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Management Message

I would like to take this opportunity to thank all NYK Line shareholders and investors for their enduring support. Yasumi Kudo, President

On behalf of the NYK Group, I would like to express my sincerest gratitude to all of the Company's shareholders and investors for their understanding and support. I am pleased to have this opportunity to report on NYK Line's consolidated financial results for the nine-month period of the fiscal year ending March 31, 2017.
During the nine-month period under review, the performance of the NYK Line Group deteriorated overall compared with the same period of the previous fiscal year. NYK Line posted consolidated revenues of ¥1,414.5 billion, a decrease of ¥352.1 billion, along with an operating loss of ¥15.5 billion, a decline of ¥62.6 billion, and recurring profit of ¥2.2 billion, down ¥53.7 billion year on year. Meanwhile, profit attributable to owners of the parent fell ¥248.9 billion to a loss of ¥226.0 billion.

Taking that into account, our forecast of consolidated financial results for the full fiscal year is as follows: revenues of ¥1,905.0 billion, an operating loss of ¥17.5 billion, recurring profit of ¥0.0 billion, and a loss attributable to owners of the parent of ¥245.0 billion. The shipping market is showing signs of recovery and we will strive to return to profitability. Based on this forecast, I regret to say that we do not plan to pay a year-end dividend. We made this decision after giving full consideration to the need to maintain a sufficient amount of internal reserves for dealing with market changes and the prolonged slump in the maritime shipping market. Looking ahead, the Company as a whole is aiming to resume the payment of dividends as quickly as possible.

Looking back at the operating environment during the third quarter of the current fiscal year, in the container shipping segment, although the influx of newly built vessels is putting downward pressure on the freight rates, we saw a rebound of spot freight rates in the container shipping market as customers became more selective about shipping lines following the bankruptcy of the Korean Shipping company around the end of August last year. In the dry bulk shipping market, which has been undergoing an unprecedented slump, market conditions appeared to improve from the beginning of autumn, largely owing to increased volume of coal and iron ore imports to China. Nevertheless, we believe that a full-fledged market recovery will still take some time.

To take a drastic measure, as we announced at the end of last October we decided to integrate NYK Line's mainstay container shipping business and international terminal business with those of two other Japanese shipping companies. Preparations are underway to establish a new joint-venture company in July of this year, and commence operations from April next year. We are organizing the new company with the goal of securing stable earnings as quickly as possible by combining the shipping fleets of the three parent companies to leverage the benefits of economy of scale, and by generating synergies derived from the best practices of each of the three companies.

Looking ahead, we remain committed to the basic strategies of our medium-term management plan, More than Shipping 2018—Stage 2: Leveraged by Creative Solutions, and will work to ensure steady growth in profits and to improve earnings capacity so that the NYK Group can better deal with changing market conditions. Through our in-house initiative, Beat the Crisis, we also intend to enhance the resilience of the Group. At the same time, we will explore forward-looking strategies and build on creative solutions to stay a half step ahead of the industry.

In the recent past, the activities of NYK Line's automobile maritime shipping operations were found to be in violation of Japan's Antimonopoly Act. On behalf of the Company's management, I would like to take this opportunity to sincerely apologize once again to shareholders and investors for raising concerns and unease regarding this issue. In response to this violation, we have continued to make all-out efforts to prevent a recurrence and ensure full legal compliance so that NYK Line's businesses operate according to fair market principles.

As we undertake these endeavors, we sincerely hope for the ongoing support and understanding of the Company's shareholders and investors going forward.

Financial Results Overview

Please see the below chart and graph for our year to date third quarter results ending December 31, 2016.

(Billion yen)
 
FY 2015 3Q
FY 2016 3Q
Change
Revenues
1,766.6
1,414.5
-352.1
Operating Income
47.1
-15.5
-62.6
Recurring Profit
56.0
2.2
-53.7
Net Income
22.8
-226.0
-248.9
Average Exchange Rate
¥121.58/US$
¥106.92/US$
¥14.66/Yen Up
Average Bunker Oil Price
US$327.80/MT
US$234.02/MT
US$93.78 Down

(Note)Figures are rounded down to the nearest 100 million yen.

Revenue

Revenue

Recurring Profit

Recurring Profit

Earnings Forecast for the Fiscal Year 2016

NYK Line's forecast of full-year consolidated financial results is as follows: revenues of ¥1,905.0 billion, an operating loss of ¥17.5 billion, a recurring profit of ¥0.0 billion, and a loss attributable to owners of the parent of ¥245.0 billion.
Container shipping and dry bulk market showed signs of recovery in the third quarter, and the one-off profit in the real estate department and weaker yen helped in the more-than-expected recovery of the company.
We foresee the recovery in the container shipping department to continue in the fourth quarter. The slump in automobile shipping demand to resource-rich countries is expected to continue for some time. Dry bulk department is recovering from historic lows. In the liquid department oil-products and LPG shipping market may take some time to recover, but LNG and off-shore businesses with long-term contracts are expected to continue to produce stable profits.
In view of the above, the Company has upwardly revised its forecast of full-year consolidated financial results, as follows.

(Billion yen)
 
Previous Forecast
October 31, 2016
Latest Forecast
January 31, 2017
Change
Fiscal Year
ending
March 31,
2017
Revenues
1,865.0
1,905.0
40.0
Operating Income
-25.5
-17.5
8.0
Recurring Profit
-26.0
0.0
26.0
Net Income attributable
to owners
of the parent company
-245.0
-245.0
0.0
Average Exchange Rate
¥103.66/US$
¥107.69/US$
¥4.03/US$
Average Bunker Oil Price
US$262.83/MT
US$255.51/MT
US$-7.32/MT

(Note)Figures are rounded down to the nearest 100 million yen.

Dividends for the Fiscal Year ending March 31, 2017

During the current fiscal year, NYK Line is expected to post a substantial loss mainly as a result of recording an impairment loss. Furthermore, management believes that more time will be needed for the maritime shipping market to make a full recovery. In view of these factors, management has decided not to pay a fiscal year-end dividend. This decision was made after giving full consideration to the need to maintain a sufficient amount of internal reserves for dealing with changes in the market and the prolonged market slump. The entire Company is working to resume the payment of dividends as quickly as possible in the future.

January 31, 2017
Tadaaki Naito
President
Tadaaki Naito President