We would like to start our presentation about our new Medium-Term Management Plan, Sail Green, Drive Transformations 2026 - A Passion for Planetary Wellbeing. I'm Kamina, Head of PR. I'll be serving as moderator today. Before starting, we'd like to play you a video about our new medium-term plan. It's about 30 seconds. After that, the members will be showing up.
[Presentation]
I'd like to introduce the presenters. Mr. Nagasawa, President, Representative Director, and CEO, to your right. The Senior Managing Executive Officer, CFO, Mr. Soga. Mr. Soga, nice to meet you. To your left, Mr. Banno, Executive Officer. These are the three speakers. They will now be seated. In opening, I'd like to explain today's agenda. It's a hybrid meeting, some in-person, some virtual. Mr. Nagasawa will do the opening remark. Mr. Soga will give the presentation, which is scheduled for 30 minutes. After that, we will have a Q&A session. After Q&A, at this venue, we will have time to take photographs. Finally, we plan to end the session at 1700 hours. Nagasawa, President, will speak.
Good afternoon. I'm Nagasawa, President of this company, and thank you for coming to our announcement of the new Medium-Term Management Plan, our Sail Green, Drive Transformations 2026 - A Passion for Planetary Wellbeing. We're very grateful that you are here, and I'm sure some of you are listening online, but I want to thank you for your support to our group's business. In making this announcement, I would like to say a few words briefly. Currently, we have this current Medium-Term Management Plan that will end this month. The business environment changed dramatically during this time. From within and from outside, there have been voices that we need to revise the medium-term plan. Because the changes were so dramatic, we wanted to carefully examine the situation of the business and put together a new medium-term business management plan.
Last year, to prepare, we established a task force of young executive officers thinking about what we need to be in 2050, then backcasting from that and discussing what we need to do. The management committee has then refined that into the new Medium- Term Management Plan. We have outside directors and outside auditors joining in the debate in putting together this plan. The contents will be explained later by Mr. Soga, who will be the new CEO. The point is the ESG management that we have been doing, we are going to promote that further. Also the cash that has been accumulated and the cash that will be accumulated in the next four years, how to allocate that and what are we going to invest in.
That is going to be easy, we are going to focus on current business and also invest in new business. In terms of return to our shareholders, in terms of a capital policy, this time, we have reviewed that. In terms of that direction, I think we are able to show a clear direction. Finally, this past Tuesday, we have acquired all the shares of Nippon Cargo Airlines, or rather, we have sold it to the ANA Holdings. Concerning this company, well, we were able to show the direction. We are happy that we are able to present this new plan with that announcement of sale of Nippon Cargo Airlines as well. Now we will have Mr. Soga, who will present the new plan, who will be the new CEO from April.
Good afternoon. I am Soga, CFO. Thank you very much for joining us today. I would like to start by explaining our new Medium- Term Management Plan, MTMP, which is available on the website or on the screen for you to see. Today, I will follow this agenda in my presentation. This MTMP consists of a management strategy to ensure that our group is a business group that contributes to society while achieving sustainable growth, and a new financial strategy to promote management with an awareness of improving capital efficiency. Before I explain the framework of the MTMP, the business and function strategies, and the financial strategy in that order, I would like to explain how we have developed this Medium- Term Management Plan, MTMP. As Mr. Nagasawa mentioned, maybe what I am going to say have some overlapping remarks.
Society today is at a major turning point in history, many things are happening around the world that are completely different from the business environment we had previously assumed. Amidst increasing uncertainty, we need to anticipate the mega trends in society over the long term up to the year 2050, predict what the business environment surrounding our company will be like, what challenges we will face there, then backcast from there to determine what strategies we should have now and what we should do over the next four years. That is the question we posed on ourselves. In other words, this MTMP sets out a major strategy for the group to continue to grow sustainably with society on the long road to 2050, as well as action guidelines for what we should do over the next four years based on this strategy.
I will now begin with the outline of the MTMP. First of all, in putting together this MTMP, we have formulated a new vision of where we should aim and aspire to be by 2030 in order to be a business group that contributes to society, being in demand by society, and achieving sustainable growth. That vision is we go beyond the scope of a comprehensive global logistics enterprise to co-create value required for the future by advancing our core business and growing new ones. This vision includes three elements of transcendence, triplets, and co-creation. The message is that while the company's starting point is its founding business of shipping, it will go beyond that and with both core and new business, realize advancement and growth through challenge and co-creation, which has been the culture of our company since its foundation.
Originally, we set out bringing value to life as our purpose and social mission, advocated three values that all group employees should have in common: integrity, innovation, and intensity. To these, we have added the new vision of what we should aspire to be. We organize them as mission, vision, and value. This MTMP can be set to indicate specific management strategies and action guidelines for realizing the vision, which is the image that we should aim for. This slide shows the backcasting mentioned at the beginning, where we have analyzed mega trends in four areas: population, globalization, technology, and environment in order to forecast the world in 2050 and the business environment in which we will operate. This is a summary of the mega trend analysis, we have extracted the implications for our business from the perspective of four mega trends.
Briefly, the first is that demand for general consumer goods will continue to increase as the population grows, demand for container shipping and logistics will grow continuously in the long term, but it is also necessary to consider responses to sporadic geopolitical risks. Second, technological developments advancement in the environmental responses, changes manufacturing methods what products are transported and how they are transported, taxation on GHG emissions will be strengthened. We must be fully prepared for changing trade patterns in the decarbonization of fleet and transport equipment. Thirdly, technological advances and decarbonization trends will cause major changes in the economic value chain and revenue streams, this is where new revenue opportunities for the company will arise. Based on this analysis of mega trends, we have developed this backcasted medium-term plan titled Sail Green, Drive Transformations 2026 - A Passion for Planetary Wellbeing.
It expresses the will to put ESG management at the core, in particular, the passion for decarbonization activities to protect the global environment and the will to powerfully drive change.
This slide shows the direction that each of our business should aim for based on opportunities and risks in each business. I will not go into details here, but based on this assumed direction, we have set the target for our management strategy for each business unit, as shown in the next slide.
We will strengthen the liner and logistics business. That is, expand the scale of our container ship business through the ONE framework and strengthen Yusen Logistics as the core of our network. In the bulk shipping business, we will strive to differentiate ourselves by demonstrating our environmental superiority and, at the same time, respond to the demands of society by ensuring stable supply of materials and existing energy sources.
We will work on new businesses that contribute not only to the decarbonization of ourselves, but also that of society and various industries, and develop these into new revenue bases. These are the targets of business growth that we have set. Based on these business growth targets, here is a graphical representation of the overall management strategy. The key strategy for the two pillars, existing core business and new growth business, are expressed as AX, ambidexterity, and BX, business transformation. The key strategy aims to advance existing core businesses as written here, advance or deepen the existing core businesses as well as advance and grow new growth businesses. To evolve and grow the new growth businesses. Supporting this key strategy are the functional strategies of CX, corporate transformation, talent organization, and group management transformation, DX, digital transformation, and EX, energy transformation.
These five transformations are defined as ABCDE-X and is a framework for this medium-term management plan. I will now briefly explain our key strategy, AX, ambidextrous management. The four-quadrant diagram on this slide starts with the knowledge and core competence of our core business. There's the market/customers axis going to the upper right and the technologies/services axis going to the lower right. In between, we show three directions of business creation in new fields. The first is to develop new markets and customers with our existing technologies and services. The second is to sell new technologies and services to our existing markets and customers. The third is to develop new markets and customers with new technologies and services. We will work on our growth strategy of creating new businesses and advancing our core businesses with our ambidextrous management to increase the value of the entire group's businesses.
These challenges will be firmly supported by CX, corporate transformation, the talent organization, and group management transformation shown on the left. In terms of advancing our core business in our liner and logistics business, until now, we have been focusing on getting the newly established container ship operations, ONE, on track. Going forward, we will position the container ship business as one of the core businesses, and through the ONE framework, we will strive to expand the scale of this business. Priority will be placed on ONE growing and surviving in the fierce international competition, and we will support the growth investments of ONE as a shareholder, and we will continue to dispatch talent to the company. The logistics business of Yusen Logistics is also a core business of utmost importance to the group.
We will firmly capture the ever-growing global demand for logistics and strengthen it as the group's growth engine. We are also considering aggressive use of M&A. Our air freight business will follow the policy that we announced on March 7th. On October 1st, around that time, ANA Holdings will acquire the NCA, and the negotiation is ongoing. In this medium-term management plan, we will not be mentioning the air freight business. Please, I ask for your understanding on that. Next, in terms of advancing the bulk shipping business, we will support our customers' transitions toward decarbonization and continue to fulfill our responsibility to provide a stable supply of existing energy as a transportation infrastructure business that responds to the needs of society.
On the other hand, we're aware of the risk that demand for transportation of iron ore, coal, and petroleum in developed countries, including Japan, will peak out, and we will optimize our fleet portfolio for multiple angles and continue to make necessary investments while balancing the risk of creating stranded assets. In the cruise ship business, a new LNG-fueled cruise ship is scheduled to enter service in 2025, and we will promote the penetration of our brand concept, Asuka Cruise, to strengthen the brand power of the group as a whole. In creating new businesses, we intend to evolve our core competence as a shipping company by changing and advancing the conventional view of cargo as a business object, ocean as the business domain, and ship as the business asset.
In addition to creating a system to safely transport hydrogen, CO2, ammonia, and other new energies as cargo by ship, by taking part in the value chain of these new energies beyond just the ship, we would like to evolve from shipping of goods to service creation. In addition, in order to deepen our focus from the sea for transport to the sea for work, we will also participate in the offshore wind power value chain. We will also enter into advanced vessel design using simulation technology and autonomous operation management technology, such as unmanned ships, to change our perspective from ships as a means to ships as an objective. Instead of just ordering vessels, we will contribute to the revitalization of the maritime industry together with Japanese shipyards and marine equipment manufacturers.
The individual measures described in detail in the boxes for each of the four quadrants are explained in more detail on pages 36 to 38 of this document. Please refer to those pages. Next, I'd like to explain the functional strategies, CX, DX, and EX, that support this ambidextrous management.
The first topic is the talent and organizational transformation under CX. As shown in the slide, we will promote recruiting, developing, and energizing diverse talent to play an active role in realizing ambidextrous management, while at the same time strengthening the HR corporate function that support them, so that each of the 35,000 group employees can utilize their abilities in the group's various challenges. We will promote the aforementioned mission, vision, and value, and foster an inclusive corporate culture that makes decisions based on diverse perspectives. We consider the transformation of group management to be another important CX measure. We will increase vision sharing and engagement across the group and prepare a platform to fully commit to potentials of group companies. The further evolution of governance is another important CX. In January this year, the company announced its transition to a company with an audit committee.
The aim is to speed up decision-making by delegating the authority to make important business decisions to the executive directors and to strengthen the function of the board of directors by focusing on deliberations on matters that will enhance corporate value, such as medium to long-term management strategy and sustainability. The monitoring function of the board of directors will be strengthened by appointing a director who is also a member of the audit committee. The formal transition will take place after approval of the general meeting of shareholders to be held in June. Digital transformation, DX. We have already started to develop the infrastructure, such as digital talent development, data use, core system update, and ID security updates.
What we would like to promote, in particular in the future, is the right-hand side of the slide, the flow of generating resources through rationalization and linking them to new business, and to foster a culture that generate new businesses through the group's internal incubation program. I will explain about EX, energy transformation. Decarbonization is a great challenge for both society and our company, we will systematically accelerate various initiatives to ensure that we achieve net zero emissions in 2050 as a group that contributes to society and experiences sustainable growth. As a Scope 1 GHG reduction strategy for 2030 on the way to 2050 net zero, we will reduce GHG emissions by focusing on the four reduction levers on the right-hand side of the slide, hardware and fuel conversion, optimal operations, energy-saving technology implementation, and use of biofuels.
These are not things we can do on our own, are areas that we will co-create together with shipyards, marine equipment manufacturers, fuel suppliers, and many others. We will establish an ESG strategy headquarters in April. This headquarters will play a central role in controlling these four reduction levers and strengthening the system to reduce GHG emissions in cooperation with internal and external parties. We are also planning to fully introduce the internal carbon pricing, ICP, system in investment decisions. In terms of decarbonization of international vessels, we aim to reduce GHG emissions by 30% or more by 2030 by promoting the introduction of new LNG-fueled vessels as part of fuel conversion, and by making maximum use of technologies that contribute to GHG reduction in terms of operations.
The fuel conversion will be further enhanced through the full-scale introduction and expansion of the number of zero-emission vessels, mainly new ammonia-fueled vessels, to accelerate the reduction of GHG emissions. For ship types that are not easy to decarbonize, we aim to achieve net zero emissions by 2050 through the use of biofuels and utilization of carbon offsets. The planned investment in the vessel decarbonization is in the order of JPY 450 billion by 2030. The breakdown is JPY 430 billion for new construction, including fuel conversion to LNG fuel vessels, and another JPY 10 billion each for optimal operation and implementation of the latest energy-saving technologies. Out of the JPY 430 billion for hardware, the premium for fuel conversion is expected to be JPY 80 billion, and the number of low-carbon and decarbonized vessels scheduled for construction between 2023 and 2030 is currently expected to be 45.
Our vessel fuel conversion scenario is shown on the slide. I repeat, up to 2030, we will promote the introduction of new LNG-fueled vessels in each vessel type to take the lead in reducing GHG emissions from around 2030 onwards. The main scenario is to convert to new ammonia-fueled vessels with accelerated introduction from around 2035. For vessel types where conversion to gas fuels such as LNG and ammonia is difficult, the introduction of biofuels and methanol fuels will be accelerated.
Lastly, I'd like to explain our financial policy, including our capital policy. First, regarding our investment plan. During the four-year period of this medium-term management plan, from fiscal 2023 to 2026, we plan to invest a total of JPY 1.2 trillion. Our main investments will include JPY 560 billion to advance our core businesses, including fleet expansion of LNG carriers that contribute to the decarbonization of society, JPY 460 billion in new ship building, which will contribute to low carbon and decarbonization through fuel conversion and M&A in the logistics sector, and JPY 100 billion for new businesses such as offshore wind power, participation in the hydrogen and ammonia value chains, and space-related businesses. Next, I'd like to explain our shareholder return policy. During this medium-term management plan, we intend to offer shareholder returns with capital efficiency improvements in mind.
First, we will acquire JPY 200 billion worth of treasury stocks over the two years from fiscal 2023 to 2024. Second, as for our dividend policy, we will increase the target payout ratio from 25% to 30%. In addition, we will set a minimum dividend of JPY 100 per share and strive to realize stable dividends even at times of downward business volatility. In the case of upward business volatility, then 30%, of course, will be applied. If capital accumulates even further, then based on consideration of investment opportunities and business environment, we will dynamically offer additional returns, thus expanding our TSR. We will explain more specific details of shareholder returns at the time of each fiscal year's earnings announcement. As a supplementary note, we have considered not just dividend payout ratio, but other dividend policies, including the use of DOE.
Given the volatile nature of our business, especially ocean freight, we have decided that the simple form of dividend payout ratio and minimum dividend is most beneficial. There is no upper limit, but there's the floor. That system, we felt is the simplest and is the most beneficial to both shareholders and the company. We decided to take this approach. Based on these considerations, our four-year cash allocation plan is as shown. It's designed to achieve both increased capital efficiency and investment for growth while maintaining our current credit rating. On the left-hand side, you see the cash in. In addition to the operating cash flow generated during the medium-term plan, we will effectively utilize the stock of free cash flow, which has been significantly positive over the past two years.
The cash outside on the right summarizes our business investment policy and shareholder return policy for the next four years, which I've explained to you. A portion of the cash out, you see lower right in a circle, that is earmarked as management allocation, which will be strategically allocated by assessing investment opportunities and the business environment, thus ensuring a certain degree of flexibility in its utilization. In our financial strategy for this medium-term management plan, we have considered the ideal capital structure and shareholders' equity. The ONE business is a long-term growth business, but a highly volatile business, we will allocate 100% equity to its assets and ensure an ample risk buffer for assets other than ONE. In light of capital efficiency enhancement, we believe it is appropriate to allocate 40%-50% of shareholders' equity.
The shareholders' equity figure is presented in a different way than in the past. Being a shipping company, we have charter fee liabilities, under the current Japanese accounting standards, such charter fee liabilities can be off-balance sheet, and that is how we have treated this. On the other hand, recent accounting standard revisions and the IFRS standard adopted around the world treats charter fee liabilities as lease. Japanese accounting standards may follow suit and be changed. Here, previously we were treating it off-balance, but on this document, we are treating it on-balance sheet. Here you see the item on the lower right, that's global charter fee liabilities. On this basis, we believe that equity ratio or shareholders' equity ratio of 40%-50% is appropriate for assets other than ONE.
Based on these two capital structure concepts, we believe that the total of these two should be the ideal capital structure and shareholders' equity ratio for the company as a consolidated entity. The figure on the left shows that. Based on these ideas, we have set the financial indicators on the left-hand side of the slide as our management targets for 2030. The major point is that we will make full use of ROIC from fiscal 2023. With that, we aim to enhance the intrinsic business profitability and further expand corporate value. We will aim to achieve ROIC of 6.5% or more, current profit of JPY 200 billion-JPY 300 billion, and ROE of 8%-10%. In addition, we have identified three non-financial indicators. They are safety, decarbonization, and D&I. We are now vigorously studying the possibility of creating additional KPIs in these non-financial indicators.
In particular, toward enhancing human capital, we intend to analyze the results of the engagement survey conducted for the first time in the second half of last year to identify items that are appropriate for future target setting, convert them to KPIs, and take concrete measures. Finally, the financial plan outlook. In fiscal 2026, the final year of the medium-term plan, we expect recurring profit at the JPY 270 billion level. The shareholders' equity ratio is expected to be 49% after on-balancing of charter fee liabilities, ROIC expected to be 6.5%, and ROE 10.2%. These forecasts are based on our policy on the cargo airline business that we announced on March 7th.
As a supplementary note, the recurring profit figures given here and the financial targets of JPY 200 billion, JPY 300 billion current profit are quite small compared to the JPY 1 trillion figures for the last two fiscal years and may seem like a significant decrease in profit. However, our recognition is that in the past two years, we had the COVID-induced global logistics network disruption, extremely unique circumstances under which we had truly special results that deviated significantly from the trend. As shown in the graph on page 43, if you exclude 2021 and 2022, which were under special circumstances, based on the trend of performance before that, our financial plan indicates a steady growth curve toward 2026 and 2030. We hope that you understand that point. This concludes my explanation. Thank you very much. Questions?
Which business unit are you going to position as a growth driver going forward? As I see it, liner trade seems to have the focal points of focus. Including that, what will be your growth driver going forward?
Thank you very much. Allow me to answer. As you rightly said, the priority area that we are going to focus on. That is to say, we have existing core businesses, naturally, container shipping and logistics. As far as container shipping is concerned, volatility is an issue, but it is sure to grow going forward. For us, we will not leave this area. We will maintain our presence and keep our status in this area. Logistics, likewise, as far as population grows, the demand for logistics will increase as well. Unlike container shipping, for logistics, we can do risk hedging and operate with lower volatility. These are the two pillars. One has high volatility with high growth. Another is high growth with low volatility. Those are the two areas we are going to put highest priority. About the bulk shipping.
Going forward, I feel that the demand will increase for liquefied natural gas, LNG, and LPG carriers as well. Beyond that, ammonia vessels and CO2 vessels. At this moment, LNG and LPG vessels, these are the things we are going to make huge investments to grow going forward. Thank you.
There are several questions. Page 42, appendix. About international accounting standards, you mentioned a little bit. You're not going to introduce IFRS, but even with the Japanese standard, it's going to be put on balance sheet. You're going to do this. Are you going to do this when you go on to the international standard? You said JPY 700 billion-JPY 800 billion in terms of the charter fees. I think you had 400 some agent ships, and of them, how much would account for the charter fee liabilities? What is the term? Other liabilities, please tell me what that is.
Thank you for the question. About the accounting standards, let me respond. As for the charter fee liabilities, Mr. Banno will respond. About the accounting standard, as you say, international accounting standards, there's IFRS, there's also the U.S. accounting standard, and also the Japanese accounting standard. Part of it is being reviewed right now. For us, the charter fee liabilities, and whether that will be off balance sheet or on balance sheet will have the biggest impact. Japanese accounting standards said it could be off balance, but based on the current review, the direction is, and it's relatively clear that it will be made on balance sheet, not immediately, but as far as we know, 2027 or thereabout, it will be treated on balance sheet.
In any case, regardless of which accounting standard you use, it's going to be put on the balance sheet. We need to prepare for when the Japanese standards would change, and also IFRS. We're considering whether we can introduce this, and we are making those considerations at this time. That's the response about the accounting standards.
The latter part of the questions, the other part, the other liabilities. This chart itself just shows that the charter fee liabilities were put in a different place. The other part just shows the balance sheet. Other than shareholders' equity and other than the interest-bearing debt, charter fee liabilities, everything else is just put into that others. All kinds of things put in there.
Sorry for a detailed question, but what is the term duration for the charter fee liabilities? Like, more than one year should be off balance sheet or whatever? What's being calculated? If it's longer, or if it's eight years, then there's the eight-year worth of the liabilities. If it's shorter, it will be the amount for that. Within one year, you don't take that kind of approach?
How it will be treated in the accounting standard, we will see. The accounting standard itself hasn't changed, so you cannot do a detailed calculation. On our initiative, we set some conditions. We made a calculation of how much charter fee liabilities that we have. Longer one, short one included. The short one spot is not included. I mean, spot has various lengths as well. It's not less than one year. I mean, some less than one year are also included. That's all.
I have a question to the president, three questions. You are talking about using logistics M&A. According to MTMP, you are talking about M&A. What is the background of the sales of NCA? Last question. With the announcement of the MTMP, your stock price declined a bit. What is your view on this?
Thank you very much. About the M&A management allocation for JPY 140 billion, of course, we need to see how many possible targets of M&As will emerge. If there are good deals, management resources can be used for logistics M&A, and if we cannot find good targets or candidates, we will do something else. What we wanted to say through this MTMP is that we were willing to grow our logistics. Quite recently, we acquired an American company to increase the warehouse capacity by 50%. That is how we are willing to grow the logistics business.
About the NCA, on the 7th of March, we came to a basic agreement. Towards the end of June, we would like to finalize it. About this background, since 1978, for 45 years, we were involved in the operation of NCA, sometimes through a joint venture, and certain times as 100% owner. The size has been the issue. Right now, we have seven in charter vessel, and then for our own independent operation. A certain news report says we are studying the possibility, but it seems that the timing to introduce new aircraft is increasing. We were not quite sure how it will work out as a business. NCA as a company and the executives of NCA, when we consider this, ANA Holdings is a huge company with more than 300 aircraft, and NCA can be utilized there. For cargo transport, NCA is excellent.
Within ANA Holdings, it can emphasize its presence. That is why we came to the decision of the sale. With ANA Holdings, we are going to work out the details. Throughout the negotiation, ANA Holdings showed a very sincere attitude, and we will continue to discuss with them so that the NCA as a company and NCA employees can continue to work comfortably under ANA Holdings. About the stock price, we were quite shocked. Why is it the case that the stock price went down? As Mr. Soga explained, for us, we are a shipping industry, and we showed the minimum dividend level of JPY 100, and then purchasing of the treasury stock by JPY 200 billion, and payout ratio, we raised from 25% to 30%. All good news, we thought, why is it the case that the stock price declined?
I was discussing this with Mr. Soga before this. It was unexpected. That came as a shock to me. Thank you.
Those participating in Zoom, we'd like to take questions from them. One question, page 29, about the shareholder return, about acquiring treasury stock. Based on past comments, past several years, you've accumulated the capital, and you want to optimize capital structure. I think that is the aim. If that's the case, in the early part of this medium-term plan, this could happen quickly. You said from 2023 to 2024, so there's a range in terms of when you do this. What's the reason for that? And the JPY 200 billion, how did you come up with this number? I'd like to ask those questions, please.
JPY 200 billion, that figure itself, we were thinking about the future, past or in the next four years, how much cash flow we will generate, and what is the capital structure that we should aim for, or capital efficiency that we should aim for.
Also dividend to the shareholders, how much we would assume for that. All of that was taken into consideration. In terms of capital structure, the first thing we decided that we should do is to do the JPY 200 billion. The amount is based on consideration of those several factors. After deliberations amongst ourselves, we decided on that number. About the timing, as of now, we're saying fiscal 2023 to 2024. Over two years is what we said. Going forward, we want to do this quickly. We will think whether we'll do it over two years or do it in one time. At least within these two years, we plan to do this, is what we are saying. Maybe it could be JPY 100 billion each year. I do not exclude that. Doing this as early as possible is another option.
That's my answer to your question. Thank you very much.
I have one question to ask. About the financial planning, the target of profit on page 33 of the handouts. Outside ONE for fiscal 2026, JPY 150 billion for recurring profit, for 2024, JPY 160 billion from 2020. That translates to JPY 10 billion of profit growth from 2026 to 2030. Up until 2026, you are going to invest JPY 1.2 trillion in ROIC of 6.5% or more, still you are assuming this much profit growth of this size, which seems too small for me. If you could elucidate me on this, I would appreciate it.
In the business units other than ONE, there's only an increase of JPY 100 billion of recurring profit. JPY 10 billion, sorry. Logistics and automotive carriers, energy-related business, that is the automotive transportation and the bulk shipping. It seems that the glass is still full, so to speak.
That's how we came up with the estimates. Actually, from 2026, let's say at 2029, logistics will increase a lot. Then towards 2030, it will slow down. Automotive, transport, and energy, from 2027, the profit will grow. You may feel somewhat uncomfortable, but from our perspective now, this is our estimate. We have core businesses and new businesses going forward. We have to recover from the existing business, starting from 2029 and 2030. That, we have to do, I mean, recovery. These are the numbers we came up with from these factors. Well, I don't know whether I answered your question or not, but this is what I have to say.
Thank you. Up until 2026, there are things you can recover. Then 2029, 2030, within this 10-year vision, in the latter half, there are certain things you are going to recover. Is my image correct?
Yes.
The recovery itself will take more years, a lot more years. It's just the starting of the recovery period.
Thank you. I understood. Thank you.
I'd like to ask one question. Page 30, talk about the cash allocation. Now, if you look at operating cash flow, if you are not able to earn as much as you expect, then the JPY 200 billion treasury stock purchase, are you going to do it by borrowing money? If you have lower operating cash flow than projection, then treasury stock purchase may be less than JPY 200 billion. What's your policy there?
Thank you for the question. Our current projection, we're looking at 2023, 2024. What kind of projections we have for those two years, we have not publicized them yet. In May, when we announce our earnings, we will show the prospects, and we're currently tabulating. Based on that, the 2023, 2024 treasury stock purchase JPY 200 billion, we are planning to do it no matter what.
I mean, if there is really big unexpected event, unless that happens, we will do this. That's my response to you.
Thank you very much.
Simply, I have two questions. First, ONE, about the profit plan. What are the assumptions of this profit? Is it 2026 when things get normalized? That's my first question. My second question, toward the ONE's asset, you share with us how much shareholders' equity you're going to have. ONE has the deposit equal to shareholders' equity, and then NYK doesn't have to have an extra shareholders' equity. If the cash position of ONE is too high, you can return it back to the shareholders, in my view. What is your take on this? That's my second question. First, Banno-san, Executive Officer, can you answer? Thank you.
ONE's profit and loss plan, this is our own simulation. We have not come to the agreement with the three shareholders. This is based on the long-term plan. We have not announced a very solid mid-term plan.
This is just a simulation that we did. The current market, as you know, the level is declining during the COVID. I'm sure this will improve, not quite shortly, but it will improve going forward. We feel that this is an extraordinary level, and steadily this will increase. That's why we came up with this number. About the second question, already ONE has the asset, accumulated cash. It seems that NYK doesn't have to accumulate the shareholders' equity on NYK part, you said. How do we balance the asset and equity for ONE? We are in the midst of discussion with shareholders, especially. We need to increase the size or magnitude. It's not a finalized agreement. This is how we feel. Toward ONE, we need to make certain investment going forward.
The cash accumulated is equal to the asset, but in a long-term basis, it's going to be diverted to investment. Container business at ONE, as Mr. Soga said, has a high level of liability. Our internal calculation is that shareholders' equity should be 100% to counter the asset. That's why we came up with this level of shareholders' equity. Thank you. If I may add, ONE itself, at this moment, for the investment plan, there has been some ambiguity, but we sometimes discuss with ONE about the investment plan. Most likely, in the first half of this year, they will announce the investment plan. They have accumulated cash, and they will make clear how they are going to use this. When the time comes, we can announce that to you. Thank you.
One question. Page 30, operating cash flow JPY 820 billion plus, including dividend from companies with equity method, maybe you cannot disclose. Dividend from ONE, how much do you assume? Can you give us a rough figure? If that's difficult to say, dividend policy from ONE, when is it going to be determined or set? I would ask Mr. Banno, Executive Officer, to respond.
ONE dividends, of course, an amount has been reflected here, I'm sorry. We would like to refrain from giving you figures. Amongst the three shareholders, there was a previous question to which I responded, and I explained how much cash should ONE hold, how much should be put into investment. That kind of discussion is ongoing steadily, we have not come to a final conclusion, I can't answer that question, how much.
Okay. Thank you.
We have received some answers in the chat box. The payout ratio is set at 30% limit. What is the reason? Have you studied or reviewed to make it even higher? Second question, what is the reason for introducing the minimum dividend, and why is it JPY 100? Are you going to study the possibility of increasing the minimum dividend at higher than JPY 100?
Thank you. About the payout ratio at 30%, have we not studied the possibility of making it higher earlier? As I said earlier, JPY 200 billion of purchasing treasury stock, and 30% payout ratio. We have stock and the prediction of the cash flow going forward. Considering all these, we try to improve the capital efficiency and what are the investment opportunities, what are the contents of investment? We need to examine all these, we have to consider ratings.
We put so much emphasis on rating. Including all these into consideration, we came to the conclusion of JPY 200 billion of purchase of Treasury stocks and the payout ratio at 30%. We thought these levels would be valid and justified. During the four years of MTMP, we are not going to change these levels. The reason why we decide on the JPY 100 minimum dividend, even if the volatility goes downward, we want to have the guarantee. Well, probably I shouldn't use the word guarantee, we need to give a certain stable level of dividend. Let's say the stock price, current stock price. Well, today there was a dip, looking at the stock price, what would be the rate of return? A little bit of 3% or over.
That's the level that the dividend is being supported, that can give a sense of comfort to shareholders. Now, what about the upside? Business environment is improving, if the performance is better than we expect in next year or 2026, 30% will be leveraged. That is to say, there's a possibility that there is an upside to the dividend. If the capital increases more than we expected, even further, there will be an additional return to the shareholders. Without the necessity to change the payout ratio at 30% during the period, we can provide the additional shareholder returns.
Page 23. GHG reduction. Science-based target, 1.5 degrees. Can you talk about the possibility of that? 30% 2030, I think it would be difficult to get that. What do you think about that?
SBT, this year, we are planning to reapply. Based on 1.5 degree Celsius scenario, we're going to reapply on that basis. For that, what we're going to do, we are making a very detailed study in detail. As you pointed out, with just a 30% achievement in 2030, with just 30% reduction, we would not achieve the 1.5 degrees scenario. We'll be far from that target. We understand that. On this page, as is written here in my explanation, I may not have explained this clearly, 27% and - 30% for international vessels, 30% and upwards is what it says. We will do this, but we will aim for even higher by 2030.
That's our stance that is shown here. We have the ESG strategy headquarters, which is the driver for this effort. They will control the levers of reductions. Also in terms of investment for decarbonization, we will be making them. The return from that In terms of CO2 emission reduction becoming higher, there is a good possibility that we will have that return of increasing emission reductions. If you add all of that, it's - 30% from - 50%. That means that we will be investing, and we want to increase that reduction further, and we want to come closer to the SBT 1.5 degrees Celsius scenario toward 2030. We're going to make our best efforts.
I have two questions. One is, ONE says future growth. Of course, you are going to support ONE's growth. Financial support, funding support, is it one of the options you have? Another is about NCA. The president talked about expanding the scale. The first plan, the initial plan was about 20 aircrafts in fiscal 2016. What was the reason the NCA could not expand in scale?
First about ONE, allow me to answer. According to the investment plan, as I said, there's a discussion going on within ONE, three shareholders, whether they can contribute capital additionally or not, we do not know yet. As we look at the present situation with the high level of cash at ONE, basically, it's so difficult to assume additional funding from the parent company.
Depending on the plan they have in the future, there's a possibility that we are going to provide more cash. We don't exclude that possibility. Have I answered your question?
Yes, thank you.
About the NCA, as you may know, if this aircraft type changes, the production process should start all over again, like 777, where you have to train from the start, and you get the certified engineers and mechanics as well. The production system has to be rebuilt from scratch for a new type of aircraft. For the continuation business, we were thinking about 20 aircrafts back in 2016, but it was a difficult situation back then. This time, from jumbo to 777, we have to change. That's the timing we are faced with. With this size, can we rebuild the production system all over again?
At the same time, ANA Holdings wants to increase the production capacity. It seems that both parties' interests matched, which resulted in the basic agreement this time.
First question, about the investment to decarbonization. You're going to boldly make such investments. Beneficiary and for users, how are you going to ask the customers to share the burden as beneficiaries? About the economic security, you mentioned that in the first part of your talk. What's your image? What are you intending to do? NCA, they will leave the group, but what will be the relationship between Yusen and NCA in terms of operations?
To respond to your first question, I will respond to that one. Compared with regular ships, it will be a more expensive ship, the decarbonized ship. That will cost more, and the cost burden, should we ask customers to pay, or we would like that happen in terms of higher charter fees.
In actuality, this cost, something that should be borne by society as a whole to protect the environment, to protect the Earth. Society as a whole is what we think should happen. We, the shippers, and the clients will also share some burden. We're always talking about this. We're asking, "Could you take this amount of burden and also enjoy the benefits?" Talking with the shippers and others. CO2, there's going to be a carbon tax in the future. Nagasawa is always saying CO2 is going to become a cost. The CO2 emissions. If you have ships where you can have lower CO2, that would be a great benefit for our customers. We are talking with our customers from that perspective.
Now, customers also have this Scope 1 and Scope 2 emissions, and they're taking various measures to lower emissions from Scope 1 and 2. In terms of cost burden, it's not an environment that they will immediately be willing to take on that burden. That's what we hear from the negotiations. We need to be frank with each other and talk how we move forward. We're connected in each value chain, supply chain. How to share that with support of the government agencies, I think we would like to continue these kind of discussions in various ways. Some European shippers, consignors, they're willing to pay a premium, and so slowly, what we are trying to explain is starting to be accepted. It will take time, but we would like to move forward with that sense.
The second question about economic security. Talking about geopolitical risk, there is the Russia-Ukraine issue, and the Sakhalin LNG, we were involved, specific responses we had to take, and we accumulated knowledge and experience around that. These kinds of geopolitical risks, they are starting to emerge in some other areas, or it might happen in the future. For that, we would like to use our knowledge and experiment that we've accumulated, and we need to sort out what we need to decide and how we should prepare. How to respond when something happens, like changing the route. Inclusive of that, we would like to make the necessary preparations. Third question was NCA. Concerning NCA, as we said, Yusen Logistics and ourselves within the medium-term management plan, we place it as a major pillar, as a growth strategy.
For the current NCA, the biggest client is Mitsui, and Yusen Logistics share, compared with Mitsui, is relatively smaller. Yusen Logistics are becoming stronger, and at NCA and ANA Holdings, we want them to become a major customer. That will be the air freight business position of Yusen.
The next will be the final question. Thank you for waiting.
Mr. Soga talked about lower volatility business area. For example, offshore wind power generation can be one, or hydrogen value chain is another. Is that the case? For new business and the core business, what's the proportion for each in percentage term going forward? About the LNG investment of JPY 300 billion, which is quite high, if you could elaborate more on this, I would appreciate it. Finally, in implementing this MTMP, Mr. Soga, please share with us your passion about implementing this MTMP, Mr. Soga.
Asked a question to which I gave an answer. What I said was that within the core business, the priority area that we focus on, container business and logistics and LNG carriers and LPG carriers. Naturally, this is a two-pillar strategy.
How can we explore new businesses and the contents of the new business, just like Mr. Minegishi said, for example, that include offshore wind power generation or energy-related businesses. What's the percentage for each? In terms of the size of the business, if I may say, for the four years, the core businesses accounts for so much. Let's say 60/40, 80/20, I cannot say that at this moment. We sow seeds, and we are proceeding with this, but whether these can grow to become bigger as a full-fledged business will be revealed after 2027. At this point in time, it is too early. It's still a sapling. But in terms of the size of the investment, and it will take time to recover this in the form of the return, but a certain level investments are to be done, about JPY 100 billion or so for the new businesses.
Total is JPY 1.2 trillion of investments. For new business investment, it is about 10%, a little bit more than 10%. That is how we start. However, it is not restricted there. If there are more seeds, we would like to invest more. More LNG carriers, JPY 300 billion. This is the core business. The demand for LNG was quite keenly felt by the Russian-Ukraine conflict. In terms of decarbonization, LNG fueled vessels are increasing in number. Southeast Asia and the emerging economies, there is a shift from coal-fired power generation to LNG-fired power generation. Globally, the demand for LNG is likely to remain high. Various reports talk about this. The demand for the LNG carrier will likely continue. It should be one of the stable businesses, and we will give and prioritize investment into this sector. Finally, in implementing MTMP, what is the level of my passion?
Thank you for your question. You ask this question, that means so much to me. I feel honored to be asked. Today, our stock price declined a lot, and I have to apologize. In terms of financial plan, this is the first time in the history of NYK Line that we introduce such detail, the MTMP. This proves that not only we ourselves, but our stakeholders are serious in expanding this business, and investors, including the will of the investors, together with them, we are committed to expand the business. As a reflection of such passion, we came up with the capital policies and financial policy. We discussed so much, and that culminated in the form of this MTMP. The numbers, the profit, well, it used to be JPY 1 trillion, and now it is JPY 200 billion-JPY 300 billion, you may say so.
Five years ago, we announced the target of recurring profit. We announced at that time was JPY 80 billion -JPY 100 billion. Five years hence, we are talking about JPY 200 billion -JPY 300 billion. Compared to five years ago, it is double or triple the level. We have been solidifying our foundation, and we are ready to move forward. Based on this MTMP, we know what we should do. We will implement this fair and square. After four years, when we look back on this MTMP, I would like to share my conviction that we have done a good job. I would like to ask for your continued support. Thank you.
Thank you for giving us so many questions, and thank you for staying for a long time. For additional questions, please send it to the IR department. We will respond. Thank you for staying with us to the end. We are sorry that we went over time. With that, we would like to conclude this presentation of the new medium-term management plan. Thank you very much.