Tsuneishi Group Business Policies for 2013

May 8, 2013


[Business reports]

For Tsuneishi Holdings Corporation, the downturn in supply-demand balance of ships and market trends in shipping after the Lehman Shock, the appreciating yen, and high crude oil prices have caused their core business of shipbuilding and their shipping division to experience a difficult business environment, but in the year ending December 2012, they had achieved sales amounts similar to that of the previous year.

The consolidated net sales (25 corporations including Tsuneishi Holdings) of Tsuneishi Holdings Corporation for the year ending December 2012 (Jan. 1, 2012 – Dec. 31, 2012) was 323.4 billion yen, an increase of 22.5 billion yen over the previous year (7.4% increase over previous year). By segment, the sWWhipbuilding business recorded 252.3 billion yen (7.3% increase over previous year), shipping business 64.8 billion yen (2.2% increase over previous year), and the environment and energy business and the service business combined for 46.7 billion yen (6.3% decrease over previous year).

At Tsuneishi Group, an endeavor is being made to develop the third pillar that would follow shipbuilding and shipping. For the year 2013, the environment and energy business is aiming for 100% recycling of wastes, and by reinforcing businesses such as group lodging in the service business, a business base for group management will be developed. Due to expected decreases in sales of shipbuilding and shipping operations, consolidated net sales for the group in the 2013 year is anticipated to be 260.1 billion yen, a decrease of 19.5% from the previous year.

1. Shipbuilding Business Division

(1) Looking Back on 2012

Amid the continuing supply-demand gap of new shipbuilding caused by a worldwide surplus of ships, 62 ships were built in 4 plants domestic and overseas during 2012. On the other hand, harsh conditions continued for orders received of new ships.

(2) 2013 Business Policies

Business policies include (1) development of energy saving technology and differentiation of products through higher quality, (2) shortening of lead time before delivering ships, and (3) seeking a competitive advantage in costs. The International Maritime Organization's greenhouse gas emission regulations were put in place for contract vessels after January 1st, 2013, heightening the interest in energy saving technology that affects management by shipowners. At Tsuneishi Shipbuilding, concentration is focused on energy saving measures in anticipation of regulations, and in order to achieve in 2020 a CO₂ reduction of 40% from 1990, technical reinforcements such as development of energy saving devices will take place.

For the production phase, shortening of lead time and cost competitiveness will be reinforced by ensuring cooperation with the 2 overseas plant bases (Philippines and China). In 2013, the number of ships (completion basis) to be built in the 4 domestic plants combined is expected to decrease from 2012's 62 to 52.

2. Shipping Business Division

(1) Looking Back on 2012

Although maritime cargo movement was increasing, it was exceeded by the oversupply of completed ships that were ordered during prosperous times, and therefore the market for bulk cargo vessels in 2012 was sluggish. In 2012, the ships in possession numbered 28, but contracting of these ships faced difficult situations. With the goal of expanding operation of non-scheduled ships, a local subsidiary was established in March 2012 in Singapore, where shipping businesses gather, to improve sales.

Deceleration of China's economic growth and the effects of the appreciating yen, as well as the decrease in transaction volume on the Japan Sea side which was used as alternate ports due to the restoration of ports on the Tohoku Pacific coast affected by the Great East Japan Earthquake, resulted in container operations connecting the local ports of Japan and China to have a combined export and import transaction volume of roughly 10% below the previous year.

(2) 2013 Business Policies

Movements for adjusting the appreciating yen were slowly seen towards the end of 2012, showing signs of recovery for the business environment. On the other hand, excess cargo space is predicted to continue, and improvement of the shipping market is difficult to expect; therefore, the management environment surrounding the shipping business is thought to be harsh for the foreseeable future. For that reason, competitiveness will be reinforced by strengthening cooperation with those inside and outside of the group, as well as by improving service.

2 container ships of 1020TEU will be completed in May 2013. Although 8 container ships between 550TEU and 920TEU were previously used, focus will continue to be put on acquisition of cargo for the shipping routes connecting Japan's local ports and China's main cities (Tianjin, Dalian, Qingdao, Shanghai, Ningbo, and others). In addition, by cooperating with Kambara Logistics Inc. to increase the ports that can handle shipping, target regions will be expanded to increase the transaction volume of cargo.

3. Environment and Energy Business Division

(1) Looking Back on 2012

Tsuneishi Kamtecs Corporation acquired Saitama Yamazen Co., Ltd.. in 2011, and in 2012 acquired soil pollution researching Earth Create Co., Ltd. to advance efforts to improve and strengthen the value chain of the waste recycling business.

(2) 2013 Business Policies

At Tsuneishi Kamtecs Corporation, due to the increasing interest in environmental issues and the effective utilization of materials, such as the 3 R's (Reduce, Reuse, Recycle) activities, perfect recycle type industrial waste disposal operations have been moving forward. Tire recycling operations are scheduled to begin at the Fukuyama plant. Beginning with the sales of tire chips that are to be alternative fuel for heavy oil, waste tires will be thermally recycled (utilized as energy source) and utilized as alternative fuel at a captive factory. Waste tires are planned to be collected at automobile recycle plants and service stations for refueling, that are operated by Tsuneishi C Values Corporation.

Additionally, a resident employee office was opened in Vietnam in July 2012, and expansion into Thailand is planned for this year.

4. Service Business Division

(1) Looking Back on 2012

In order to enrich the third generation theme park Miroku-no-Sato, the Shinshoji Temple hot springs were relocated to inside the park, and the “Tsuneishi Shimanami Village” plan that includes the artificial turf soccer field that is currently being constructed to advance efforts to increase the revenue base. In order to improve sales in the major client base Kansai region, a Kansai business office was opened.

(2) 2013 Business Policies

Tsuneishi Human Services Inc. is reinforcing sales to prepare for a full-capacity operation in July 2013 of the lodging facility “Tsuneishi Shimanami Village,” which includes lodges currently being constructed, as well as the artificial turf soccer field “Tsuneishi Field” approved by the Football Association of Japan and the “Tsuneishi Arena” gymnasium.

Tsuneishi Shimanami Village takes advantage of a lodging facility with capacity for up to 962 persons and a well-developed sports facility as its neighbor to attract people with hands-on training and camps such as cycling and cutter boat as formerly, and also with various sports events including soccer tournaments.