July 2010
It is a great privilege as well as a big challenge for me to follow Mr M Morooka in taking the position of President and Chief Executive Officer of NYK Group Europe Limited. I moved to this position in April this year and am looking forward to this challenge. I was stationed in Germany and the Netherlands between 1990 and 1995, and am very pleased to be given the opportunity to work again with old friends and also to get to know and work with new friends within the NYK Group in Europe.
Although I have been in my new position for only a short time, I have some advice and comments to make about the NYK Group's present situation in Europe, as follows:
First of all, it is important that we should be sensitive to changes that occur in the market and react quickly when we perceive that a change is occurring. For example, although the world economy seems to be showing signs of recovery, the recovery is still shaky and vulnerable as far as Europe is concerned. The financial crisis that has occurred in Greece may adversely affect the confidence of consumers, leading to a reduction in consumption, an increase in unemployment and risk of another recession. We must be wide awake to what is happening and be able to react quickly in case there is another recession or a pick-up in the market affecting our European businesses.
Secondly, I wish to reactivate the SEA-LIP programme so as to enhance group sales activities to the maximum extent possible - this especially in view of the forthcoming merger between the NYK Logistics and Yusen Air & Sea parts of our organisation. Synergy between Liner, RORO and Logistics must be pursued further, and it should be appreciated that the expansion of our Double Wing Express division will benefit not only the Logistics side of our business but also Liner and RORO. What is important is not to create a single sales window to our customers (who often do not require us to provide this), but to ensure that information about our customers is shared between our different business units, which can then help each other to create business opportunities.
Thirdly, I wish to emphasise that corporate governance is of the utmost importance to NYK, especially in Europe where we have over 70 corporate entities, with a total of about 6,000 employees. My aim is to make sure that we have a strong grip on our day-to-day business activities, and the recently established Regional Control Office will help in this respect from the point of view of accounting and taxation.
Finally, I wish to say that I am fully committed to doing my best to expand the businesses for which NYK Group Europe Limited has responsibility. This includes our business activities in Russia and in African countries. I will also aim to follow my predecessors in creating a happy and healthy working environment for NYK employees in Europe. I very much look forward to working as a team together with my new colleagues.
Hiroshi Hattori
President and Chief Executive Officer of NYK Group Europe Limited
Below messages from Masamichi Morooka (CEO 2007 - 2010)
December 2009
Since my last message was posted on this site, there have been some small improvements in trading conditions. As I mentioned in my last message, the recurring loss for the NYK Group globally during the April to June quarter of this year was about 27 billion yen, and it now seems that the equivalent figure for the July to September quarter is likely to amount to about 17 billion yen. We have some reason to hope that the results for the October-December quarter will show a continuing improvement, but this does not alter the fact that NYK, in common with its competitors, has suffered very seriously from the crisis that has hit the world economy since the autumn of 2008.
Against this background, Nippon Yusen Kabushiki Kaisha (i.e. NYK Tokyo) announced recently that it would make a public offering of new shares in the company, together with a secondary offering of its shares, with the aim of increasing the capital available to the company. This is linked with the company’s emergency structural reform project, referred to as “Yosoro”, and its revised medium term management plan, “New Horizon 2010”, announced in October. This revised plan includes the following elements:
- Transition of our containership business to a “lean asset structure”
- Fundamental restructuring of our air cargo business
- Further development of our integrated logistics business
- Strengthening of our vehicle transportation business
- Expansion of our natural resources and energy transportation business and development of new business opportunities.
Through this public share offering, the company is aiming to procure funds for capital expenditure, principally with respect to vessels, and to bolster its financial position in order to implement effectively its structural reform plan, which I have outlined above.
It will be noted from the third bullet point above, that as part of the revised medium term management plan, the company is aiming to develop further its integrated logistics business. In connection with this aim, the company recently announced that NYK and Yusen Air & Sea Service (“YAS”) are commencing discussions with the objective of reorganising and integrating NYK’s logistics business with that of YAS. The new integrated logistics company will be an NYK subsidiary. In Japan, it has been agreed that the integration will take place soon after 1st April next year. In Europe, a sub-committee of the global Steering Committee that has been set up in Japan is being established, and the objective is to achieve full integration in Europe within the next two years. The overall objective is for the new integrated entity to become one of the world’s top five logistics companies, with synergies between the new entity and the rest of the NYK Group being maximised. The European sub-committee that is being established will have the interests of NYK and YAS staff members very much in mind when drawing up plans on how the integration is to be achieved in Europe.
I personally regard the developments that I have described above as being very positive for NYK and its future.
September 2009
Conditions globally in the business of moving goods by sea, land and air remain very difficult. There has been no significant improvement in trading conditions in any of the areas of business that NYK is engaged in since my last message posted on this site three months ago. Under such circumstances, NYK recently posted a recurring loss of 27 billion yen for the first quarter (April through June) of the fiscal year 2009 on a consolidated account basis. Unfortunately, this substantial loss for one quarter period is the worst performance in our company’s history. We are now anticipating that the first half loss will amount to 44 billion yen. The deep and long downturn in the shipping industry will continue to next year since quite a large number of new buildings are still to be delivered during the next two to three years and, in the short term, the growth in global demand for ocean transportation will not be as high as the growth in supply.
Against this background, I would like to draw the attention of readers of this message to remarks made by the President of the NYK Group, Mr Kudo, in the recently issued Company Annual Report for 2009. This contains a record of an interview with Mr Kudo, which includes comments on Company policy and objectives made by him. I summarise below some of the comments that he made during this interview:
1. One of NYK’s strengths is the creativity of its employees – the ability of the Company’s employees to find clever solutions to problems that are being encountered by our customers. Use of such creativity for our customers’ benefit has and will continue to enable us to build strong relationships of trust with our customers. By all means, NYK staff members will strive to be increasingly creative in aiming to solve our customers’ problems.
2. The Yosoro Project, mentioned in my last message, consists of two phases: a short term phase and a medium/long term phase. In the short term, the Company has already taken steps to reduce fleet size so as to lessen the gap between supply and demand. For the medium and long term, part of the strategy that will be adopted will involve achieving a flexible fleet composition, so that the Company will be able quickly to adjust its vessel capacity at times of growth and recession, so that as far as possible we can match supply with demand.
3. One key concept in the Company’s long term strategy is “integrated logistics”. This means that we need to develop an approach to our customers that combines marine and land logistics – many of our customers “want to deal with hybrid salespeople who have a thorough understanding of both marine logistics and land logistics.” Another key concept for growth of the Company in the future is to take full advantage of the opportunities that exist in various Asian markets, particularly China.
4. Having strong and effective management in the area of Corporate Social Responsibility (“CSR”) continues to be a major Company objective. This involves, amongst other things, providing stable Monohakobi (transport) in order to improve the lives of people round the world, as well as paying close attention to protection of the environment. As far as the environment is concerned, most readers will be aware that since April 2008 we have had the NYK Cool Earth Project in operation. NYK’s efforts in the area of CSR have already been for some years recognised in Social Responsibility Indexes associated with various of the world’s major stock markets.
From what is stated above, I hope that it will be understood that – whilst trading conditions are difficult at present – the NYK Group does have a coherent strategy for the future that will enable us to take full advantage of the upturn in economic activity that will inevitably come in the not too distant future.
June 2009
Unfortunately, since my last message was posted on this site, global trading results for NYK have continued to deteriorate, just as they have for pretty well all of NYK’s competitors. This further deterioration has been for reasons that are not directly under NYK’s control, but it is clear that it is becoming increasingly important that the company should vigorously forge ahead with its Emergency Structural Reform Project, “Yosoro”, which I mentioned in my last message.
In his inaugural address, given on 1st April, NYK’s new President, Mr Kudo, emphasised this point. He also made a number of other points, including the following:
- Most of what we have to do under the Yosoro Project is already included in New Horizon 2010, where paying attention to growth, stability and the environment are listed as being the key medium-term strategies.
- Within NYK’s bulk/energy and car carrying divisions, prudent behaviour in the past (including, where possible, entering into long term contracts with customers) has enabled these divisions to maintain freight rate levels during the current economic downturn much better than would otherwise have been the case.
- On the other hand, freight rates on the container shipping side of the business have proved to be much more volatile as, in the absence of long term contracts and stable relationships of mutual trust with customers, freight rates fluctuate entirely according to supply and demand and have therefore collapsed during recent months.
- Part of the problem on the container shipping side has also been “the past business model of giving top priority to investment in fleet expansion”. The company will therefore consider, as part of the Yosoro Project, placing a greater emphasis on chartering vessels rather than owning them so that we can “turn our ship expenses into a variable cost”.
- On the logistics side of the business, there are problems arising from, amongst other things, excessive possession of hardware, lack of on-site capabilities and insufficient co-operation with the containership/liner division.
All of the above issues, and many others – including matters relating to the non-business divisions of the company - are on the agenda for Yosoro Project discussions. In Europe a Yosoro Project Committee has already been formed, with representatives involved from all relevant parts of NYK in Europe. It is already clear that, in Europe and elsewhere, there will be more emphasis than in the past on developing non-asset based businesses, such as NYK’s Double Wing Express operation.
In the meantime, it should be mentioned that NYK’s new President, Mr Kudo, emphasised in his inaugural address the Group Values of Integrity, Innovation and Intensity. He added one other “i” – Ingenuity – and said: “Innovation and ingenuity belong to the sphere of human ability. That is why people are said to be the most important assets for an enterprise. And I will never fail to invest in people.”
March 2009
Since my last message issued in November 2008, there have been continuing adverse developments in the global economy. These have had negative effects on NYK’s trading results just as they have negatively affected the results of all of NYK’s competititors in the shipping and transport businesses. Almost all of the economies in which NYK does business throughout the world are in recession, with Japan particularly hard hit. Although NYK is a company that does business globally, it is a company that is domiciled in Japan and therefore more dependent than most of its competitors on the Japanese market. Recently published figures show that Japan’s economy shrank by 3.3% during the fourth quarter of 2008 - an annualised rate of shrinkage of about 13% - which is the worst quarterly rate of decline since the 1974 oil crisis.
Against that background, NYK’s President, Mr Miyahara, recently announced the inauguration of an Emergency Structural Reform Project, to be named “Yosoro”. Some readers of this message may have read the notice on this subject that was recently issued by Mr Miyahara, but I would like to quote the part of it that reads: “…what we have to do in the face of the current recession is to conduct a thorough reexamination of the profit structure and business structure of every activity of the whole NYK Group, undertake structural reform of all our corporate operations, and further enhance our organizational capabilities without limiting ourselves to backward-looking cost reduction. This will enable us to take a further leap forward after the recession.”
Needless to say, NYK in Europe will be an important part of this project. During the coming few months, NYK Group Europe Limited will have a project team established that will have the task of reviewing the profit, business and operational structures that we have in place in Europe. This will be done in liaison with the project committees that have been set up in NYK Tokyo. The aim of the review will be to make significant improvements, not just to ensure that we survive this recession, but so that we are in a position to take full advantage of the opportunities available when the global economy begins to expand again.
To be successful, this project team will have to challenge existing business models and make tough decisions. Through adherence to our Group Values, especially Innovation, I am sure that as a Company we will be able to maximise the improvements and minimise the pain during the next few months.
November 2008
All readers of this message will be well aware of the “financial crisis” and the very negative effect that this has had on worldwide economic activity. I mentioned in my last message on this website that NYK had enjoyed very good financial results during the April to June quarter this year. However, I also pointed out that - already at that time, three months ago - NYK’s liner trades were under pressure arising from less than expected growth in cargo volumes and a consequent worsening supply/demand situation in all the major liner trades. Writing this now in November, I have to say that the economic downturn has started to affect adversely almost all parts of NYK’s business in parallel with the global trade decline.
Apart from our liner trades, the downturn is most marked on the dry bulk side of the business, where freight and charter rates have plunged from the high levels that prevailed earlier this year. In addition, car sales are down worldwide, which is obviously not good for our RORO activities, and on the Logistics side, reductions in sales in the automotive and retail sectors of the world economy are having a correspondingly adverse effect on the volume of business that is available to companies within our Logistics division. It is already noticeable that goods are remaining in warehouses operated by our Logistics companies for much longer than was previously the norm and, whilst this will not necessarily in the short term have a negative effect on revenue or profit, it is clear evidence of the reduction in retail sales that is occurring in almost all the markets in which NYK does business.
All in all, the immediate prospects for most of the businesses in which NYK is engaged globally are not very positive. However, NYK is a resilient company, and during its 123 years of history has seen and overcome many difficult trading circumstances. In the present downturn, NYK – partly because of the diversity of its involvement in different parts of the shipping and transport businesses, and partly because of the solidity of its financial foundations - is in a much better position than most of its competitors to weather the storm. Therefore, I remain very confident about NYK’s long term future.
In the short term, NYK is taking action to reduce expenditure wherever this can be done without jeopardising the standard of service that it provides to its customers. The Company is also taking action to minimise the risk of losses and reductions in service levels that might result from bankruptcies on the part of companies with whom it does business. I believe that these actions will help NYK to emerge from the present economic downturn as an even stronger corporate entity than it is at present.
August 2008
In this message, I would like to focus on two particular matters, as follows:
Financial Results: The NYK Group has recently issued a press statement showing its financial results for the first quarter of the Company’s financial year, i.e. the April-June period. The overall results are very positive, with profits at the highest level ever recorded by NYK for a single quarter. These good results are more than anything else the result of the favourable market conditions that generally prevailed during the April-June period in the Bulk Shipping markets. In particular, there was very strong demand in the dry bulk market for movement of such commodities as iron ore, coal and grain to emerging nations such as China and India.
However, the favourable results that the company enjoyed overall during the April-June quarter cannot disguise the deterioration that has been occurring in the liner shipping part of our business. Less than expected growth in cargo volumes this year in the main liner trades worldwide, including the Asia-Europe trade, has resulted in a worsening supply/demand situation, which in turn has led to our capacity not been fully utilised on the dominant legs of the major trades and to freight rate levels coming under pressure. At the same time the huge increases that have occurred in fuel prices during the last few months have resulted in a significant increase in our costs. In view of these adverse trends on the liner side of the business, we need as a company to revisit and review all cost items, as we have to do whatever we can to reduce our expenses by making savings in bunker costs, improving operational efficiency, reviewing our selection of vendors etc etc. Reducing our operational costs is a top priority for liner management in Europe.
Safety: Ensuring that we operate our vessels safely, and that all our landside operations are conducted with safety a paramount consideration are key points within the “New Horizon 2010” medium term Management Plan that the Company has recently adopted. Safety and the Environment are coupled together within that Management Plan as part of the Company’s “Commitment to the Earth and Society”. All NYK’s staff in Europe are reminded that they should ensure that all our operations are carried out with safety very much in mind.
May 2008
Welcome to our new Group Europe website, which has been launched to improve our communications and knowledge sharing with you. I plan to use this page to provide regular updates as seen from my position as NYK’s European Group CEO, a role I was appointed to in April 2007, having previously worked with the company in various assignments in Japan and North America since joining NYK in 1975.
To mark the launch of this CEO page and to highlight the breadth of NYK’s services in Europe and globally, I would like to focus on our new medium-term Management Plan – New Horizon 2010 – that will run between April 2008 and March 2011. This Management Plan provides a set of strategies for the Group that follows the New Horizon 2007 Management Plan that operated successfully between April 2005 and March 2008. By acting in accordance with the strategies contained in the new Plan, the Group intends to continue to expand its business and evolve into a global monohakobi (transportation) company that achieves regular increases in revenue and profits.
I summarise briefly below the three key strategies that are highlighted in the new Plan:
Growth: the Group intends to deepen the scope of its strategies for the global logistics business, to expand its involvement in energy and natural resource transport and to expand its business reach in growth regions - especially in Brazil, Russia, India and China (the so-called “BRIC” countries).
Stability: the Group will aim to reinforce its customer-oriented services, stabilize its profits by securing long-term contracts and, at the same time, maintain and strengthen its financial position.
Environment: the Group will continue to place a high priority on ensuring that its operations are safe, and will aim to score far ahead of its competitors as an environmentally progressive Group, as well as aggressively investing in environment friendly technologies.
There is a more extensive explanation of New Horizon 2010 contained on our Corporate site here, and I commend it to you.
Needless to say, New Horizon 2010 runs in parallel with, and is fully compatible with the global NYK Group Values of Integrity, Innovation and Intensity. It is by adopting these values that we seek to deliver ever greater benefits to all our stakeholders, customers, shareholders and investors, society and staff members.
I look forward to providing regular updates on our progress towards our goals via this page in the coming months. In the meantime, if you have any questions or comments about NYK in Europe, please do not hesitate to contact us.
Masamichi Morooka
CEO NYK Group Europe