Review of the Shipping Business Plan

「Under its policy of concentrating management resources on its core logistics and real estate businesses, the Group decided to transfer all shares of its consolidated subsidiary Westwood Shipping Lines, Inc. (ウエストウッドシッピングラインズ会社), which operated the shipping business. The transfer was completed on 29 June 2022 (U.S. Pacific Standard Time).」

「Following a review of the Group’s business portfolio, the Group determined that it would be preferable to concentrate management resources on its core logistics and real estate businesses and transfer the shipping business to an operator with specialized expertise in that business. As Westwood’s performance was improving, the Group determined that the current situation represented the optimal time to promote the transfer of Westwood. Following consideration of a transfer on the premise that Westwood’s business would continue, the Group has now agreed with the Swire Group to transfer shares and other assets on the premise that Westwood’s business will continue to operate as it does currently.」

「In the shipping business, the Company aims to improve performance by expanding its handling of highly profitable cargo,」

「Operating revenue rose 52.7% year on year to ¥17,079 million, owing to higher container freight rates and the recovery in container volumes from Japan and South Korea to North America. Although container-related costs and fuel expenses increased, the effect of higher revenue resulted in operating profit of ¥2,415 million, compared with an operating loss of ¥621 million in the same period of the previous year.」

「In the ocean shipping business, operating revenue rose 17.7% year on year to ¥7,468 million, owing to the recovery in container volumes from Japan and South Korea to North America and higher container freight rates. Operating profit was ¥715 million, compared with an operating loss of ¥175 million in the same period of the previous year.」

「In the shipping business, the Company aims to improve performance by reducing operating expenses and handling more highly profitable cargo,」

「Operating expenses decreased due to lower container-related costs, including repositioning expenses, resulting from the decline in container cargo volumes, as well as lower fuel oil prices. However, as performance for the cumulative second quarter of the current fiscal year remained weak due to the impact of the infection, the business recorded an operating loss of ¥398 million, compared with an operating loss of ¥272 million in the previous year’s corresponding period. In the third quarter alone, the business returned to profitability for the first time in 5 quarters due to the recovery in cargo volumes and other factors.」

「In the shipping business, operating revenue was ¥11,184 million, down 12.6% year on year. Due to lower revenue resulting from the impact of the infection, the business recorded an operating loss of ¥621 million, compared with an operating profit of ¥2 million in the previous year’s corresponding period.」

「In the shipping business, container transportation volumes declined and the stronger yen had an impact, but improved container freight rates and other factors kept operating revenue broadly in line with the same period of the previous year at ¥6,347 million, up 0.3% year on year. Although container-related costs, including repositioning costs, declined with the decrease in container transportation volumes, operating expenses increased because higher-priced fuel was used in response to tighter regulations on sulfur oxides from marine fuel oil, among other factors. As a result, the company recorded an operating loss of ¥175 million, compared with an operating loss of ¥144 million in the same period of the previous year.」

「Against this backdrop, to achieve its long-term vision, the Group is pursuing the following measures as business strategies for each business, while strengthening its business foundations, and will also undertake structural reforms, with a sense of urgency, in the shipping business and other businesses whose earning power has declined.」

「In the shipping business, operating revenue was ¥18,849 million, down 3.7% year on year, as freight rates recovered but cargo volumes for forest products and containers bound for East Asia declined, and the yen appreciated. Although earnings improved significantly due to the recovery in freight rates and reductions in container-related costs, including repositioning expenses, the business recorded an operating loss of ¥272 million, compared with an operating loss of ¥1,202 million in the previous year’s corresponding period.」

「In the shipping business, operating revenue was ¥12,791 million, up 0.8% year on year, due to increased container transportation volumes bound for North America and a recovery in freight rates. Efforts to reduce container-related costs, including repositioning costs, resulted in operating profit of ¥2 million, compared with an operating loss of ¥802 million in the same period of the previous year.」

「In the shipping business, efforts were made to improve profitability by expanding transportation volumes and reducing operating expenses, among other measures.」

「In the shipping business, ocean freight rates showed signs of recovery but remained below the assumed level. In addition, operating performance fell below the business plan due to higher fuel costs resulting from rising crude oil prices, and increases in North American inland transportation costs and chartering expenses, among other factors. Accordingly, the company revised its business plans, reduced the carrying amount of the above shipping business asset group to its recoverable amount, and recorded the reduction as an impairment loss under extraordinary losses.」

「This amounted to ¥1,703 million, down 60.1% year on year, mainly because the Company recognized impairment losses on fixed assets related to the shipping business as an extraordinary loss following a careful review of the business plan in response to deteriorating performance in the shipping business.」