Mitsui O.S.K. Lines President Akimitsu Ashida said while the company's overall 2007 results were favorable, he expressed concern about its container business, particularly on North American routes.
Ashida noted his company began a new three-year management plan in April 2007 and is "projected to greatly exceed our initial targets for the first year, thanks to booming markets in worldwide seaborne trade and especially a significant upswing in the dry bulker market.
"Overall results of the company are favorable, but my area for concern is the containership business," he said.
MOL expects to report profit of $1.7 billion and ordinary income of $2.6 billion on revenue of $17.7 billion in the current fiscal year.
In the container business, consolidated ordinary income, including its terminal business, is expected to be about $92 million. But Ashida said, "losses on the North America route will be significant and total results of all routes will not be able to break even.
"This segment faces a severe situation that, if left unprofitable, threatens its viability. 2008 is a crucial year for the turnaround of the containership business. We set forth an achievable target of at least 5 percent in ordinary income margin for this segment."
Ashida noted that MOL has become a global organization with cross trades to countries other than Japan accounting for more than half of revenue and ordinary income for the first time in fiscal year 2008.
"To ensure further growth, I want to set 2008 as the first 'global' year of a drive to transition from a Japanese shipping company to a global shipping company. In other worlds, we will truly become 'global MOL,'" he said.
"Japanese customers are the origin and foundation of our business, but we will drive to expand our business focusing on cross trade as the core of expanded seaborne trade in the future. We will proactively work to expand cross trade in the Atlantic as well as in nations that are expected to see rapid economic growth, such as India, Russia, Black Sea coastal nations, and Central and South American nations including Brazil. And I want to increase the ratio of overseas revenue and ordinary income to 60 percent and 70 percent as a result," he added.
"For that, we must not only proactively acquire customers overseas, but also further globalize our human resources to support that effort," he said.
"The business climate surrounding our group changes every second. What we must keep an eye on at the moment is rising costs," Ashida said. "Many costs such as repair, labor and lubricants as well as skyrocketing bunker prices, are rising sharply."
He urged employees to "not readily accept higher costs, and once again go a step further to reduce costs. But remember the adage 'You get what you pay for,' and never compromise on vessel repairs relating to safe operation. Please be painstaking in optimizing costs and consider the primary objective -- to ensure safe and high-quality services over the long term.
"We are riding on a wave of strong performance backed by record highs in the dry bulk market. We expect this momentum will continue in 2008, so I want to carry it even further, into a solid advance. However, the world economy always has uncertainties, such as the U.S. sub prime loan crisis, which came to a head in late 2007," he said.
"But we will seek to maximize market-sensitive profits based on stable earnings from medium to long-term contracts as the external business climate changes, and to earn stable profits and always prove worthy of our shareholders' trust even when the market sags," Ashida said.
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