Archives for January 2016

“Enhancing Individual Strengths to become a Globally Trusted Corporate Group”

To everyone of the “K” Line Group, I extend to you my sincerest wishes for a Happy New Year.

As we enter 2016, I would like to take this opportunity to reflect on the past year and offer a look forward to the challenges ahead.

Although 2015 opened amid concerns of a return by the Greece-sparked European economic crisis, the economies of the developed countries actually remained relatively firm. Indeed, Europe rebounded on the back of falling oil prices, a weak Euro, and a policy of quantitative easing. The United States also saw its consumer spending and housing market gain stability as its employment picture improved.

On the other hand, poor economic performance in emerging markets acted as a drag on growth. There was a clear economic slowdown in China, which is attempting to deal with overinvestment and surplus capacity, and falling resources prices cast a shadow on the economies of Brazil and Russia. The result was a murky picture for the world economy as a whole.

Looking at the international framework, there were conspicuous instances in which countries reached out to each other. A general agreement was reached for the Trans-Pacific Strategic Economic Partnership Agreement (TPP) after more than five years of negotiation, and the United States and Cuba took steps to renew diplomatic ties and normalize relations for the first time in 54 years. At the same time, however, there were heightened geopolitical concerns as extremist organizations hostile to the international community stepped up their activities throughout a broad area.

Because the “K” Line Group plays an important role in global logistics, we cannot ignore such international economic trends or circumstances.   Our medium-term management plan, “ (“K” Line) Value for our Next Century,” which we launched in April of last year, sets a course for raising our corporate value. Its aim is to secure “financial stability” that cannot be shaken, even in the midst of the environmental changes described above, and then to strengthen our “growth potential” in response to expanding and diversifying international logistics demand.

During the first half of this fiscal year, we benefitted from falling fuel oil prices and a continually weakening yen. At the same time, however we were exposed to tough market conditions, particularly in our Containership and Dry Bulk businesses, as the cargo movement fell below expectations while supply pressure on shipping capacity was intensified. Nonetheless, a number of our businesses showed steady performance. They included our Car Carrier Business, which, in addition to the movement of completed cars, is advancing initiatives aimed at heavy construction equipment and rail cars with the use of the latest large energy-saving vessels; our Energy Transportation Business centered on LNG carriers, large LPG carriers, and tankers, which provides stable income based on medium- and long-term contracts; and our Logistics Business, which is expanding its operations in various regions. Accordingly, our overall earnings exceeded initial estimations despite being influenced by fluctuations in foreign exchange-related profit and loss. However, given stagnating resources demand in China and other regions as well as rising geopolitical risks, the business environment continues to be uncertain in the second half. We anticipate that some more time will be required before we see full-scale market recovery.

In response to this changing business environment, we are taking steady steps forward in line with the scenarios detailed in our medium-term management plan. We will formulate and execute streamlining measures with agility. And we will stay on schedule with strategic investment aimed at growth in energy transportation and other sectors, as well as in investment to expand our base for stable earnings with the introduction of the latest large energy-saving vessels. As we respond flexibly to future changes in the environment, we will remain focused on our basic policy and committed to the steady promotion of our plan.

Any effort to drive business forward toward a common goal requires the foundation provided by a strong organization. Because such an organization is ultimately comprised of individuals, when those individuals enhance their capabilities and improve the quality of their work, they help the organization demonstrate its full power. Above all, having the ability to gather great amounts of information, arrange it, and use it to anticipate future events is a vital part of business promotion, even in everyday operations. Although the “K” Line Group has always emphasized human resources development, I would like to see us put even more effort into the development of individuals who possess knowledge and expertise. I hope that each one of us will view the New Year as an opportunity to take stock of our own abilities and improve them.

The year 2015 marked a new start for the “K” Line Group. This start was based on a reexamination of our corporate philosophy and vision and renewed verification of what it is we want to be. We formulated our medium-term management plan as an action plan for the actual application of this philosophy and vision, and we are taking steps to improve our corporate culture and climate through the “”K”-no-Kaze” (“K” Line Wind) program. Additionally, we prepared a long-term policy for environmental conservation—called “Environmental Vision 2050”—to fulfill our responsibility to minimize our impact on the global environment. Early next month, DRIVE GREEN PROJECT, construction of a car carrier equipped with state-of-the-art technologies and designed to achieve the highest level of energy savings and environment-friendliness, is scheduled to be completed. I believe this new vessel will become symbolic of our ideal of “contributing to affluent living as a globally trusted corporate group.”

The safe operation of this vessel and compliance with the law are of paramount importance in our effort to truly be a “globally trusted corporate group.” In addition to being our responsibility to society, safe operation forms the foundation upon which we continually gain our customers’ trust. It also has important environmental aspects. At the same time, all of our corporate activities are built on compliance with laws and social norms. I hope that everyone will constantly bear in mind the fact that any failure of compliance can upset the foundation of our group’s business.

Additionally, we are implementing measures to prevent or reduce cases of long working hours. Through a combination of company-led initiatives and improvements in work quality and productivity by individual employees, I want to reduce working hours and tie the benefits to a better work-life balance.

Over the course of 2016, we will continue to execute our medium-term management plan and other important business plans and activities. Let us move forward steadily, unwaveringly, and with full attention to our goals.

In closing, as we celebrate the New Year, I wish all of you, the members of the “K” Line Group, and your families good health and prosperity, and pray that all of our ships will enjoy safe passage throughout 2016.

Eizo Murakami

President & CEO