NYK Line ( Nippon Yusen Kabushiki Kaisha (OTC:NPNYY)), the Japanese shipping company, has reported substantial growth in its second-quarter earnings for fiscal year 2024, surpassing initial forecasts amidst global economic tensions. The company experienced a significant increase in profits, largely attributed to favorable container freight rates driven by tight supply and demand conditions. During the earnings call, President Takaya Soga provided an optimistic outlook for the remainder of the fiscal year, with increased revenue and profit projections.
Key Takeaways
- NYK's Q2 revenue rose to JPY 1,316.8 billion, with a net profit of JPY 265.8 billion.
- The Liner Trade segment saw a major increase in revenue, contributing significantly to the overall profit growth.
- Full-year forecasts for FY 2024 have been revised upward.
- A total share buyback of JPY 130 billion has been announced, with a maintained year-end dividend of JPY 260 per share.
- The company is progressing well with its mid-term management plan, aiming for a Price-to-Book Ratio (PBR) of 1 or higher.
- NYK has increased its four-year investment plan from JPY 1.2 trillion to JPY 1.3 trillion.
- The company's total shareholder return for the mid-term plan period has increased to JPY 650 billion.
- NYK is adjusting its strategy to balance future investments with shareholder returns, with a 30% dividend payout target for FY 2025.
Company Outlook
- NYK forecasts full-year revenues of JPY 2,540 billion, with a recurring profit of JPY 410 billion and net income of JPY 390 billion.
- Investment in new business opportunities, particularly in decarbonization, is being explored to enhance capital efficiency.
Bearish Highlights
- The Logistics segment faced a revenue decrease of JPY 1.4 billion.
- Dry Bulk and Energy segments reported declines in recurring profit.
Bullish Highlights
- Liner Trade and Air Cargo segments reported substantial revenue increases.
- Automotive segment's recurring profit rose by JPY 1 billion.
Misses
- Projected investment cash flow for FY 2024 is around JPY 300 billion due to postponement of some investments to the following fiscal year.
Q&A Highlights
- Management is committed to maintaining a minimum annual dividend of JPY 100 per share and a 30% payout ratio.
- The company's withdrawal from the Russian energy vessel business was a strategic decision influenced by geopolitical tensions and sanctions.
- NYK aims to achieve a Return on Invested Capital (ROIC) of 6.5% or higher, despite potential short-term fluctuations.
NYK (ticker not provided) has demonstrated a strong performance in the second quarter of fiscal year 2024, with President Soga expressing confidence in the company's strategy and financial health. The company's proactive approach to managing investments, shareholder returns, and navigating global market conditions has positioned it favorably for the upcoming fiscal periods. The earnings call concluded with a reaffirmation of NYK's commitment to achieving its financial targets and enhancing shareholder value.
InvestingPro Insights
NYK Line's robust financial performance, as highlighted in the earnings report, is further supported by data from InvestingPro. The company's market capitalization stands at $14.11 billion USD, reflecting its significant presence in the Marine Transportation industry.
One of the most striking InvestingPro Tips is that NYK Line is trading at a low earnings multiple, with a P/E ratio of 5.94. This aligns with the company's strong financial results and could suggest that the stock is potentially undervalued relative to its earnings potential. Additionally, NYK Line pays a significant dividend to shareholders, with a current dividend yield of 2.99%. This information complements the company's announcement of maintaining its year-end dividend of JPY 260 per share.
Another relevant InvestingPro Tip indicates that management has been aggressively buying back shares. This is consistent with the company's announcement of a total share buyback of JPY 130 billion, demonstrating a commitment to returning value to shareholders.
The company's profitability over the last twelve months, as noted in the InvestingPro Tips, is evident in its impressive revenue of $17.64 billion USD for the last twelve months as of Q2 2025. This strong financial performance supports NYK Line's ability to invest in new business opportunities, particularly in decarbonization, as mentioned in the earnings call.
It's worth noting that InvestingPro offers additional tips and insights beyond what's mentioned here. Investors interested in a more comprehensive analysis can explore the full range of tips available on the InvestingPro platform.
Full transcript - Nippon Yusen Kabushiki Kaisha (NPNYY) Q2 2024:
Yasuaki Okada: Thank you very much for your patience. Now we would like to start our session. Thank you very much for joining our call despite your busy schedule. Now we would like to begin the briefing session for NYK's Second Quarter Results for fiscal 2024. I will be serving as your MC today. I am Okada, the Head of IR Group. First, let me introduce the representatives from the company. President, Representative Director, President and CEO, Takaya Soga; Representative Director, Executive Vice President, Executive Officer, CFO, Akira Kono; Managing Executive Officer and Chief Executive of Liner and Logistics Headquarters, Takuji Banno. Today, Mr. Soga, the President, will first give you the overview of the second quarter result, which will be followed by Q&A session. We will explain how you can ask your questions. The presentation materials for today's session are uploaded on the company website. And as always, this briefing session, including the Q&A session, will be video distributed on an on-demand basis. We ask for your cooperation. Now without further ado, we'd like to start our presentation. Mr. Soga, over to you.
Takaya Soga: I am Takayasoga, President of NYK. Thank you very much for taking time to attend this result meeting today. Today, I will first give you an overview of the financial results for the second quarter of FY 2024 followed by the full year earnings forecast. I will also update on the progress of the mid-term management plan having finished the first half of the second year under the plan. After the presentation, we will have some time for Q&A. The presentation will be projected on the screen. If you have downloaded the file from our website, please have them ready. Now I'd like to start with the overview of the financial results for the second quarter of this fiscal year. In sum, first half results exceeded our initial forecast despite the ongoing global tension, including the volatile currency market, the unresolved Russia and Ukraine situation and the Middle East situation, namely the Israel and Gaza conflict. Please refer to the table on Page 6. The blue column on the right shows the first half results for FY '24. Revenues were up by JPY 148.4 billion year-on-year to JPY 1,316.8 billion with recurring profit increasing by JPY 129.9 billion to JPY 289.2 billion and profit attributable to owners of parent growing by JPY 152.5 billion year on year to JPY 265.8, achieving revenue and profit growth at all levels. The profit growth was mainly driven by the higher container freight rates, which rose more than expected. This was due to the tight supply and demand situation caused by the continued inability to pass through the Red Sea. Let's take a look at the segment breakdown on Page 7. The lower figures for each segment in the blue column, the first half recurring profit by segment for FY '24. In the Liner and Logistics segment, the revenues for the three sub-segments were as follows. For Liner Trade business, revenues were JPY 176.6 billion up by JPY 129.9 billion year-on-year. For the Air Cargo Transportation, revenue grew by JPY 8 billion to JPY 8.3 billion and revenue for the Logistics sub-segment were down by JPY 1.4 billion year-on-year to JPY 12.4 billion. In the Container Shipping business, the freight rates rose more-than-expected due to strong cargo movements and the continued tightness in supply and demand due to the situation in the Red Sea, resulting in a profit level that significantly exceeded the previous year. The freight rates for the Air Cargo Transportation business also was year-on-year due to strong cargo movement from Asia to Europe and to the United States, especially driven by the EC trend. In Logistics, the profit for the airfreight and ocean freight handling hoarding businesses declined slightly due to the impact of the purchasing prices, but the contract Logistics business secured solid earnings. In addition, the equity affiliate earnings of O&E was JPY 163.1 billion. The recurring profit for the Automotive business grew by JPY 1 billion year-on-year to JPY 61.6 billion. Despite the impact of port congestion and the situation in the Red Sea, the number of vehicles transported and profit levels were maintained at the same level as the previous year through the implementation of flexible and optimal vessel deployment plans. The recurring profit for the drybulk business declined by JPY 12 billion to JPY 8.5 billion. Although the market for each vessel type was better than the previous year, the profit was down due to the factors such as the drop in freight rates and volumes as well as foreign exchange factors. The profit for the Energy business dropped by JPY 1 billion to JPY 21.8 billion. The LNG carrier business continued to perform well, supported by medium-to-long term contracts, and the VLGC business also generated stable earnings with contract renewals at charter rates reflecting previous year's strong market, although the current market was somewhat weaker. On the other hand, the VLCC market was favorable, but the vessel utilization rate declined due to an increase in the number of vessels being docked. Please turn to Page 8. As the left table illustrates, the JPY 129. 9 billion year-on-year increase in recurring profit was driven by the profit growth in the Liner Trade business, which just so happened to be the same figure. The yen depreciated by approximately JPY 14 against the dollar compared to last year and the uplift from the currency was JPY 19.7 billion. But as you can see in the table, there is the currency loss of JPY 10.1 billion and this is because the yen strengthened from the weaker yen level. Also, this figure includes the valuation loss. Also, overall, the uplift from the currency was JPY 19.7 billion, but we also had some valuation losses from the strengthening of the yen during Q2. So that was the result for the first half of FY '24. And now let's turn to the full year forecast for FY '2024. Please turn to Page 9. For the full year of fiscal '24, we project revenues of JPY 2,540 billion, recurring profit of JPY 410 billion and JPY 390 billion in net income. And there are no changes from the previous guidance except for the revenues. However, the recurring profit by segment has been revised and the details are indicated by the figures in brackets on Pages 10 and 11 of the handout. Please turn to Page 10. In the Liner and Logistics segment, the full year forecast. A recurring profit in the Liner trade sub-segment is JPY 205 billion revised up by JPY 22 billion year-on-year -- sorry, compared to the previous forecast. In the Container Shipping business, despite your assumption that the situation in the Red Sea will not improve until the end of the fiscal year, i.e. March. We expect that the tight supply and demand situation will ease from the third quarter onwards and that the spot freight rate will gradually decline towards the end of the fiscal year. That said, we expect the full year profit level will also exceed the previous forecast owing to the additional profit recorded in the second quarter and hence, the upward revision of JPY 22 billion. Air Cargo Transportation business is expected to post JPY 13 billion, JPY 3 billion higher compared to the previous forecast. We expect that air cargo from Asia to Europe and the U.S. will remain strong from the third quarter onwards. The JPY 22 billion profit guidance for Logistics Business remains unchanged from the previous forecast. Although there may be some deviations in freight and ocean Freight Forwarding business and Contract Logistics business, overall, we do not expect to see any material change. On Page 11. The full recurring profit of Automotive is JPY 110 billion, down JPY 10 billion against previous forecast. Albeit the decline due to slightly reduced transportation volume and the FX. The profit level is expected to remain high. Compared to last year's results, our forecast are slightly better than that. The number of transportation or units is slightly down, but reduction was about 60,000 in six months or so. This doesn't mean that, the demand is going to decrease. Demand is very robust in the shortage of vessel space. But the trade using, the cap, not the at Red Sea will continue to the end of March. Theoretically speaking, the space is going to reduce. This means that, the other number of units to be transported is going to go down. For dry bulk, is JPY 20 billion, down JPY 13 billion against the previous forecast due to anemic results in the second quarter driven by FX. For the year profit, it's expected to be lower than the previous forecast. Energy business is JPY 42 billion down JPY 3 billion against the previous forecast. While a stable earnings expected for LNG and VLGC, market forecast for VLCC is lower than the previous forecast, thus slight decline. Now for comparison with the full year forecast as of the first quarter earnings briefing. As to comparison with FY 2023 full year results, please look at the table on Page 13. Please look at Page 9 for shareholder return based on the full year forecast. Year-end DPS remains unchanged at JPY 260 per share with the share payout ratio of 30%. As to share buyback, we add JPY 30 billion to the current total of JPY 100 billion making the revised total JPY 130 billion. Buyback period remains unchanged namely from May 9th, 2024 to April 30th, 2025. Last year, although we repurchased our share of JPY 200 billion on May 8th as of the announcement for 2024 forecast, being the base from May 9th JPY 100 billion the share buyback, additional share buyback was announced. Back then, based on that, we were saying that, the JPY 100 billion will be returned to the shareholders, but now the first half results are closed and based on that, we have found that additional shareholders return. So not a JPY 100 billion, but JPY 130 billion share buyback will be exercised. That's for the full year forecast for the year ending March 2025. Next (LON:NXT) I explained the medium-term management plan. This fiscal year marks the second year of the plan. Please look at Page 16. First progress for each financial metrics. The blue column, second from the right, lists metrics, based on the full year forecast this time. With the recurring profit greater than forecast, we expect ROIC and ROE, for example, to be far greater than medium-term plan targets. But we will continue to work on reducing shareholders' equity ratio for example. Please look at Page 17. This page shows progress on the investment policy in the mid-term plan. Originally, we planned to invest JPY 1.2 trillion in total over four years, but as we announced at the previous earnings briefing, the total is to increase to JPY 1.3 trillion of which JPY 850 billion was already earmarked for specific project as of the end of the second quarter fiscal year 2024. The four quadrants at the center and planned investment amount during full years meet the planned period are the same as shown in the medium-term plan materials. Percentage numbers next to each amount are progress rates with arrows showing the changes since the previous earnings announcement. Albeit some differences in pace, all-in-all, there has been a good progress. Please look at Page 18, progress on cash allocation. On the left is the plan as of May 8th this year where we announced a full year results for fiscal year 2023. On the right is the latest plan factoring in the first half results and full year forecast for FY 2024. As to cash out items, we added JPY 30 billion for share buyback and JPY 50 billion for ordinary dividends in our latest plan. On Page 19, it's shown shareholders return in an easy to understand manner. The total shareholder return over the four year mid-term plan period was JPY 430 billion when we announced the plan. The amount is to be increased to JPY 650 billion in which, as I mentioned earlier, we expected JPY 200 billion, we executed rather JPY 200 billion was a share buyback and this year JPY 130 billion buyback. All the shares repurchased are to be retired. Striking a good balance between results and investment, we will continue to consider how to strengthen shareholders' return. Lastly, on Page 20, this page illustrates our recent initiatives to achieve a PBR of 1 or higher. To improve return and decrease volatility, we are promoting a collaboration to expand transportation business of liquefied, CO2, LNG and ammonia. We are also expanding and differentiating Logistics business by leveraging a new Logistics technology as well as M&A. We are exploring new customers and businesses to contribute to decarbonization. To reduce shareholders' equity cost and improve capital efficiency, we are enhancing transparency by applying more detailed disclosure of business segments and promoting share buyback. We are also introducing enterprise system to speed up management decisions and ROIC forecast management. By making a progress in those day in day out initiatives, we are we will optimize financial metrics and by adding fair disclosure of non-financial metrics we will achieve PBR of 1 or more. We will continue to manage our business focusing on cost of capital and share prices. With that, I end my presentation. Thank you.
Operator: Thank you. Now we'd like to start the Q&A session. First of all, you can ask questions, if you have a question.
Unidentified Analyst: Thank you very much for this opportunity to ask my questions. I have one question. Regarding cash allocation, I would like to confirm, for when you revisited the cash allocation strategy, and for March 2025, is this just reflecting the vision for this fiscal year? But for the next two fiscal years, March '26 and March '27, have you made any changes for the following two years? And based on that, the operating cash flow, I think, was increased by JPY 200 billion from the previous forecast. And the cash out, to respond to that, in total, it will be JPY 80 billion with a combination of share buyback and dividend increase. Also, you still have JPY 120 billion, which is not allocated yet. Would that be used for additional shareholder return, or we will be increasing the investment plans beyond the following fiscal years?
Takaya Soga: Yes. Thank you for your question. Also, on this point, Mr. Kono, the CFO, will respond to your question.
Akira Kono: Yes. Thank you very much. As you pointed out, regarding the cash out portion of the cash allocation policy, we have reflected just for the fiscal year ending in March '25. So for FY '25 and FY '26, we have a target of a dividend payout of 30%. But the current cash in is just based on what we have projected in the original mid-term plan. So for the additional two years, we have some buffer, as you pointed out. For that portion, we will look at the balance between the future investment and also the shareholder return. So as you pointed out, yes, that is our intention.
Unidentified Analyst: Thank you very much. I have a follow-up question. I don't remember if it was May or August, but regarding investment, you have a plan of a JPY 1.2 trillion that could go up to JPY 1.4 trillion. And I think that was a round figure that was communicated. Have you updated that number? And has that been reflected in the plan?
Akira Kono: As for what we have announced, we did not mention any specific figure, but investment into any solution and also any investment that's not for the vessels are opportunities that we are actively looking at. Also, including those opportunities, the number could be higher. But of course, we have to have an opportunity to invest. At this point, we are saying JPY 1.2 trillion, but we will be looking at the future investment opportunities and also the cash flow of the fiscal years to strike a balance between investment and also shareholder return. So, at this juncture, we have set aside JPY 1.2 trillion, but it's possible that this number could get bigger.
Unidentified Analyst: I see. So revisiting the investment plans or the shareholder return, would you be making some announcement when you announce the full year results in May?
Takaya Soga: Yes. This is Soga speaking again. If you could turn to Page 19. Here, we have a policy for shareholder return. And as you have said in the midterm plan, we have the four year plan for profit and also shareholder return. And the profit plan, which is used as the base, is using a certain assumption for FY '23, '24, '25, '26. And for those assumed profit, we are looking at the dividend payout of 30%. Including share buybacks. This is the total amount, of the shareholder return. The initial projection was JPY 430 billion. But the profit plan for each year as we close the book for the year and as we review the profit, we are renewing our plan every year. Also, then, the number went up to JPY 570 billion and JPY 620 billion, and then beyond that JPY 650 billion. Also for FY March '26 and March '27, for the remaining two fiscal years, we have not revisited for those fiscal years. Also, the plan will be revisited, as needed, and we are making efforts to make this bigger number. We are also looking at investment opportunities. And of course, we would also consider increasing the amount paid back to the shareholders. As Mr. Kono mentioned, for the total amount, we have been communicating JPY 1.2 trillion and in the presentation, we also have a number JPY 1.3 trillion. And regarding this investment plan, theoretically and technically, there will be some payback. Net, net, it will be JPY 1.2 trillion, but the actual investment that we are trying to make will be JPY 1.3 trillion under the current plan.
Unidentified Analyst: I see. Thank you very much.
Operator: Thank you for the question. Moving on to the next question.
Unidentified Analyst: Thank you. Hello. I have three questions. First, the Page 16, does show what does the go to ratio? This time, the rate goes up from the level of the beginning of the year. And in two years, you have a quite a different number. Could you please talk about, the thinking behind those numbers? My second question is, on Page 19, as to dividends. Here it says, the lower limit, that is going to be maintained. Maintain a lower limit on dividends commensurate with enhanced downward resistance, meaning that, it remains intact, unchanged. For the cash allocation, according to your midterm plan, is likely to increase. So next year, in the year after next, what would you like to do? Payout ratio of 30% is fine, but the potential decrease in dividend, if the profit goes down, that's always in mind of investors. So could you please talk about, how you are going to think about the dividend, when you think about allocation of cash? Also, on the FX side, the impact and the benefit coming from it for each segment, how much impact is there for the first half and the data for the full year? Dry bulk and automotive probably are the two sectors having some impact. Am I right to understand that way? The first quarter and the second quarter not so much different in terms of the other profit.
Takaya Soga: Thank you for the question. Mr. Kono is going to answer your question.
Takuji Banno: Thank you for the question. About the shareholders' equity ratio, 67% or a little bit less than that is this time's forecast. So for FY '26, the yardstick number is shown here as 57%. So 50% to 60%, somewhere between that, that is the range of our target. But currently, it is improving, ratio is improving. And I think the intent of the question is that, if we are going to the right direction or not? For this fiscal year, there is some other one-off effects. For example, the cash. The other person said that, there is some refund coming from the investment side. For this fiscal year, investment cash flow, there is some proceeds from the sales that included are receiving more than the paying out, when it comes to investment cash flow. So for FY 2024, if so happens, the shareholders' equity ratio has improved. But for FY '25 and '26, our plan is that, we are going to make progress in investment. With that, in addition to 30% of payout ratio, very agile share buyback, in other words, additional return to shareholders is in our plan. So, 50% to 60% range will be -- the actual ratio will be somewhere between 50% to 60% of the range. Your second question about lower limit, JPY 100. Currently it stands at JPY 100. Any change or not? And the potential reduction in dividend less than JPY 100 or the JPY 260 is the forecast number for the year, whether it will go down below that level or not. I think that's the intent of your question. So JPY 260 dividend payout. In addition to that, this fiscal year, we are going to repurchase some shares. We are repurchasing some shares. So next year and onwards, profit plan might change from now on, because next year, we are going to finalize the plan. So we do not assume that, the lower limit will be less than a JPY 100. Not at all. So it will be a bit, meaningless to raise the lower limit now. Even if we change this JPY 100 limit, still, we will be able to maintain, the other level. So, in an absolute level, whether or not the dividend payout goes down or not, in our agile, the plan of shareholders return, would it be dividend payout or share buyback, as was pointed out earlier, we are going to look at shareholders' equity ratio to think about it. Your third question, impact from FX, the PL and data evaluation side could be different. I think the explanation will be a bit complicated there. Basically, FX impact, somewhere you will find the other JPY 10 difference in the impact. Page 12. If you look at Page 12, JPY 1 going down. 950,000,000 yen of increase in profit. So for each segment, basically it is denominated in the dollar and that would the numbers will change due to FX. And in the first half, the FX, the valuation side especially for dry, the accounts receivable, a quite big number in the dollar. Within this fiscal year, FX has moved significantly and so the valuation changed. For example, in the first quarter, as you can see here on this page, on average, JPY 153 or so. JPY 155 first quarter, JPY 152.77 in the second quarter. Toward the end of the year, as of the end of June, JPY 161.07. The accounts receivables on the balance sheet, what is counted in the dollar, we need to convert it to JPY 161.07 to the yen on the balance sheet. In the second quarter, temporarily, the yen, strengthened. And as of the end of September, it was JPY 142.73. In the second quarter, the sum of them will be realized, but the yen strengthened, the gap of JPY 161 and JPY 142 are giving impact in terms of the revision. There's there was an impact especially for dry bulk, because of the big account receivable, there was big impact. So I have answered three of your questions.
Unidentified Analyst: As to your second question, as to my second question rather, so as to additional return for the next year, you have such potential room. For example, whether it is JPY 260 or not for this fiscal year, you have the shareholders return framework. Is it possible that, you are going to exercise a share buyback even if it means that, you will reduce, the dividend payout or you would like to maintain the current, the payout amount?
Akira Kono: Thank you for the question. For the time being, one, you have a number of 30% of payout ratio. For the time being, we'd like to respect that number rather mechanically to some extent, 30% against our net income. We plan to continue that line. For example, JPY 260 for this fiscal year, and next fiscal year, net profit goes down slightly, JPY 240 yen, for example. But, still, we are not saying that we are going to stick to JPY 260 level. So the shareholders' return is exercised in a hybrid manner. The objective -- one of the objectives there is that, the number of shares in the market has now increased significantly, and we'd like to reduce the number of shares in the market. By doing so, the value per share held by shareholder will theoretically go up with a certain numerical targets, we -- one direction that we can take is to reduce the number of shares in the market. Of course, we need to revisit that issue, how long we are going to do that. But for the time being, we are going to take hybrid approach. For the dividend payout ratio, for the time being, we would like to keep 30% at least for this year and for the next fiscal year.
Unidentified Analyst: Thank you.
Takaya Soga: One additional comment for investment side, for the financial metrics. Page 16, as Kono said earlier, second from the left, grey column, investment cash flow. This is cash in portion, it's positive. So to some extent in the first half we planned some investment, but as I mentioned earlier, we sold very expensive vessels and associated with that, that we disinvested from the other related companies so that cash flow there is now shown positive on this page. For 2024 forecast on the right hand side compared to last year, compared to 2023, it's just a half of the number over '23. So that is the numerical picture. But in the first half, those positive numbers in the first half were quite big. So this is the result. FY 2024, the investment -- planned investment in vessels, quite a big number of vessels and projects, part of them are postponed to FY 2025. So that is another factor to reduce the overall number for 2024. So for next fiscal year, the postponed investments will be realized. So the investment cash flow, the other negative number will be much bigger, Distributing the debt, along with that, is probably increased, so shareholders' equity ratio naturally will go down. So in short, we will be on the track. In that sense, cash flow and others this year saw some unique situations. That was an additional comment. Thank you.
Operator: Thank you for your questions. We'd like to move on to the next question.
Unidentified Analyst: Thank you. Can you hear me?
Takaya Soga: Yes, we can.
Unidentified Analyst: I have two questions. Regarding the investment cash flow, what is your projection for next fiscal year? That's my first question. And regarding the question around cash allocation, the operating cash flow was revised up by JPY 200 billion this time. Looking at this closely, what are the breakdown? The operating profit is revised up by JPY 35 billion from the initial guidance and also from O&E, the dividend income, I think, was revised up because the projections were increased. In a simple calculation, I think that will be JPY 100 billion. On Page 16, when you talked about the financial KPIs, the financial cash flow is higher by JPY 100 billion, compared to the initial plan, but you have additional JPY 100 billion with JPY 200 billion. So what is the breakdown of that extra JPY 100 billion?
Takaya Soga: Yes. On the first question, I, Soga will respond. And the second question will be addressed by Mr. Kono, the CFO. Regarding investment cash flow, the projection for next fiscal year and onward, at this point, I cannot give you any concrete number. But as you have seen earlier, Page 16, for FY '23, we had roughly JPY 300 billion of investment cash flow and probably, that will be close to this, plus the ones that's postponed from FY '24. Also, I think that will give you some ballpark number. So for FY '25 and FY '26, I think that will be the level. Also, this is a ballpark number, but I think the amount will be quite sizable. That's my response to the first question. Moving on to your second question. For the number for this fiscal year, as you pointed out, you made the right guess. And on top of that, looking at last fiscal year, there were some incremental numbers. So adding them together, the forecast was or projection was revised up.
Unidentified Analyst: As of May 8th, so in JPY 1.1 trillion, this was not including, what was incremental from last fiscal year. Is that right?
Takaya Soga: Last time, we have some preliminary figures. When we announced the full year results for FY '23, we mentioned JPY 1.1 trillion, but we had JPY 1,1 trillion plus alpha, but we rounded up to JPY 1.1 trillion. This time, we mentioned JPY 1.3 trillion. In reality, it's slightly below JPY 1.3 trillion, but again, we rounded number and communicated JPY 1.3 trillion. So the JPY 100 billion plus alpha that you mentioned in your question, explain the revision.
Unidentified Analyst: I see. Thank you very much.
Operator: Thank you for the question. [Operator Instructions] Next question.
Unidentified Analyst: I have just one question. So the cash flow from investing, the incremental part for the cash flow, for this fiscal year, is it part of your strategy or next year and onwards there will be some similar incremental portion on the investment side so that, you can strengthen your cash creation capability.
Takaya Soga: Thank you for the question. As to cash flow from investing activities, some incremental portion, you could say that, it was intentional but to be honest with you the big portion of that incrimination was related to our investment in Russia and the sanction on the Russia, for example, energy vessels that we have been investing, that we withdrew from that business and we sold those vessels. That was the incremental portion, because LNG vessel we are talking about. It's very expensive. It's a big impact. The Ukraine-Russia issue since that issue emerged, some Russia related businesses, we have been discussing, how we should address them especially in the context of the sanction imposed by Western countries. That was part of our judgment to sell the vessel to withdraw from the business, and as a result on a net basis, it was represented as incremental portion. So you could say that, it is intentional on our side, but we are forced to do so. Earlier, we just gave some hints roughly for the future direction. The investment with the good expected return, which would allow us to return to shareholders and we would not hesitate to make such investment to expand business. And for that we are thinking about how to be prepared in terms of cash. Thank you.
Operator: Thank you for the question. We would like to move on to the next question. [Operator Instructions] Go ahead, please.
Unidentified Analyst: Yes, thank you for the presentation. I have one question on Page 16, regarding the progress of the Metro Management Plan. Personally, you were saying 6.5% or more for the target. But I think you have exceeded that target. Excluding the Liner Trade business, is it okay to understand that your ROIC progress is steady, or are you still working on? I know that in advancing your IT system, you still have work to do, but how would you assess the progress on the ROIC?
Takaya Soga: Yes. Thank you very much. Please give us a moment. Mr. Kono will take your question.
Akira Kono: Yes. Thank you for the question. Regarding ROIC, as you pointed out, the O&E portion in the first half of this fiscal year made profit contribution. It did contribute to uplift or the profit. Naturally, for each of the businesses, the timing for investment will be different. Also looking at the single year ROIC, there will be some fluctuation. But, at this point, for now, we are implementing the IT system and going forward, from next fiscal year beyond, we will have the IT system for real time monitoring. At this point, we are aggregating the data by each quarter or by each six month. At this point, we are on track. For the LNG business, the investment, if they concentrate, at one point, the balance sheet will be inflated and the investment will increase and ROIC may go below 6.5%, temporarily, but we are reflecting that in our projection. Overall, we are targeting 6.5%. We are on track and some upside that we enjoyed this year is having a positive implication for the ROIC.
Unidentified Analyst: Yes, I understand that, there will be some single year fluctuations. But, looking at the investment, it seems like the investment is also making good progress. Looking at the expected return from your investment, it seems like you're on track or there might be some upside is my understanding. Thank you very much.
Operator: Thank you for the question. Any other questions? [Operator Instructions] Seems that, there is no other questions. So a bit earlier than the schedule, but, we would like to complete Q&A session. Thank you very much. That concludes our financial results briefing for the Second Quarter FY 2024. Thank you very much for your participation. Thank you.
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