It is time to start. Thank you very much for joining us today.

We would like to start the announcement meeting of financial results for the third quarter FY2025 of NYK Line. I am Okada, the head of IR Group.

I serve as MC today. Let me introduce today's presenters: Akira Kono, Representative Director, Executive Vice President, Executive Officer; Takuji Banno, Chief Executive of Liner and Logistics Headquarters.

Today, Mr. Kono is going to present you the outline of financial results of third quarter FY2025 followed by Q&A.

Let me explain about how to ask questions later. As usual, today's materials are also available on our homepage.

This announcement meeting is to be delivered on demand, including Q&A session. Thank you for your understanding.

Without further ado, Mr. Kono, please.

This is Kono, CFO. Thank you very much for taking the time to attend our FY2025 third quarter financial results briefing.

Today, I will first provide an overview of our third quarter financial results and the FY2025 full-year earnings forecast, followed by Q&A session. The materials for this presentation will be projected on the screen you see here, but if you have downloaded them from our website, please have them ready.

First, I will provide an overview of FY2025 third quarter financial results. Please turn to the table on page 6 of the materials.

The second from the right blue column shows our cumulative results of the first three quarters of FY2025. Revenue was 1,812 billion yen, down 164.8 billion yen year-on-year.

Recurring profit was 165 billion yen, a decrease of 271.3 billion yen year-on-year. Net income attributable to owners of parent was 146.9 billion yen, a decrease of 248.5 billion yen year-on-year.

Factors contributing to this decline include the removal of Nippon Cargo Airlines, NCA, from our consolidated subsidiaries in the air cargo business and declining market conditions in our liner trade business. Looking at quarterly trends, the average exchange rate was 148.52 yen to the dollar, which is 3.75 yen appreciation of the yen compared to the same period last year.

Bunker oil prices averaged $553.11 per metric ton, were down $71.64 per metric ton. In addition to these external factors, fluctuations in market conditions and handling volume weighed on profits.

Next, I will explain the results by segment. Please refer to the table on page 7.

The blue column second from the right shows third quarter results. First, let's look at the recurring profit and loss for the liner and logistics business, which consists of liner trade, air cargo, and logistics.

Liner trade posted a recurring profit of 38.5 billion yen, down 211.7 billion yen year-on-year. While there was improvement in the market conditions in the first quarter of the year, partly due to tariff policies in various countries, market conditions declined since the second quarter due to increased shipping capacity resulting from the completion of new vessels.

Air cargo posted a profit of 2.1 billion yen, down 16.9 billion yen year-on-year. However, due to the exclusion of Nippon Cargo Airlines from the consolidation as of August 1st, 2025, the results of fiscal year '25 are effectively only for the first quarter.

Logistics posted a profit of 9.7 billion yen, down 10.9 billion yen year-on-year. While airfreight volume decreased year-on-year, profits improved due to lower purchasing prices in the first half of the year.

Ocean freight profits declined year-on-year due to lower freight rates and rising costs due to inflation. In contract logistics business, profits fell year-on-year due to a decrease in cargo volume at major customers caused by tariff policies.

Next, recurring profit of automotive transportation decreased by 13.8 billion yen year-on-year to 77.8 billion yen. While the number of vehicles transported remained at the same level as last year, profits fell year-on-year due to rising costs, including cargo handling expenses caused by the stronger yen and inflation.

In the dry bulk business, market conditions for all vessel types improved year-on-year. The stronger yen and declining profitability of small bulkers and box-shaped vessels resulted in recurring profit of 2.2 billion yen, down by 19.6 billion yen year-on-year.

Finally, recurring profit of energy business increased by 9.8 billion yen year-on-year to 42.2 billion yen. Market conditions for VLCC and other vessels improved due to the easing of OPEC+ production cuts and increased cargo demand in the Atlantic, and LNG remained strong, supported by long-term contracts.

In the first half, the offshore business booked a one-off profit associated with the start of new FPSO operation. Regarding NYK Energy Ocean, which became a consolidated subsidiary in April, the allocation of the acquisition cost was carried out in the third quarter, resulting in an impact from increased depreciation and amortization of assets such as vessels and other intangible assets.

Please turn to page 3 of the deck. Again, overall recurring profit decreased by 271.3 billion yen year-on-year to 165 billion yen.

After adjusting for extraordinary gain and loss and taxes, net income decreased by 248.5 billion yen to 146.9 billion yen. In the FY2025 share buyback program, which began on May 9th last year, the cumulative number of shares purchased back as of January 31st is 23,486,800 shares, totaling about 120.3 billion yen.

Now, please turn to page 8 of the material. As explained earlier, and as shown in the left table, that year-on-year 271.3 billion yen decrease of recurring profit is due to market effects and volume decline, namely that of liner trade, and the exclusion of air cargo transportation segments NCA from the consolidation.

That was the explanation for the results up to the third quarter of FY2025. Now, I'd like to explain the forecast for the full year of FY2025.

Please turn to page 9. As for the full-year forecast, compared to the previous forecast announced after the second quarter on November 6th, we revised the revenues upward by 40 billion yen to 2.39 trillion yen, and the recurring profit upward by 5 billion yen to 195 billion yen.

The net income remains unchanged at 210 billion yen. I will explain the segment details later, but page 12 shows the profit and loss at each stage along with assumed exchange rates and bunker oil prices.

As sensitivity factors for the remaining three months of the fourth quarter, a 1 yen depreciation of the yen is expected to increase profit by about 430 million yen, and a $10 per metric ton decrease in bunker prices is expected to increase profit by about 190 million yen. The dividend forecast based on this remains unchanged.

On top of the 110 yen interim dividend already paid, the year-end ordinary dividend of 85 yen and a commemorative dividend for our 140th anniversary of 25 yen, thereby the total 110 yen will be paid. The scheduled annual dividend amount is 220 yen per share.

Now, the annual ordinary dividend of 200 yen is based on the targeted consolidated payout ratio of 40%. As mentioned earlier, the share repurchase is being implemented from May 9th, 2025 to April 30th, 2026, with the maximum amount set at 150 billion yen.

The annual dividend forecast is based on the number of outstanding shares, excluding those acquired up to January 31st. Next, I'd like to explain the full-year forecast for each segment, comparing them with the previous forecasts.

Please refer to page 14. The blue column in the center shows the revised full-year forecast figures for FY2025.

First, for liner trade segment, we forecast recurring profit of 46 billion yen, revising upward by 1 billion yen from the previous forecast. Recently, due to increase in shipping capacity following the delivery of new vessels, cargo movement slowed in the third quarter, mainly on the Asia-North America westbound route, which led to short-term freight declining year-on-year.

However, as we anticipate a gradual recovery in the fourth quarter, the overall revenue for the second half is expected to be in line with the previous forecast. Next, the logistics segment.

The airfreight business is expected to remain steady, but reflecting the impact of declining ocean freight rates and the tariff impact on the cargo volume of the contract logistics business, we revised down the recurring profit forecast by 4 billion yen from the previous forecast to 8 billion yen. For automotive segment, due to steady cargo movement and the postponement of additional port fees in the United States, which had been factored into our previous forecast, we revised up the recurring profit by 10 billion yen to 98 billion yen.

Please note that the forecast for liner trade and automotive are on the assumption that the Cape of Good Hope route would continue to be used due to the situation in the Red Sea. Next, for the dry bulk business, while market conditions are likely to exceed our previous projections, because the profitability of small-sized bulkers is falling below our expectations, the full-year recurring profit forecast remains unchanged at 5 billion yen.

Moreover, the energy segment's recurring profit is also unchanged from the previous forecast at 48 billion yen for the full year. Medium- to long-term contract vessels are operating steadily, the business is expected to remain firm.

Going one page back, please also refer to page 13 for our year-over-year comparison table. Furthermore, on our website, you can find the slides presented today, as well as the appendix, which contains reference materials such as projected key figures for each segment.

Please check them out as well. That is all from me.

Thank you for your attention.

Thank you very much. Now we move on to Q&A session.

Here is how to ask questions. First questions.

Now you are unmuted. Now you have the right to unmute yourself, unmute yourself and start your question.

Thank you for the presentation. I have two questions.

First, result or any 215 billion yen of recurring profit and the progress you are making, will be on the acquisition or the Suez situation has been changing. How are you evaluating your progress to achieve 250 billion yen, 15 billion yen?

Second question is about the downward revision of logistics for the 4Q, it's in the red, and Movianto acquisition is done, and you have accumulated maybe some more expenses. My question is, could you please give the breakdown of the downward revision of the logistics business?

Thank you.

Thank you for the question. Other than ONE, what is the progress?

That's the first question. All in all, we are making good progress, but when it comes to dry bulk, the impact it's slightly by the market.

The previous time we met, we explained about it as well. There are various factors involved, not only short-term developments, for example, the war in Ukraine, the shipments from Ukraine are changing, status is changing.

As to bulk shipping mainly, the front haul or back haul, that's how we call it, in other words, through some combination, we tried to increase the volume at the balance leg that should be shorter as much as possible. There, we are seeing some impacts.

This year, we are seeing some strong adjustment phase. Especially the small bulkers and the bulk shipping, there, numbers, actuals, are slightly below our expectation.

From the next year and on, it will be corrected, there will be some correction. To some extent, we think that the numbers will be more in line with our expectation.

As to other investment, including logistics, and also other long-term contracts of energy vessels, things are progressing smoothly. As to related to logistics later, Mr.

Banno will make some more comments as well. As to Movianto, of course, it involved some M&A cost, but rather than that, the market effects impact are greater.

Some comments from Mr. Banno.

Thank you for the question. First, red number in the fourth quarter you said, exactly you are right.

Actually, in November, when we made an announcement, 5.3 billion yen black number for the second half. Already in that, the assumption for the fourth quarter is in the red because of seasonality.

Usually numbers are not so good in the fourth quarter, and the third quarter, black number. That was our assumption.

It turned out that the third quarter is not as good as we expected. As to market, the airfreight is to some extent stable, with some profits.

When it comes to ocean freight and contract logistics, contract logistics should be stable, but partly because of US tariff issue, after the Christmas season, our customers are more hesitant for imports. We revised it downward as well.

As to M&A, acquisitions, and of course it came with cost for this year, but at the point of announcement in November, such cost had already been factored in, and not so much increase since then. Compared to November, it's not increased so much.

That's not the reason for the 4 billion yen downward revision. It is the ocean freight and contract logistics were less than our expectation.

That was the reason. Thank you.

Thank you for the question. Now let's move on to the next question.

Please raise your hand, and we'd like to point to those who have raised hand. We are going to give you the rights to unmute yourself, when you were given the rights to unmute, please unmute by yourself and speak out.

Thank you. I'd like to ask a question.

Thank you for the explanation before that. I'd like to ask about automotive, two things.

First is regarding the progress of the performances this year year-to-date, and especially the revision of the forecast, the upward revision. I think the port fee part is the difference.

Also if you look at third quarter alone, on year-on-year, it's going to be the decline of profit. I'd like to confirm what the background there more.

The second is regarding automotive current market conditions. What do you think about that?

Can you also comment on that? Because as a whole global market, the shipping volume has been strong in the past few months.

In January, the auto volume has already been seen the bottom, it seems, overall. What do you see about that?

What are the likelihood of the revision of your contracts for freights in the coming months? Are there any positive factors that you can count on?

Thank you for the question. Regarding the first question about the progress this year, especially for the second half of the year, there was the port fee.

Other than port fees, I think you're asking what was the impacting factors. Originally, the port fee impact in the second half was expected to be in January in November, when we announced, we expected that about to be 7 billion yen after the second quarter.

Their improvement of 10 billion yen is that there was this port fee postponed, and it's not just that. Partially, there is also the increase in the volume of cargo, too.

Compared against the last projection, there is increase by about 40,000 units. That is leading to the upside in our profit.

That's how you can think about the situation. As for the current market conditions and the outlook for the next fiscal year, for that part, there are still a lot of uncertainties.

As for the current situation, we do not see much of a big change. That's not what we feel.

For the US and such, especially the area where we are mainly carrying for those car OEMs, the demand is not likely to change so much for the time being. On the other hand, in the long run, there is going to be new delivery of vessels, and from the next fiscal year and on, the Suez Canal situation is unknown.

According to our assumption, we think for the time being we still need to pass through the Cape of Good Hope, but how that would affect us in the next fiscal year is still uncertain for the moment. Still yet, big concerns are not really visible for us at the moment.

That is my answer to your question. Did I answer well?

Yes, understood very well. Thank you very much.

Thank you for the questions. Moving on, now you have the right to unmute yourself.

Please unmute yourself and start your questions. Thank you.

I have two questions. First, automotive transportation on a full-year basis, about 15 billion yen minus year-on-year, that is the estimate that you have.

What is the breakdown of this negative 15 billion yen? Is it because of volume or the freight or the efficiency or FX?

Either by numbers or just an image, could you please put some color on that number? How are you looking at the car carrier for the next year?

Second question, you do not have a slide about cash flow, and you have one more year to go, one more year to go in the current medium-term plan. Any plan to review cash flow allocation?

If necessary, I think you will make an announcement in May. My question is whether the cash flow allocation will change or not.

If yes, any change for the payout ratio of 30%, any potential change on that as well?

Thank you for the questions. Year-on-year basis, a minus 15 billion yen in profit of automotive transportation.

Setting aside specific numbers, factor-wise, first, cost is increasing slightly, especially because of inflation, about 200 days. A tariff impact, it's not zero.

Sometimes we need to deviate the usual trade, and if this is the date for new tariffs or the customers who wanted us to move our vessels earlier than schedule, we face that situation in the first half. Also additional port fees, partly it is already being collected, those impacts have been factored in this time.

This is related to earlier questions, namely the third quarter of last year performance was quite good. Year-on-year basis included, it was good.

That means for this year, numbers are not weak, but some impact coming from cargo volume. Those factors played out for minus 15 billion yen year-on-year basis.

As to the numbers for next year and onwards, as to the cargo movements, as I mentioned earlier, we do not think that we will see material changes. There are other factors, for example, geopolitical factor, the Suez Canal-related issue, also tariff policies.

Those are the things which are difficult to predict. As we compile our budget for the next fiscal year, we are going to review these issues more closely so that we can show our plan in May.

That is for automotive transportation. Are you satisfied with my answer?

Yes, thank you.

For the next year, the year contract freights will be reviewed, and probably freight average will go down significantly. Is not going to be a factor for the car carrier?

It is based on long-term contracts. Some fluctuations in freight will not be the material as is the case for container ships.

Of course it is yet to be seen, but we do not expect to see the significant decline.

Thank you.

Thank you.

As to your second question, one more year to go in the midterm plan, and what about cash allocation, any change?

Management allocation, management-directed allocation, I think, is the basis for your question. It's 200 billion yen.

At the end of the second quarter, we presented this number, and at this moment, we have not changed that figure. As we have been explaining about it, we don't know whether we are going to use that number for the midterm plan.

It looks like that we have 200 billion yen as managed allocation, but we are increasing investments, and we are making additional shareholder return with additional 100 the 150 billion yen the share buyback and so on. Cash flow coming from operation is expanding.

As a result, we have the buffer, if you like, of 200 billion yen. Going forward, because of geopolitical issues or the different countries' economic policies, there's some uncertainties out there.

Watching them closely, we would like to make agile judgments. It's not that we are going to use the figure completely next year, or we are going to use it for investment or shareholder return, nothing has been decided yet.

Have I answered your question?

Thank you, that's clear. If a management allocation framework is to be used for shareholder return, how are you going to do that?

A share buyback or the additional payout? I think there are different ways to do that.

Of course it is yet to be decided, but any particular axis that you have in your thinking?

At this moment, we do not have any particular thought on that. One thing that I can tell you is that when it comes to share buyback, it is partly a shareholder return, but also it is to improve our capital efficiency.

That is another target, objective, of share buyback. In order to, while maintaining our rating and expanding investment, increasing leverage, thus improving the capital efficiency, the adequate capital ratio, it is nearing the target in the current midterm plan.

The future operating cash flow, the forecast will be part of the picture for us to make judgment. As to payout ratio, now we have raised it from 30% to 40%.

To raise it further, well, we know that it is one of the issues that we need to work on, but we have not decided anything whether we are going to do it right away. Thank you.

Thank you for the question. Let's move on to the next person.

I'd like to appoint the person who has raised the hand next. I am giving the unmuting rights to that person just now, please unmute yourself and speak out.

I have a question. Can you hear me?

Yes, I can hear you.

My first question is regarding energy business, the third quarter and fourth quarter profit seems to be, compared against the previous year's level, it's lower. I'm wondering why that happened, why are you thinking that it's going to drop like this?

Please explain the background to this drop in profit year-on-year. The second question is regarding the dry bulk business.

In the next fiscal year, you might improve the profitability by balancing better, it seems, but what level profitability can you go back to? Are we going back to one year ago level?

Still yet, the dry bulk profitability has been low to begin with, are you accepting it as it is as CFO or management at this timing for this business? Finally, about HR, changes to the HR, you're changing the organization for next fiscal year, and Kono-san, what would your role be in the next fiscal year?

Aman-san is likely to be next CFO, if you can give us a little color there, that would be appreciated.

Thank you for the question. Regarding energy business, third-quarter profit that's going down, earlier in the explanation I mentioned, but that's because NYK Energy Ocean, this company has been set up and has been consolidated into us in April in 2025, that's relevant.

Previously it was ENEOS Ocean. They have been shipping oil, but non-oil tanker businesses were carried over to us as NEO.

As for the acquisition price, that was including the goodwill and some fixed assets such as vessels. We were supposed to use for depreciation, so that would become fixed assets, in other words.

The acquisition cost allocation was conducted in the third quarter. For this amortization part, that was not included in the first half.

All were booked in the third quarter. Therefore, there seems to be a big decline, but other than that, it's been very healthy and steady as a business.

That was about the energy business. Was that clear?

Was it okay?

In the fourth quarter, that impact will be gone,

right? We're just going back to the usual status.

As for NYK Energy Ocean, will this contribute to the profit next year or not?

There's some goodwill and amortization, which is still there. That would be a bit of a burden at the beginning years, but throughout the next midterm plan period, this business would surely contribute to our overall profits.

Understood, thank you.

About the dry bulk business level, this fiscal year -- so far we have had double-digit billion yen as target profit in the past, and we have generated great profit in the past, especially when the times were good. This fiscal year, compared against that level, the profit level is much lower, maybe it seems like a shortcoming.

As for the specific numbers, I cannot really mention at the moment, but at least double-digit or higher profit would have to be generated. As for this, the non-regular ships are going to be affected by the market conditions.

Trying to minimize that is something we're doing, and also when the market conditions are good, we'd like to enjoy that benefit much more in our operations. We have been pursuing that from before.

As regards to that, there are no changes, no obstacles that we see. As regards to the mid- to long-term contracts, they are underway steadily.

From that part, in the next year and on, as we were achieving in the previous year as was the year before last, we'd like to achieve better profit in the next fiscal year. As for your final question regarding the human resources matter, I myself has served as CFO for three years, and I truly appreciate your kind support to everyone here.

Continually, I would be a representative director of the company and also as GCIO, Group CIO, Chief Information Officer, that is. I would be looking over DX, digital transportation -- transformation matters.

In the previous DX activities, the DX was the base, and we were thinking about pursuing further business developments, but on top of it now we are hoping to make DX as the foundation to accelerate the speed of the management or to improve the KPIs properly by grasping that earlier and on and on, disclosing that early on as well, that would be very important. That's a part of the challenges that we are acknowledging.

In the context, last year, we replaced our mainframe system, and that's SAP's S/4HANA. It's open cloud system, it's the that's the new one.

Previously, most of the Japanese companies were customizing those mainframe systems to to adapt to their own operating process and were using in a private cloud environment, we decided to go into global standard earlier than the others. We have now this system in place, and we'd like to make sure that within the group, it will be cascaded well enough so that we can generate the good results out of this new system, because that's another challenge of DX for us.

Previously from finance, accounting, and all I've been in charge of all those departments previously, so that's why I would be looking over DX from from April. As for the successor, Mr.

Banno, previously he was in the business planning and will be my successor, and I have no issues, no worries at all that he's taking over. That was all from me.

Did I answer to your question?

Yes, thank you very much. Thank you for the questions.

Seems that there's no more questions, it's a bit early than the scheduled time, but now we would like to finish our Q&A session. Thank you very much for your questions.

With that, we would like to complete the third quarter FY2025 financial results announcement. Thank you.