new LNG carrier has been put into service in an equity-accounted subsidiary.

In the offshore business, an FPSO and an FSRU have been delivered to enter into a long-term contract for the respective new projects. During this time, operations in existing projects such as submarine support ships were generally stable. However, the charter contract for an existing FSRU was renewed, resulting in a deterioration in profitability year over year.

(C) Product transport activity

ONE, the equity-accounted subsidiary of the company, saw its freight volume increase compared to the same period a year earlier on all routes, with the exception of the Asia-North America routes, where port congestion has increased. made schedule delays and service cancellations inevitable. In addition, as disruptions to operations in ports, inland transport and ship schedules have had a significant impact on the supply-demand balance, spot freight rates have remained considerably higher than a year ago. . As a result, the Containers business recorded substantial year-over-year profit growth.

The volume of transport of completed cars increased sharply compared to the same period of the previous year, when it was affected by the global decline in automobile production, although supply shortages of semiconductors and Component shortages caused by COVID-19 due to lockdowns in Southeast Asia have also had an impact. Profitability improves significantly from one year to the next thanks to the resumption of the movement of goods combined with the effect of the rationalization of the allocation of vessels, etc.

Passenger numbers recovered from the same period a year earlier but remained low from pre-pandemic levels, severely affected due to the declaration of a state of emergency by the Japanese government which forced people to s refrain from going out and traveling. The above factors, combined with an increase in vessel operating costs caused by rising bunkering prices, have outstripped cost reduction efforts and profits have deteriorated year on year.

(D) Associated companies

The real estate activity has regularly recorded a result comparable to that of last year, despite a drop in sales linked to the reconstruction of certain buildings owned by Daibiru Corporation, the company at the heart of the Group’s real estate activity. The cruise business, despite some cancellations, restarted cruises during the period. However, profit deteriorated year over year, primarily due to an increase in crew expenses associated with preparations or actual operations from October 29, 2021. The tug business recorded an increase of its profit over one year, reflecting the recovery in the number of vessels requiring tug services entering / leaving the port.

(E) Others
The other activities, which are mainly cost centers, such as vessel operations, vessel management, vessel charter and financing, show an increase in profit over one year.

(2) Outlook for 2021

(A) Dry bulk company
In the Capesize bulk carrier market, the charter rate is expected to remain high for the remainder of the year, reflecting heavy shipments of iron ore from Australia and Brazil and port congestion in China caused by the measures. border control in response to COVID-19. From the start of the new year, the rate could weaken due to lower iron ore shipments associated with cyclones in Australia and the rainy season in Brazil, but it will still be supported by the effects of the COVID-19 border control. In the Panamax bulk carrier market, demand for thermal coal shipments to China and India is expected to increase due to power shortages, and the charter rate is expected to remain high for the rest of the year. year, COVID-19 regulations around the world creating a sense of tightness in the supply of ships. From the start of the new year, the rate could enter a corrective phase mainly due to the reduction in coal use in China ahead of the host country of the Winter Olympics and a weak grain harvest in South America, but will remain firm nonetheless, supported by tight ship demand. Under these market conditions, the dry bulk business as a whole is expected to show improved year-over-year profits.

(B) Energy and offshore activities

The market for very large crude oil carriers (VLCCs) is expected to experience a modest recovery due to expectations of an upturn in economic activity and easing of production cuts. The petroleum products market is also expected to recover as jet fuel and diesel shipments recover and the northern hemisphere heads into the peak heat demand season. As we anticipate market conditions and cargo movements to recover from recent levels, profit is expected to decline year over year across the Petroleum division.

In the LNG carrier division, one LNG carrier is expected to be completed and the division plans to continue to generate stable revenues, mainly through existing long-term contracts.

In the offshore, profitability is expected to deteriorate year on year, mainly due to the renewal of a charter contract for an FSRU, although an FPSO is expected to be completed.

(C) Product transport company

In the container ship business, we expect the current robust shipments and current space shortages to persist through the end of the year. However, from the start of the new year, shipping schedules are expected to normalize as the movement of goods decreases due to the Chinese New Year holidays and the shortage of port workers and truck drivers abates in the near future. North America. Consequently, we have taken into account in our forecasts that freight rates will enter a phase of correction.

Regarding the activity of car carriers, while the effects of COVID-19 and the shortage of semiconductors will be of concern in the short term, the trend of recovering freight volumes is expected to continue. We will continue to focus on streamlining vessel allocation and more efficient operation while maintaining an appropriate level of fleet size.

In the RoRo ferry and coastal ship industry, the impact of a resurgence of COVID-19 infections on business performance is a concern, but we expect passenger numbers to recover to some extent, depending on sentiment changes with the lifting of the state of emergency and government support measures for the travel industry. (Unaudited translation of “Kessan Tanshin” provided for reference only) October 29, 2021

(D) Associated companies
The impact of the COVID-19 pandemic on real estate activity is likely to be limited. For cruise and travel activities, economic conditions are expected to improve to some extent. Fluctuations in business performance are possible depending on the COVID-19 situation, although the scale of these businesses is not large.

5. Financial situation
The balance sheet total at September 30, 2021 increased by 320.2 billion euros compared to the balance at the end of the previous year, to 2,415.8 billion euros. This is mainly due to the increase in investment securities.
Total liabilities at September 30, 2021 increased by 22.0 billion euros compared to the balance at the end of the previous year, to 1,418.4 billion euros. This is mainly due to the increase in short-term bank loans.

Total net assets at September 30, 2021 increased by 298.2 billion euros compared to the balance at the end of the previous year, to 997.3 billion euros. This is mainly due to the increase in retained earnings.
As a result, the equity ratio increased 8.5% over the ratio at the end of the prior year, to 36.1%.

Full report

Source: Mitsui OSK Lines, Ltd