Nippon Yusen Kabushiki Kaisha : New Year's Message from the President -Staying a Half Step Ahead-

The following is an excerpt from the New Year's speech made by NYK president Tadaaki Naito as business opened for 2017 at the company's head office in Tokyo.

I would like to wish everyone a happy New Year.

The year 2016 was a turbulent one for the maritime shipping industry as well as the world. The Baltic Dry Index hit record low levels in February, and then at the end of August, we witnessed the bankruptcy of Hanjin Shipping Co. Ltd. Meanwhile, international shipping traffic decreased due to the slowdown of economic growth in China, while the impact of the rush to construct new vessels was prolonged as a result of monetary easing policies. Consequently, the maritime shipping market remained sluggish throughout the entire year.

Last year marked a major turning point also for the NYK Group. The company posted a large sum in losses, and recorded a substantial decline in capital stock, which our predecessors worked so hard to accumulate. We need to be fully aware of the fact that shareholders are very troubled with our decision to not pay a dividend for the first time in 52 years. Furthermore, we have decided to integrate our container shipping business and international terminal business with those of two other major companies in Japan. Preparation for the integration will have a major impact on the entire group, so 2017 will be a year for bold steps toward positioning the NYK Group for the times ahead under our 'Beat the Crisis' in-house initiative. I want everyone to achieve differentiation in day-to-day operations by staying half a step ahead in each area of business. I would like to speak about goals that have been set for this year at respective business headquarters and divisions.

< Global Logistics Services Headquarters >
The Liner Trade segment will continue to be our core business after the integration in April next year. Our objective for the joint-venture company is to maximize its competitiveness by drawing on the best practices and outstanding aspects of all three companies. We shall further enhance the effectiveness of our systems and operations by adopting the superior ones used at NYK.

The stable operations of the terminal business should continue, and I would like everyone involved to raise the competitiveness of the business in Japan by taking exhaustive steps toward improving its efficiency.

The logistics business will become a more strategically important part of our global logistics service. For the future, we need to expand the scale of this business and enhance its operations. I would like to see it grow as a core business for the NYK Group.

As for the air freight transportation business, all departments are requested to continue their coordinated efforts to enable and support flexible shipments in response to the market. I would like relevant personnel to explore new business models while focusing on ensuring the safety of air freight transport.

< Automotive Transportation Headquarters >

We expect current trends in the automobile industry to continue, specifically local production for local consumption, and production tailored to specific locations and output. I want personnel in relevant divisions to reorganize shipping routes with a fresh understanding of customers' needs and to boost efficiency without being constrained by previously accepted practices.

Automobile logistics is a field in which we have pursued strategies for differentiating the NYK Group. Consequently, we have widely expanded this business ahead of other companies, establishing operations with good prospects in every region of the world. This year, we need to shift to cultivate each area of operations.

< Dry Bulk Division >
The dry bulk shipping market was extremely challenging in 2016, with demand falling to historically low levels. However, from early autumn, the market improved considerably. The charter market used to be solely dependent on indices. But factors such as safe and reliable transportation for customers are now recognized and reflected in the market. Since it is comparatively difficult to differentiate in this market, there is a great advantage to realize differentiation based on 'creative solutions.' I am looking forward to getting to the next stage while making use of the experience we have gained thus far in Asia, which is still growing markedly.

< Energy Division >
We can expect future market growth for LNG, since it has a relatively low burden on the environment. Another round of new business is foreseen in various countries in Africa from 2020. Therefore, I want us to prepare for that next wave of growth with fresh ideas and awareness gained from our past experiences.

In the offshore business, our entry into the subsea EPCI segment enables us to offer service in each area of the supply chain. NYK needs to determine whether existing projects can actually be made into profitable businesses through sound management.

While market trends related to very large crude carriers, LPG tankers, and chemical tankers are distinct, I expect these operations to grow as businesses that can secure stable freight rates. I want everyone to maintain a broad perspective and pay close attention to market trends in this region so that we can differentiate our services and acquire new business in Asia where the demand for energy will rise.

< Cruise Business >
Last year marked the 25th anniversary of the commissioning of our Asuka cruise ship. To maintain this business, which brings happiness to people and offers a path for future expansion, I would like to ask everyone concerned in the cruise business to make a thorough study of the new business and the possibility of constructing a new ship, and produce relevant results that can be used in the future.

< General Affairs Headquarters, Management Planning Headquarters, and Technical Headquarters >
I want everyone in these headquarters to do what is necessary for this business integration so that we can maximize the competitiveness of the new company. As each of our sales divisions and group companies face intensifying competition, I would like the corporate divisions to apply creative solutions as means to support sales activities and bolster the Group's competitiveness.

NYK will mark its 132nd anniversary in October of this year. NYK is one of Japan's long-established companies, and also one of the few to operate for so many years without a name change. My mission is to ensure that the NYK Group has a sound corporate structure for the next generation of management and employees. I want us to envision the future of the NYK Group by pursuing two objectives.

First, I would like for us to contemplate and craft a new medium-term management plan to commence in fiscal 2018, a plan that takes into account the integration of the container shipping business. Second, I would like us to focus on group management. That means, increasing the corporate value of the NYK Group by effectively utilizing and optimally deploying operational resources, including human resources, and overhauling our group-wide management structure.

In closing, I offer my wishes for a happy New Year filled with good health and prosperity for all NYK Group employees and their family members around the world.