Earnings Call: Q1 2026

Aug 1, 2025

Summary

Q1 profit fell sharply YoY as containership weakness outweighed gains in energy and vehicle transport. FY2025 ordinary profit and net income forecasts rose to JPY 170B and JPY 200B, respectively, with tariff risks still monitored.

I am Kazuya Hamazaki, CFO of Mitsui O.S.K. Lines. Let me start with a general overview. In our fiscal year 2025 first quarter results, we recorded business profit, which is operating profit plus equity in earnings of affiliated companies of JPY 50.9 billion, ordinary profit of JPY 52.2 billion, income before income taxes of JPY 61.6 billion, and net income of JPY 52.8 billion. The energy business and the vehicle transport business performed strongly, and our results exceeded initial estimate. As a result, our balance sheet showed total assets exceeding JPY 5.3 trillion and shareholders' equity exceeding JPY 2.5 trillion. During the first quarter of fiscal year 2025, we increased investment for stable revenue businesses, including completing acquisition of LBC Tank Terminals, acquiring an office building in central London, joining an offshore wind project in Taiwan, and signing a long-term time charter contract for a new LNG dual fuel VLCC with Idemitsu Tanker. Looking at our fiscal year 2025 full-year forecast, we revised our initial ordinary profit forecast of JPY 150.0 billion upwards by JPY 20.0 billion to JPY 170.0 billion. Our previous forecast for net income has also been raised by JPY 30.0 billion to JPY 200.0 billion. While we must continue to monitor the impact on trade volumes of the introduction of additional tariffs by the U.S., we have roughly halved our initial estimate of the impact of tariffs of JPY 40.0 billion based on cuts to the tariff rates and our first quarter results. Our exchange rate assumption is unchanged at JPY 140 to the dollar. As for the Red Sea tensions, in line with our forecast at the beginning of the fiscal year, we assume there is no prospect of transit restrictions being lifted during fiscal year 2025. Due to the upward revision of our full year forecast, we plan to pay an annual total dividend of JPY 175 per share, which is an increase of JPY 25 per share in accordance with our shareholder return policy, which sets the dividend payout ratio at 30%. We are committed to maintaining our current dividend forecast of JPY 175 per share, which represents a dividend increase even if our performance forecast for the current fiscal year is lowered due to the impact of tariffs or other factors. Any additional allocation of free cash flow based on the latest upward revision of our performance forecast will be disclosed at the time of the first half financial results announcement. Our Chief Communication Officer, Sanae Sonoda, will now give an overview of the first quarter financial results based on the financial results presentation materials. In the first quarter results, ordinary profit fell JPY 56.3 billion year-on-year to JPY 52.2 billion, reflecting downturn in the containerships business compared with the previous fiscal year's strong performance. Income before income taxes fell JPY 53.0 billion to JPY 61.6 billion. Net income amounted to JPY 52.8 billion, a decrease of JPY 54.1 billion. Dry bulk business. The dry bulk business posted an ordinary loss of JPY 3.4 billion, a decrease of JPY 10.9 billion from the same period of the previous fiscal year. Looking at the rates for each type of vessel, the market rates for Capesize bulkers softened in April and May due to sluggish iron ore imports by China, resulting in a year-on-year decrease in profit. The market rates for Panamax and smaller vessels operated by MOL DryBulk had periods of improvement, reflecting an increase in ton miles and tighter vessel supply and demand due to trade measures between the U.S. and China. The market rates for wood chip carriers and multipurpose vessels were lackluster due to stagnant domestic demand in China. As a result, profit decreased year-on-year. The open hatch vessel business won highly profitable contracts for the transportation of minor bulk commodities such as aluminum. However, the business was affected by weak demand for the transportation of its main cargo, pulp, as well as changes in accounting relating to the recognition of expenses such as depreciation associated with the consolidation of Gearbulk Holding AG. Energy business. The energy business posted ordinary profit of JPY 29.7 billion, rising JPY 7.7 billion year-on-year and helping to push up overall profit. Tankers and offshore business. The crude oil tanker market rates and product tanker market rates softened due to decreased shipments of petroleum products in China due to China's sluggish economy, and despite profit contributions from long-term contracts and surging market rates during the Iran-Israel conflict, profit fell year-on-year. The market rates for chemical tankers softened from the previous fiscal year, impacted by China's economic slowdown and the introduction of additional tariffs by the U.S. In the FPSO business, stable profit was secured through long-term charter contracts, and equity in earnings of affiliates attributable to MODEC also contributed to profit. Liquefied gas business. In the LNG, ethane carriers, and gas infrastructure businesses, stable revenue from long-term charter contracts as well as decreased expenses as a result of the rescheduling of dry docking for some vessels from the beginning of the fiscal year to the second half of the fiscal year, and the recording of one-time non-operating income related to refinancing, resulted in higher profit than a year earlier. Product transport business. The product transport business, which includes the containerships business, posted ordinary profit of JPY 30.2 billion, a decrease of JPY 35.1 billion from the same period a year earlier, mainly due to a sharp decline in profit in the containerships business. Containerships business. Due to pressure from new vessel supply and the impact of the U.S. tariff policies, cargo demand, especially on China-U.S. routes, was weak, causing freight rates to decline year-on-year. Although spot rates for North America temporarily rose following the provisional agreement on tariffs between the U.S. and China in May, the contribution to profit in the first quarter is limited. In the first quarter, ONE reported after-tax profit of $86 million, and MOL integrated its 31% share of these earnings into segment profit as equity in earnings of affiliated companies. Please look at page 4 of the materials for details of changes in liftings, capacity utilization rates, and freight index. Due to these earnings at ONE, our containerships business reported ordinary profit of JPY 6.5 billion for the first 3 months, which represents a year-on-year decrease in profit. Vehicle transport business. In addition to firm shipping demand for completed cars unaffected by tariffs, improved operational efficiency resulting from the easing of port congestion in the Middle East and Australia led to increased profit year-on-year. Terminal and logistics business. The domestic terminal business remained firm. In the logistics business, shipments to the U.S. decreased due to the impact of U.S. tariff policies. Wellbeing and lifestyle business. The wellbeing and lifestyle business posted ordinary profit of JPY 0.6 billion, a decrease of JPY 5.0 billion from the same period the previous fiscal year. Real property business. Although existing properties continued to contribute to stable profit decreased year-on-year due to the absence of one-off equity in earnings reported in the previous fiscal year. Ferries and coastal ro-ro ships business. In the ferries and coastal ro-ro ships business, both the logistics and passenger transportation businesses performed firmly, and profit was mostly unchanged year-on-year. Cruise business. In the cruise business, profit decreased year-on-year, partly impacted by the non-operating period of Mitsui Ocean Fuji. Associated businesses. The associated businesses posted profit mostly unchanged year-on-year due to the profit contributions of the tugboat business and the trading business. This concludes the summary of the financial results for the first quarter. Next, I would like to explain our fiscal year 2025 full year forecast. We forecast ordinary profit of JPY 170.0 billion, up JPY 20.0 billion from our initial forecast income before income taxes of JPY 230.0 billion and net income of JPY 200.0 billion, which represents an upward revision of JPY 30.0 billion. These forecasts reflect our first quarter results and future performance forecast. Dry bulk business. The dry bulk business is expected to post an ordinary loss of JPY 1.0 billion, representing a downward revision of JPY 8.0 billion from our previous forecast. Capesize bulkers are expected to be less profitable than initial forecast, taking into consideration the possibility that market rates will soften on concern about a slowdown in China's crude steel production. Panamax and smaller vessels are expected to generate less profit than initial forecast, given that market rates will soften under the impact of China's economic slowdown and the impact of decreased Brazilian grain shipments. Open hatch bulkers are expected to be less profitable due to decline in China's pulp imports and higher depreciation than initial forecast due to the consolidation of Gearbulk Holding AG despite expectations for firm project cargo demand. Under these market conditions, the dry bulk business as a whole is expected to show a loss this fiscal year. Energy business. The energy business is expected to post ordinary profit of JPY 64.0 billion, which is a decrease of JPY 2.0 billion from our previous forecast. Tankers and offshore business. Crude oil tankers are expected to see a steady profit contribution from long-term contracts. However, the previous forecast for product tankers has been revised downward on the expectation of reduced demand due to the stagnation of the Chinese economy and softer market rates due to increased new vessel deliveries through the latter half of 2025. The outlook for chemical tankers has been revised downward on expectations for softer market rates due to reduced cargo demand associated with the impact of additional tariffs and economic stagnation in China and Europe. The offshore business is projected to generate stable profits due to the contribution of existing long-term charter contracts in the FPSO business. In the LNG, ethane carriers, and gas infrastructure businesses, existing long-term contracts are expected to make a stable contribution to profit. However, we have factored in the impact of delays in the delivery of new vessels and reduced revenue as a result of equipment failure. Product transport business. The product transport business is expected to record ordinary profit of JPY 106.0 billion, which represents an upward revision of JPY 31.0 billion from the previous forecast. Containerships business. ONE forecasts profit after tax of $700 million, while pressure from new vessel supply and the introduction of additional tariffs by the U.S. might disrupt the supply-demand balance. The outlook has been revised upward from the previous forecast based on careful examination of the impact of the disruption, given that the scenario of major global economic slowdown caused by tariffs is now less likely. MOL also thinks that this revised forecast is probable to the extent that forecasts are possible in the current circumstances, and we have also increased our initial forecast of $600 million by $100 million and factored this into our forecast. Please refer to "ONE's Response to Recent Changes in the Business Environment" later on page six for further details. Our full-year forecast for the containerships business, including charter fees from ONE, is JPY 42.0 billion, which represents an upward revision of JPY 6.0 billion from our previous forecast. Vehicle transport business. In the vehicle transport business, we had initially assumed that shipping demand for completed cars would be weak under the impact of tariffs. However, judging from the first quarter results, the number of completed cars transported is expected to increase by 306,000 units from our initial assumptions. Accordingly, we revised our full-year forecast upward. Terminal and logistics business. In the terminal and logistics business, the domestic terminal business is expected to perform solidly, while in the logistics business, shipments to the U.S. are expected to decrease under the impact of tariffs. Wellbeing and lifestyle business. The wellbeing and lifestyle business is expected to post ordinary profit of JPY 2.0 billion, which is a decrease of JPY 3.0 billion from our previous forecast. Real property business. Daibiru, our core real property subsidiary, is expected to report lower profit than a year earlier due to acquisition costs incurred for newly acquired overseas properties. However, existing properties will contribute to stable profit. Ferries and coastal ro-ro ships business. In the ferries and coastal ro-ro ships business, the logistics business and the passenger transportation business are both performing strongly. Cruise business. We revised our initial forecast downward due to the non-operating period of Mitsui Ocean Fuji during the first quarter. In the cruise business, promotional sales activities are taking time to produce results. However, we expect to see a gradual improvement in profitability. Associated businesses. In the associated businesses, we forecast performance in line with our previous forecast, with the tugboat business and the trading business expected to perform solidly. Turning finally to dividends, we are planning an interim dividend of JPY 85 and a year-end dividend of JPY 90, making an annual total dividend of JPY 175 per share. This represents an increase in our total dividend of JPY 25 due to the upward revision of our performance forecast. This concludes my explanation of the fiscal year 2025