Earnings Call: Q4 2026

Apr 30, 2026

Summary

FY2025 pre-tax income was JPY 239.0B and net income JPY 213.2B. FY2026 guidance forecasts JPY 200.0B pre-tax income under assumptions for Hormuz normalization, while stable-revenue businesses and progressive JPY 205/share dividends support the Phase 2 value-realization plan.

I am Jotaro Tamura, President of Mitsui O.S.K. Lines. I would like to give a summary at the beginning of this presentation. The instability surrounding the Strait of Hormuz has been a stark reminder of how important it is for the global community to secure stable maritime transportation. Shipping is basic social infrastructure that underpins the global economy and people's lives through the transportation of energy, raw materials, and daily necessities. We fully recognize the weight of our responsibility as a provider of safe and stable transportation, and will continue steadily fulfilling the role of maintaining logistics services regardless of the circumstances. In our FY 2025 financial results, income before income taxes was JPY 239.0 billion, and net income was JPY 213.2 billion. While income fell year-on-year, partly due to the global economic disruption caused by Trump's tariffs, average ROE over the three-year period from FY 2023 to FY 2025, which is Phase 1 of MOL Group Corporate Management Plan BLUE ACTION 2035, remained above 12%. As a result, our balance sheet indicates effective use of financial leverage and an appropriate capital structure, with total assets exceeding JPY 5.9 trillion, shareholders' equity exceeding JPY 2.8 trillion, and a shareholders' equity ratio including estimated lease obligations of approximately JPY 900 billion exceeding 41%. In Phase 1, we identified the rebalancing of assets as a priority theme. Taking into account the high market volatility inherent in the shipping industry, our plan was to increase the proportion of stable revenue assets in order to achieve an optimal balance that delivers high returns in a strong market while maintaining profitability for the group as a whole, even during downturns in the shipping market. In the initial Phase 1 plan, we had set an investment plan of JPY 1.2 trillion. However, by proactively capturing opportunities, we executed investments totaling JPY 2.0 trillion, including investments of JPY 1.6 trillion in stable revenue businesses. We made progress transforming our asset ratios, increasing the ratio of stable revenue assets from the previous 50% to 63% as planned, and executed investments and fleet management for the future. From FY 2026, Phase 2 of the Group Corporate Management Plan for FY 2026 to FY 2030, announced at the end of March 2026, kicked off. This is the stage for value realization. The investments that we decided on and executed in Phase 1 will gradually be completed during Phase 2, and our operating cash flow and profit will increase. Regarding our full-year outlook for FY 2026, it is currently difficult to predict how long the blockade of the Strait of Hormuz caused by the situation in Iran will last. Referencing the IMF's World Economic Outlook, we have assumed that transit will be mostly normalized by July 2026. At present, amid negative impacts such as rising fuel prices and constraints on Middle East trade, the situation is mixed. Following the reopening of passage through the Strait of Hormuz, there are also positive factors, including restocking-driven demand, increased ton miles due to more diversified sourcing, and stronger demand for storage. The latest outlook factors in recent negative impacts. However, positive impacts following the reopening of passage through the Strait of Hormuz will be reflected in the outlook once the situation has been fully examined. Our exchange rate assumption is JPY 150 to the dollar. Based on the assumption of increased transit times throughout the year due to the impact of Red Sea transit disruptions, we forecast income before income taxes of JPY 200.0 billion, which represents a decrease from the previous year, and net income of JPY 170.0 billion. This income before income taxes forecast is at the same level as that in the Group Corporate Management Plan announced on March 31st. As for the dividend amount, in line with our shareholder return policy for Phase 2 announced the other day, specifically progressive dividends starting at JPY 205 and a target total payout ratio of around 40%, we plan to pay an annual dividend of JPY 205 per share, which is an increase of JPY 5 from the previous year. I will now give a breakdown of income before income taxes by segment, and also disclose information about core operating cash flow for the first time. We consider income before income taxes, which combines both ordinary earning power and extraordinary income, and losses that arise in the asset recycling for portfolio optimization to be an important financial KPI for management. By breaking down income before income taxes by business, we will try to give you a more realistic understanding of how the overall earning power of each business was generated. At the same time, by disclosing information about our core operating cash flow to demonstrate our ordinary earning power, we will also clearly communicate our ability to continuously generate cash. By disclosing this information, we will increase transparency and improve the quality of market dialogue, which will help enhance corporate value. CFO Hamazaki will now give further details of our business performance in fiscal year 2025 and our outlook for fiscal year 2026. I am Kazuya Hamazaki, CFO of Mitsui O.S.K. Lines. Let me start by explaining our fiscal year 2025 financial results. Please look at page three of the slides in the blue colored presentation materials. Ordinary profit was JPY 175.8 billion, which represents a decrease of JPY 4.1 billion from the previous forecast. Income before income taxes was JPY 239.0 billion, down JPY 0.9 billion from the previous forecast. Net income was JPY 213.2 billion, increasing JPY 13.2 billion from the previous forecast. I will now explain factors behind these results using a waterfall chart that shows analysis of the variance in ordinary profit compared with the previous forecast by segment. Please look at page five of the slides. The Dry Bulk business posted ordinary profit of JPY 10.8 billion, which represents an increase of JPY 6.8 billion from the previous forecast due to favorable market rates for Panamax and smaller vessels and the impact of a gain on valuation of derivatives. The Capesize bulker market rates remained firm due to steady iron ore and bauxite shipments from Western Australia and Brazil. Panamax and smaller vessels benefited from favorable market rates due to increased cargo movements bound for China from January, along with increased grain shipments from South America. The Open Hatch Bulker business achieved improvement in profitability as we continued to secure contracts for aluminum transportation and highly profitable project cargoes, despite weak demand for pulp, which is the main cargo type. The Energy business posted ordinary profit of JPY 55.5 billion, representing a decrease of JPY 18.4 billion from the previous forecast due to impairment losses on shares held at equity method affiliates, as well as one-off expenses associated with finance related factors, despite strong performances in very large crude oil carriers and offshore business. Very large crude oil carriers, product tankers, the FPSO business, the LNG and Ethane carrier business, and gas infrastructure businesses generated stable profit through long term charter contracts. However, chemical tankers saw a decline in demand for the transportation of chemicals due to global economic uncertainty. The Product Transport business posted ordinary profit of JPY 95.9 billion, which represents a decrease of JPY 1.0 billion from the previous forecast due to the impact of higher operating costs in the car carriers business. The Containerships business posted increased profit due to improvement in freight rates. The Wellbeing & Lifestyle business posted an ordinary loss of JPY 2.7 billion, which represents an improvement of JPY 0.2 billion from the previous forecast, reflecting increased profits due to reduced expenses in the real property business, despite the impact of a lower revenue per passenger in the cruise business. As for the annual dividend, we plan to pay a year-end dividend of JPY 115 per share, in line with the annual fixed dividend per share of JPY 200 announced in our FY 2025 first half results. I will now explain FY 2026 consolidated forecasts. These consolidated forecasts are based on the assumption that transit through the Strait of Hormuz will be mostly normalized by July 2026. We assume a full year average VLSFO bunker price of $655 per MT, Red Sea transit disruptions through to the end of the year, and an exchange rate of JPY 150 per US dollar. Based on these assumptions, we forecast business profit of JPY 170.0 billion, ordinary profit of JPY 145.0 billion, income before income taxes of JPY 200.0 billion, and net income of JPY 170.0 billion. We have also performed fiscal year-end alignment procedures, changing companies with a December 31st fiscal year end to a March 31st fiscal year end. Accordingly, we have included profit for 15 months for companies with a December 31st fiscal year end. We expect alignment of fiscal year ends to have the effect of increasing profit by approximately JPY 4.0 billion. Additionally, from FY 2026, we have newly established the Chemical Logistics business as a result of the acquisition of LBC Tank Terminals in FY 2025, aiming to create synergies between businesses. The Chemical Logistics business will take over the chemical tankers, methanol carriers, and product tanker business from the Energy business, and the chemical tanker terminal business from the Product Transport business. As explained by President Tamura earlier, starting from this forecast, in addition to disclosing ordinary profit by segment, as we have done every year, we will also disclose income before income taxes by segment and our outlook for core operating cash flow in three business categories according to volatility. We decided to enhance disclosure to encourage better understandings of value realization, which is the theme of phase 2. By indicating the overall earning power of each segment through the disclosure of income before income taxes by segment and showing core operating cash flow to demonstrate ordinary earning power. Please turn to page 8. Let me start by explaining year-on-year changes in ordinary profit by segment. In the Dry Bulk business, we forecast ordinary profit of JPY 11.0 billion, which is an increase of JPY 0.2 billion from the previous year. This is mainly due to the offset of profit and loss between Capesize bulkers, which are expected to see favorable market rates due to steady iron ore and bauxite shipments, and Panamax and smaller vessels, which are expected to see higher fuel costs due to the Iran situation. Next is Energy business and the Chemical Logistics business. I will explain the Energy business and the Chemical Logistics business together due to the recent segment changes. For both segments combined, we forecast ordinary profit of JPY 48.0 billion, down JPY 7.5 billion from the previous fiscal year. We assume that market rates for very large crude oil carriers will strengthen, reflecting the tightening of vessel supply and demand as a result of changing trade patterns in response to the Middle East situation, and that our two spot tankers will drive profit. The LNG and Ethane carriers, LNG Infrastructure, and FPSO businesses will continue contributing to stable profits. However, the Chemical Tankers business will be impacted by trade restraints and higher fuel costs associated with the Middle East situation, resulting in significant profit decline. Meanwhile, the Chemical Tanker Terminals business will generate profit exceeding JPY 7.0 billion on a non-consolidated basis, but post a loss on a consolidated basis due to the amortization of goodwill, which is a non-cash expense. In the Energy business, 16 LNG and Ethane carriers with long-term charters are scheduled to be delivered during the current fiscal year, and results are expected to recover considerably from fiscal year 2027. In the Product Transport business, we forecast ordinary profit of JPY 82.0 billion, down JPY 13.9 billion from the previous year due to the impact of vessel allocations and high fuel costs associated with the Middle East situation. Since the Containership and Car Carrier businesses are network-type businesses, we anticipate that the impact of rising fuel costs and changing trade patterns will have a negative effect in the first half. In the Wellbeing business, we forecast ordinary profit of JPY 4.0 billion, up JPY 6.7 billion from the previous fiscal year, driven by higher profit in the Real Property business. In the Cruise business, profit is expected to improve from fiscal year 2025, with Nippon Maru due to retire from the fleet in mid-May and Mitsui Ocean Sakura due to be delivered as a Japanese-flagged vessel in September. Mitsui Ocean Fuji, which has already been delivered, will also contribute to an improvement in profit since service quality has improved and there will presumably not be any period of non-operation like the one in the previous fiscal year. Moving on to page 9, I will explain our forecast for income before income taxes. I will explain the extraordinary income and losses that will have a major impact on income before income taxes. In the Dry Bulk business and Energy business, gains on the sale of vessels will contribute to extraordinary income. In particular, gains on the sale of crude oil tankers are contributing significantly. In the Product Transport business, gains on the sale of terminals are contributing to extraordinary income. In the Wellbeing & Lifestyle business, we anticipate extraordinary income of JPY 11.0 billion as a result of the sale of owned assets that we plan to sell as part of an asset recycling totaling JPY 230.0 billion in Phase 2 in the Real Property business. Finally, extraordinary income included in Other represents gains on the disposal of idle assets and cross-shareholdings as part of efforts to improve capital efficiency. Combining ordinary profit of JPY 145.0 billion and extraordinary income of JPY 55.0 billion, we forecast income before income taxes of JPY 200.0 billion. Next, please look at our core operating cash flow forecast on page 10. This shows our core operating cash flow in three categories, which we have newly defined from Phase 2 of the Group Corporate Management Plan. Core operating cash flow excludes extraordinary income or losses arising from gains or losses on vessel sales and equity method investment gains or losses, and includes dividend income. We believe this is an important indicator that corroborates the group's earning power. To explain the three categories again, the highly volatile Containership business is a market-driven business. Dry Bulk Carrier, Tankers, Chemical Tankers, and Car Carriers, which are businesses that are not as volatile as the Containership business but are still affected by market conditions to some extent, are in the hybrid business category. Finally, businesses that can be expected to generate stable revenue through long-term contracts, such as the LNG and Ethane Carriers, LNG Infrastructure, Offshore, Tank Terminal, Logistics, Real Property, Ferry, Wind Power, and Cruise businesses, which are businesses that have a low correlation with shipping market conditions, fall into the stable revenue business category. We forecast core operating cash flow of JPY 300.0 billion, which represents a decrease of JPY 127.5 billion from the previous fiscal year. Core operating cash flow generated through the market-driven business category, which consists of the containership business, will decrease JPY 118.0 billion from the previous fiscal year, and will be heavily impacted by profit decline in the Chemical Tankers and Car Carriers businesses that are network-type businesses affected by the Middle East situation. However, core operating cash flow in the stable revenue business category, which we have focused on expanding in phase one, will increase JPY 15.7 billion, partly due to the impact of new vessel deliveries. Next, please look at our shareholder return policy on page 11. This page shows our shareholder return policy. We have adopted a policy of progressive dividends starting at JPY 205 per share from fiscal year 2026 and flexible share buybacks, targeting a total payout ratio of 40%. In fiscal year 2026, we plan to pay an interim dividend of JPY 100 per share and a year-end dividend of JPY 105 per share, making an annual dividend of JPY 205 per share. With this, the dividend payout ratio is equivalent to 41%. This concludes my explanation of the fiscal year 2025 financial results and fiscal year 2026 forecast. Finally, I will report progress on ONE 2030, the management plan of ONE, which is 31% owned by MOL. Please refer to page 20 of our presentation materials. Two years have passed since the announcement of ONE 2030 in March 2024. At this juncture, given the high level of interest, we will explain the progress of ONE 2030, focusing on key points. Looking at the profit plan, ONE is still targeting profit of $3.8 billion in FY 2030, despite the constantly changing external environment. As for investment scale, against target vessel investment of over $25.0 billion, ONE has already made investment decisions worth $12.0 billion, and against target business expansion investment of up to $10.0 billion, ONE has already made investment decisions worth $3.0 billion. In terms of fleet scale, ONE plans to expand its fleet scale to 3 million TEU by FY 2030 and had expanded its fleet scale to 2.23 million TEU as of the end of 2025. Planned special dividends of JPY 3.0 billion have already been paid in FY 2024 and FY 2025. Please turn to page 23. Although ONE plans to maintain investment on the scale of approximately $35.0 billion compared with the initial plan, ONE is expanding investment allocated to secondhand vessels and terminals and is also considering investment to build a competitive fleet and provide sustainable services. The dividend payout ratio has been revised to 40%. If profit is much better than anticipated, ONE will consider paying a special dividend. Finally, please turn to page 24. This slide shows ONE's approach to realizing an appropriate capital structure through achievement of each target indicator. The FY 2030 figure shows the structure that will be reached based on the future investment plan and approach to capital efficiency. Specifically, ONE will get closer to a capital structure that balances capital efficiency and financial soundness by using appropriate financial leverage in investments totaling approximately $35.0 billion made since FY 2024, while at the same time aiming to achieve an ROE of 10% or higher. As for total asset size and the appropriate level of liabilities and shareholders' equity, ONE has adopted the approach of continuing to assess an appropriate balance, taking into consideration the business environment and investment plan. This concludes my explanation of progress on ONE 2030.