It's time to start FY2025 second quarter results briefing by Nippon Yusen Kabushiki Kaisha. Thank you very much for joining us. My name is Okada, the head of IR Group. I serve as MC. Thank you. Let me first introduce today's presenters. Soga, President, Representative Director, President and Chief Executive Officer. Kono, Executive Vice President, Executive Officer, CFO. And Banno, Chief Executive of Liner and Logistics Headquarters. Today, first, Soga is going to walk you through the outline of the second quarter results of FY2025, followed by Q&A. I'm going to explain about how to ask questions later, immediately before the Q&A session. As usual, today's presentation is going to be distributed on demand, including the Q&A portion. Thank you for your understanding. Without further ado, we will start our presentation. Mr. Soga, please.
My name is Soga, President of Nippon Yusen.
Thank you very much for joining us today for this results briefing. Thank you very much for your support and advices. We are reflecting those advices in our business activities. Thank you very much for that. First, I am going to cover the following: following this agenda, we are going to talk about the most recent business environment and our group's mid-to-long-term initiatives. I will also touch upon the first-half results and FY2025 full-year forecast. Lastly, progress on the mid-term management plan will be covered. We have attached ONE's results, which are the same materials used by the two other shareholders. In this presentation, we will not touch upon it. Please look at page four. First, the most recent business environment and the group's mid-to-long-term initiative. Business environment remains very uncertain with various external changes.
On short term, our business might be impacted, but all the same, we are working steadily on mid-to-long-term growth. Amidst the business environment, such as the economy and the impact coming from the tariff policy and the impact of port fees in the U.S. and China, we have revised the FY2025 full-year forecast. Annual dividend has been reduced by JPY 10 from the previous forecast to JPY 225 per share. I will give you more details later. What warrants continuous attention includes the possibility of Suez Canal reopening and the future trend of GHG emissions control of the international shipping industry. With respect to the group's mid-to-long-term growth initiatives, as we touched upon at the first quarter result briefing in August, we are continuing our gross investment, including our biggest M&A in logistics business.
On the short run, M&A-related expenses might occur, but we are strengthening steadily our future earning power. Also, several LNG carriers are expected to be delivered next fiscal year, contributing to stable profits. We continue to invest with the goal of increasing the number of LNG vessels for which we are involved to 130 by FY2028. Now, I will explain the results for the first half of the fiscal year ending in March 2026. Please refer to the profit and loss table on page nine. The second column from the right shows first-half results, and the rightmost column shows year-on-year changes. As you can see, both revenue and profit of all line items decreased year-on-year. The main reason for the large year-on-year decline in recurring profit and net income is the significant year-on-year decline in the performance of ONE, which is included in non-operating income as equity method investment earnings.
Equity method investment income from ONE was JPY 163.1 billion in the first half of the previous fiscal year and JPY 20.3 billion in the first half of the current fiscal year. Now, regarding our actual results, revenue was JPY 1,182.1 billion, down JPY 134.7 billion year-on-year. Recurring profit was JPY 126.8 billion, down JPY 162.4 billion year-on-year. Net income was JPY 102.2 billion, down JPY 163.6 billion year-on-year. Next, regarding the impact of exchange rate fluctuations on profits, the six-month average exchange rate for the first half of FY2025 was JPY 146.18. In the first half of FY2024, it was JPY 153.89. The Yen's appreciation of JPY 7.71 is estimated to have had a negative impact of about JPY 8.7 billion in recurring profit. Next, please turn to page 10 for recurring profit results by segment.
In this table, as with the previous table, the second from the right blue column shows results for the first half of FY2025, and the rightmost column shows the changes compared to the same period last year. Here, for each segment, the top row shows revenue, and the bottom row shows recurring profit. Now, let's look at the recurring profit in the bottom row of the second from the right blue column. First, for liner trade business, recurring profit for the first half of FY2025 was JPY 34.8 billion, down JPY 141.8 billion year-on-year. Regarding this, with respect to ONE's container shipping business, in the first quarter, due to the impact of U.S.-China tariff policies, the container market temporarily rose, but subsequently fell as shipping capacity increased due to the delivery of new vessels.
As a result, freight rates throughout the first half of the year were lower than the same period last year. In the air cargo business, as to Nippon Cargo Airlines, share exchanges with ANA Holdings were completed on August 1st, 2025. As a result, NCA's performance from the second quarter onward is not included. Next, regarding the logistics business, recurring profit was JPY 6.7 billion, a decrease of JPY 5.6 billion year-on-year. In the air freight business, while handling volume was lower than the same period last year, profit increased year-on-year due to lower purchasing prices. In the ocean freight business, handling volume increased year-on-year, but profit decreased year-on-year due to factors such as lower freight rates and rising cost inflation.
In the contract logistics business, due to the uncertain economic outlook caused by tariff policies and other factors, major customer transaction volumes decreased, resulting in a lower profit level compared to the same period last year. Next, in the automotive transportation business, recurring profit was JPY 50.1 billion, down JPY 11.4 billion year-on-year. Transport demand remained strong, and the number of vehicles transported remained flattish year-on-year. However, due to a decrease in revenue caused by the stronger Yen combined with rising costs such as cargo handling expenses due to inflation, profit levels were lower than the same period last year. In the dry bulk business, recurring profit was minus JPY 2.1 billion, down JPY 10.6 billion year-on-year. Market conditions for all vessel types improved in the second quarter, but declined year-on-year throughout the first half. Furthermore, the Yen's appreciation compared to the same period last year had an impact.
In the energy business, recurring profit was JPY 39.7 billion, up JPY 17.8 billion year-on-year. In the VLCC business, market conditions showed instability in the first quarter due to the situation in the Middle East, but then improved compared to the same period last year due to increased cargo demand and other factors. In the VLGC business, tariff policies and other factors caused changes in trade patterns, tightening supply and demand, and resulting in improvement of market conditions compared to the same period last year. LNG carriers performed steadily, supported by medium to long-term contracts. The FPSO business recorded a one-time profit due to the start of operation of a new FPSO. This concludes the explanation of the results. Next, let me move on to the full-year forecast for full year 2025. Please turn to slide 15. This table shows a profit forecast.
The third blue column from the right represents the full-year forecast for full year fiscal 2025. The next column to the right shows the year-on-year change from the previous fiscal year, fiscal 2024. The far right column shows the change from the previous forecast. As for the FX assumptions, in the previous forecast, we assumed JPY 145 for the second quarter and JPY 140 for the second half. As you can see, the exchange rate noted just below this table, the first quarter result was JPY 145.32, and the second quarter came to JPY 147.04. For the second half, we now assume JPY 147, which is about JPY 7 weaker than the previous forecast. As a result, we are assuming a full-year average exchange rate of JPY 146.59.
In addition, regarding the impact of tariffs and port fees, we've made no changes to the tariff assumptions from those used at the time of the first quarter results. As to the impact of port fees, in this forecast, we have assumed JPY 7 billion in the automotive segment, which is included in the forecast. Now, let's take a look at figures. Revenue is projected at JPY 2.35 trillion. As you can see in the far right column, there is no change from the previous forecast. Recurring profit is now JPY 190 billion, down JPY 50 billion from the previous forecast. Net income is JPY 210 billion, down JPY 30 billion from the previous forecast. Please go to slide 17. Next, I will explain the recurring profit forecast by segment.
In this table as well, the upper figures for each segment represent revenue, and the lower figures represent recurring profit. The fourth blue column from the right shows the current full-year forecast, and the far right column indicates the change from the previous forecast. Looking at recurring profit by segment, first, the liner trade segment. We project recurring profit of JPY 45 billion, down JPY 25 billion from the previous forecast. About the container shipping business, ONE. Due to the impact of tariff policies and an increase in vessel supply from new ship deliveries, short-term freight rates have declined. Now we expect freight rate levels from the third quarter onwards to be lower than previously assumed. We assume that rerouting via the Cape of Good Hope will continue throughout the fiscal year.
As to the full-year outlook for ONE, net profit is projected at around $300 million, and we have reflected our 38% equity share in our full-year forecast. Next, for the logistics segment, we project recurring profit of JPY 12 billion, which is down JPY 5 billion from the previous forecast. In the air and ocean freight businesses, particularly in ocean freight, freight rates have fallen below previous assumptions, and with rising costs such as personnel expenses, profit levels are expected to fall below the previous forecast. In the logistics business, due to the impact of tariff policies and other factors, handling volumes from major customers have decreased, and profit levels are expected to fall below the previous forecast. Next, the automotive segment. We project recurring profit of JPY 88 billion, which is down JPY 12 billion from the previous forecast.
As mentioned earlier, the forecast figure for the automotive segment includes an assumed impact of JPY 7 billion from port fees. Dry bulk segment. We project recurring profit of JPY 5 billion, down JPY 5 billion from the previous forecast. This is mainly due to vessel expenses rising ahead of the market during the upturn in the second quarter, combined with lower than expected profitability from spot cargoes. Energy segment. We project recurring profit of JPY 48 billion with no change from the previous forecast. Both the VLCC and VLGC markets are expected to maintain the strong levels seen in the second quarter, and we now anticipate results to exceed the previous assumptions. The LNG carrier business is expected to remain firm, supported by stable earnings from mid to long-term contracts. Based on these forecasts, let me now explain our dividend forecast. Please go to slide 12.
Regarding dividend forecast, our policy is to target a consolidated pay ratio of around 40%, determining profit distribution based on a comprehensive assessment of business performance and outlook. At present, uncertainty remains regarding tariff policies in various countries, their impact on the global economy, and future cargo movement trends. Given this business environment at this point, we plan to keep the interim dividend unchanged from the previous forecast at JPY 115 per share, while the year-end dividend will be revised downward by JPY 10 to JPY 110 per share, in line with the revision to the full-year earnings forecast. The breakdown of the year-end dividend of JPY 110 consists of an ordinary dividend of JPY 85 and a 140th anniversary commemorative dividend of JPY 25, with the appreciation to the shareholders to support us for many years. This brings the annual dividend for fiscal 2025 to JPY 225 per share.
Also, please turn to slide six for details on the share repurchases. We are implementing a program with a total acquisition limit of JPY 150 billion, running from May 9th, 2025, to April 30th, 2026. As of the end of October 2025, we have completed repurchasing 15.479 million shares. In principle, the shares repurchased are scheduled to be canceled. Please go to slide 18. The following pages from 19 through 22 contain materials related to the progress of a midterm management plan. Please go to slide 19. This slide shows the trends in profit and financial indicators. The two columns on the right for fiscal 2026 and fiscal 2030 show the revised figures that were presented at the time of full-year results announcement in May.
In addition, the second column from the left shows the actual results for the first half of FY2025, while the third column from the right shows the revised full-year forecast for FY2025. Please go to slide 20. Regarding our investment policy, for investment that will lead to stable shareholder returns in the future, the total investment amount through FY2026 is expected to reach approximately JPY 1.4 trillion, revised up in May. As of the end of September, investment projects already approved amount to approximately JPY 1.2 trillion. Please go to slide 21. Regarding cash allocation, we have updated the figures to reflect the current situation of various cash flows. On slide 22, this page covers our policy on shareholder returns.
The column on the far left shows the policy at the time the midterm plan was announced, while the column on the far right reflects the latest forecast for FY2025. From the top, in May, we raised our target pay ratio to 40%. Just below that, we increased the minimum annual dividend per share by JPY 100 to be at JPY 200 per year. We expect the annual dividend per share to be JPY 225, as explained earlier. As for the total dividend amount, compared with the JPY 230 billion plan over four years under the policy in the original midterm plan, we now expect to pay a total of around JPY 3,000 billion over just three years.
Furthermore, the one below, regarding share buybacks, although the original plan called for around JPY 200 billion over four years, we've already decided on a total of JPY 480 billion just over three years. As a result, as noted at the bottom of the slide, the total shareholder return ratio stands at 116%, and EPS is JPY 495. So, the net income is expected to decline compared to FY2023. EPS is projected to increase. This is the result of us steadily buying back our shares, even more than we originally planned. We are doing this to make our capital more efficient. This concludes my explanation today. Thank you very much for your attention.
Thank you for the presentation. Now, we move on to the Q&A session. Let me explain about how to ask questions. First question. Thank you for the detailed presentation.
I have two or three questions. First, the impact of tariffs. No change from the first quarter, you said. In the first quarter, the JPY 22.4 billion or JPY 24 billion are the lost cut. Maybe you do not have actuals for the first six months. Maybe qualitative basis. Could you please talk about your progress? My first question. The second question, the automobile vessel, that it was revised down this time. It seems that it is because of the inflation of cost, including the port fees. Without it, the short-term freight did not have any impact. Am I right to understand that way? The third question is about logistics. The ocean freight rates went down more than expected. What about the air freight, the procurement prices, and the other elements? Could you please answer those three questions?
Thank you for the questions.
Starting with tariff impact, our CFO, Kono, will explain. As to automotive vessel, myself, and then logistics, especially air freight, the banner is going to explain. Kono-san, please.
Tariff impact. As you pointed out, in the first half, or I should say at the end of first quarter, about JPY 24 billion was the impact. That was the estimate. As to the other liner trade, a little bit less than JPY 20 billion. And the other part, JPY 4 billion-JPY 5 billion. That is the breakdown as of the end of the first quarter. That was our forecast as of the end of the first quarter. As you pointed out, which part is impacted by tariffs and which part is by the market or any other economic conditions? It is so hard to find the borders among those elements. Assuming that there will be tariff impact, we look at the second quarter.
Based on that, as to liner trade,
the freight decline was more than we had expected, and the demand and supply loosened up. There was an impact coming from that, so we have revised it down. Partly, that was because of the tariffs, but it is difficult to say, to talk about in a clear-cut manner. Other than that, markets or logistics included. Back then, we did not assume any big impact or element. Looking at the current market conditions, business environment, I think those elements are all included. That said, as our President said earlier, as to port fees for automotive, the carriers, there is a very explicit number shown so we can make calculation. Given our track record of using the ports, and there is a portion that we can avoid using those ports, or we can transfer the cost to the customers.
Based on that, we used JPY 7 billion as our new estimate. Last week, there was an agreement between the U.S. and China. Between the two countries, the adoption of the port fees will be delayed for one year. Other than that, the shipping vessels, the treatment of shipping other companies at those ports is yet to be determined. This port or port fee factor remains included in our estimates. If there's no change, there's a bigger possibility that we will have some upside.
Second question about automotive carrier. In the previous forecast, we assumed JPY 100 billion acquiring a profit. Now, it was down to JPY 88 billion. So, JPY 12 billion revised down. As you said, this JPY 12 billion is not by tariff impact. Also, the cargo movements are not decreasing, and the freight is not decreasing.
The JPY 7 billion out of JPY 12 billion is, as Mr. Kono said, the port fees, the result of our reasonable calculation on our side. That is JPY 7 billion. The remaining JPY 5 billion is cost increase, for example, fuel, biofuel or bio-LNG is in a test phase. The prices there are higher than our expectation. That is driving up the cost. Market freights are not the factors to impact. Your third question about logistics business, air freight business, Vanosan, please.
Thank you for the question. Let me start with ocean freight. Last year, from spring to summer, the other trade from the other Cape of Good Hope. We could book big profit for ocean freight last year. This year, the freights went up significantly and then came down significantly because of tariffs and other factors.
The movements are smaller than last year's. On a year-on-year basis, the profit is smaller. For air freight, U.S.-China element is one thing. Also, from China to U.S. e-commerce, the volume is almost gone this year. As a whole, the industry of air freight space remains unused. The purchasing prices are coming down significantly. As a forwarding company, we could buy the cheaper and sell the higher. The profit is getting better.
That is very clear. Thank you.
Thank you for your question.
Now, I am turning to the next person.
Thank you very much. I have two questions. First is the profit level for the logistics business. You have revised down about JPY 12 billion. That is due to the increased expense. Also, the Mobianto contribution can be also considered, which can actually bring out certain recovery profit.
Last year, with the PMI expenses, maybe that will put pressure on your profit level next year. On the other hand, depending on the environment, it could change. What is your view on your profit level? Second question regarding energy business. For the full year, there is no revision made. For the second half, you made a downward revision. That is because of the, is it the time shift? Any delay in expenses or any additional cost expected? What is your view on the energy business? Those are the questions, one for logistics, one for the energy
Thank you very much for your question. First question, the logistics profit level for next year onward. We will have Mr. Banno answer the question. Second question about the energy business, first half and second half differences. It will be answered by the CFO, Kono. Okay. Mr.
Banner, please.
Thank you. Regarding logistics business, and this year, we revised downward. Air and ocean freight were explained earlier. By combining them together, we're not really seeing major change. Contract to logistics, there was a confusion in May, June timing. Due to the drop in the ocean freight amount coming from China, that actually brought out a huge reduction in profit level than expected. Once again, we have reviewed the profit level, and we made a downward revision. The major impact was the expenses related to the acquisition. That is already seen in this fiscal year. That is also part of the downward revision. We have not closed the deal yet. When are we going to include this acquired business as part of the group? It's not decided yet.
The official contribution of the business performance is going to be in the next fiscal year, fiscal 2026. Beyond that, as we mentioned, the PMI-related expenses are going to be incurred additionally. Also, we will have to have the amortization of goodwill starting at the same time. Those are becoming next year since the acquisition amount was quite large because the size of the business that we acquired was quite huge. The expected expense impact can also be large to put pressure on our profits. It would be great if we could finish up this integration within a year. I think it is going to go a little beyond that. We will have the expenses being incurred, and then we will start to see a much bigger contribution coming from this acquired business and the profit level from the third year onward.
Thank you for your question.
Energy business, the gap between the first and second half. It was nothing coming from market situation changes. It is more like a cost posting timing, recording timing. NYK Energy Ocean was now consolidated in April as a subsidiary. The depreciation cost, of course, we have a motivation of the goodwill. Part of the spending should be also booked as depreciation. However, there was a minor change in the amount after talking to the accountant. We tend to have a less figure than expected. We will have more spending to be booked in the second half than expected. That is one of the factors. As a result, there is no change for the full year. We saw some changes in the difference between first and second half. I hope this answers your question.
Thank you very much.
I understood very well.
Thank you for the questions. I'm going to go to the next question.
Thank you. I have two questions. First, dry bulk and about the revising down, revising down. Am I right to understand that it is a negative spread of spot trade? I think there's something like that happened in the past. It's difficult to control these things. Could you please talk about some details about it? Second question, next fiscal year, the last year of the current mid-term management plan, JPY 270 billion of recurring profit, ROE 8.1%. That is the current expectation. To achieve these numbers, what is the probability of achieving those numbers? How are you committed to achieving those numbers? Are still recurring profit?
I think it depends on the environment, but as to ROE, by selling assets, for example, or share repurchases, I think there are ways to come close to the ROE. Are you feeling very enthusiastic about this, the 8.1% ROE target?
Thank you for the question. As to the dry bulk result of the forecast being revised down, Kono-san will explain. The second question, as to numerical targets of the last year of the MDMP, I am going to answer that question.
Thank you for the question. Dry bulk, especially bulk shipping trade and spot basis. As we have been explaining on different occasions, there are contracts and assets, namely the vessels that we own. The contract and those assets are matched as much as possible. For long-term contract, we use the adequate vessels for that. For the short contract, we have something like COA.
In those cases, we use the short-term vessels so that the exposure-wise, there will be matching between the contracts and the vessels. For those, by getting those spot cargo, we can ensure some of the profits. It's a COA. It is linked to market. For example, front hold and back hold, based on this concept, for example, from Brazil, iron ore trade, to get it in the ballast basis, it will be costly. We use the other back hold concept, namely we transport something else in between by improving the efficiency of the other transportation. Such trade patterns have been changing slightly. For example, the factors behind it as follows: in Ukraine, the Ukrainian issue, which is the exporter of iron ore to Asia or China, for example. Because of this, the war with Russia, the situation is changing.
In Europe, for example, in the Pacific area, from Australia, the coal was transported to Europe. In Europe, they are decarbonizing. The coal cargo is decreasing. This year, such trend is emerging more clearly. We are coming into the adjustment phase. That is the first half of this year. Now, the deployment of vessels, we are adjusting the deployment so that in the second half, we can get more profitable the way of the deployment of vessels. We are now working on such setting up. The second half and the next fiscal year, the situation that is expected to be more normalized. That is the background. As to the second question, Soga is going to answer your question.
FY 2026, the fourth year of the mid-term plan, last year.
We have JPY 270 billion target for the recurring profit and ROE 8.1% target. In this mid-term plan, a big focus has been on capital ratio, how to improve it, how to optimize it. For that, we need to have more earnings power and also gross investment and the shareholder return. These three pillars are very important for us. In that context, we are committed to this 8.1%. There is an impact on recurring profit, for example, comparing 2024 and 2025. Or ONE's, at equity method, the earnings have changed dramatically. That was a big impact. As I have been saying on different occasions, bulk or dry bulk energy, automotive, logistics, namely other than ONE businesses, should be stronger. That is what we have been working on.
Looking at the results of 2024 in these four areas, JPY 200 billion, that is the target that we are likely to achieve. Based on the current forecast, it will be JPY 160 billion instead of JPY 200 billion. 20% of the decrease in the other number. We need to reflect upon that as to how to reinforce those businesses. We will remain focused on them. As a result, the ROE of 8.1% will be realized, and we will work for that. Just for the sake of the number, we do not intend to sell assets or share buyback. Before thinking about it, we will think about how to reinforce those four areas that I talked about, for example, automotive carrier. There was just one off element. Rather, dry bulk business, as Mr. Kono talked about, how flexible we can be for these businesses' operation.
We would like to focus on reinforcing those four business areas. As a result, the ROE 8.1% is to be achieved. That is our resolve. Have I answered your question?
Yes, it's very clear. Thank you.
Thank you for your question. Now, we want to move on to the next question.
Thank you very much for your explanation today. I have two questions today. First is about dividend. Now you're setting it as JPY 225 billion. Can you give us a rationale for this number? In compared to the planned net income, actually, the decrease in dividend was less. Is there any message behind this number? Second question is about the management allocation of JPY 200 billion. What are you using this for? Any update on the expected usage?
You are talking about solidifying those four business categories.
I guess maybe this could be the area where you invest in. Can you elaborate more on this usage of the capital?
Thank you very much for your question. In response to the first question about dividend policy, let me answer this question first. Management allocation of JPY 200 billion, the usage for this fund will be answered by CFO Kono. Regarding the first question of JPY 225 dividend, actually, when we decided the minimum amount of JPY 200 at the beginning of the year, based on the net income of JPY 210 billion, we calculated the annual dividend is going to be actually calculated as JPY 200 with 40% payout ratio. We have that as a basis.
For the interim dividend of JPY 150, if this is maintained, for the full year impact, for full year, if we were to maintain the 40% payout ratio, the second year-end dividend is going to be JPY 85, which will be a total of JPY 195. Sorry, JPY 200 for the year. This is what we are thinking. I also mentioned about the commemorative dividend. Aside from the ordinary dividend, I do not know whether the dividend payout was the appropriate way or not, but for 140 years, we were able to continue our business. The shareholders, who is one of the very important stakeholders for the company, we discussed a lot how we can show appreciation to those shareholders. Additional dividend or special dividend was considered to be the best option so we can return back to all the shareholders.
At the time of 100th anniversary or 120th anniversary, we actually took the same concept to pay out the commemorative dividend. We also checked the amount spent at the time, also the ratio that we have spent. We decided to give out JPY 25 as special dividend this time. This JPY 200 was the calculated dividend. By adding JPY 25 billion, we decided to go with JPY 225 for the year. This JPY 200 number is exactly based on 40% payout ratio. Including the additional dividend to be JPY 225 in total, the payout ratio is going to be 45%. We are not trying to narrow the gap against the JPY 235, but instead, we were trying to show the appreciation back to the shareholder. That came out to be the number of JPY 225.
It was going to be a milder downside, but that's how we came out with this number. Regarding the second question on the management allocation, this will be answered by Vice President Kono.
Thank you for your question. Regarding management allocation, as explained by the President and also shown on the presentation, we have set a JPY 200 billion that is maintained. Profit was slightly revised downward. Looking at operating cash flow, there is no major change on the operating cash flow because ONE, actually, profit was captured by the equity method. That will not actually lead to a decline in operating cash flow directly this year. Including dividend, it is possible that we may see a change in operating cash flow. It could go more, it could go less. We also want to consider this can be a kind of buffer.
For the usage of this fund, as explained in the past, our intention is to spend in a gross investment and return to shareholders and capital policies, including shareholder return, and to accomplish the most optimal capital efficiency, debt to equity ratio, and shareholders' equity ratio. All these are factored in in a comprehensive manner. If there are any investment opportunities, we will spend into those investments. If not, of course, there will be some opportunities. If for the time being, we may decide to spend into the shareholder return for the time being, it is also another possibility. Right now, we are now starting to discuss the details for the next mid-term plan, where we also will experience some investment opportunities. Within the management, executive members will have more discussions to decide how to use these funds.
Basically, it's in line with what we have announced in the past as the policy. I hope this answers your question.
Thank you. I understood very much. Thank you.
Thank you for the questions. Moving on to next question.
Thank you. First question about ONE. At the beginning of the year, without tariff impact, JPY 1.1 billion of net income was expected. In a normalized way, you have the same thinking about the level of profit that you can achieve for the freight from the other November, but that October, mid-October, it has been coming down. As to second question, the Suez, the canal, the routing and the reopening of the Suez, do you think that it is more likely that the trade through the Suez, the canal, that will be reopened? When it happens, what kind of changes are you going to go through?
When the IMO is extended or delayed, what will happen
Thank you for the question. First, ONE and the future freight, Banno is going to answer your question.
Thank you for the question. Yes, you are right. At the beginning of the year, JPY 1.085 billion was the other number that we publicized. That is the other normal level of our earning power. As we think that way, in the peak season toward Christmas, usually it goes up and then comes down again. Such a big flow would change, such trade, as long as such trade continues. With the healthy competition among other shipping companies and the freight coming down, we are going to use our own judgment to make adjustments. As long as we can do that, this level of profit should be ensured.
This year, in May and June, it was a chaotic situation. Not only just us, but our customers as well. There was a change in also the China-U.S. tariff problem. The inventory in the is decreasing. There was a rumor about it. In the very chaotic situation, we struggled. Probably it might continue into the next fiscal year. The numbers that we developed in the original budget, I think that we can achieve them. I'm sorry, for FY2026, we have not had any specific numbers. Please understand that we are just talking in general terms. Second question. Here, it's Soga answering your question about Suez Canal.
We are monitoring how many vessels are going through, actually, the canal. In many of the cases, there's not much of the change there.
More than 50% of the vessels are not going through the Suez Canal. We know who are actually using Suez Canal. For example, some Chinese automobile, the vessels or the container ships or the tankers owned by Greece. Those are the vessels which are still using Suez Canal. Container ships or the automotive ships. In terms of competition, at this moment, we are not getting any pressure from the customers saying that you should go through Suez Canal because it is more beneficial. That is not happening yet. What about safetyness to go through the canal? As you know, Israel is still attacking Gaza. The things in that region are not settling down yet. It is very uncertain what will happen in the future. It is our judgment that we are not in the environment where we can safely use Suez Canal yet.
As to IMO, the GFI regulation about the environment, as you know, it has been postponed by one year to have a resolution on that. GFI regulation, we wanted to take aggressive stance to GFI. To be honest with you, it is very regrettable. As you know, those global rules such as GFI are in place. When that happens, the GHG-related cost or the cost of value, we can use the common measurement, the tool. We have been making lots of investments in those areas earlier than others. We thought that to comply with those rules will give us another competitive edge. Now, this resolution on GFI has been postponed. Globally, beyond the industry or sector, it seems that the understanding of GHG and its value cost level is coming down.
That said, we will not postpone or halt our decarbonization effort. As you know, there are various technological advancements, developments, or the commercial flow where all of these things take a lot of time. We need a certain period for trial and error. Rather than stopping what we have been doing in the longer run, eyeing the decarbonized society, we need to continue what we have been doing. Our policy remains unchanged. In one year's time, if there is an opportunity, actually, we hope that there will be an opportunity to vote for the GFI collaborating with the Japanese government. In order to get endorsement, we would like to make efforts to get sufficient endorsement and support. Thank you.
As to Suez Canal, if that trade is reopened, accumulated scraps will be removed.
Do you have any image of what will happen once the reopening happens? As you said, in 2023 and 2024, scrap volume was so small. Not only container ships, but there are old ships increasing. Once the reopening of the canal happens, and if there's oversupply, then there will be more vessels to be scrapped. What will happen?
There are not many yards globally to scrap vessels, and the capacity is limited. The question is how we can make adjustments, and that will be the next issue to work on. Thank you.
Thank you for your question. There are no additional questions. We want to close the Q&A session for now. Thank you for your questions. I think we're also about the ending time now. We want to wrap up the financial results briefing meeting for the second quarter of fiscal 2025.
Thank you very much for your cooperation.