MOL Plans ¥30 Billion in Cost Cuts

President Koichi Muto said MOL is making bold changes

Mitsui O.S.K. Lines [TYO:9104] (MOL) plans to cut its costs by more than ¥30 billion ($321 million) while also taking advantage of a weakening yen and growth in the U.S. economy, President Koichi Muto said in a statement marking the company's 129th anniversary.

Muto said the Japanese company has already made substantial savings through methods including slow steaming.

"Cost cutting is a task that we can achieve through our own efforts, regardless of the external environment," he said.

"In fiscal 2013, besides continuing the cost-cutting efforts we have implemented so far, we will reduce costs on an entirely different stage than before.

"We will fundamentally overhaul and reform operations that we have taken for granted until now."

Muto said that, despite an expected decline in vessel deliveries starting in 2014, the glut of capacity in the market will continue through the end of fiscal 2013, a condition that will combine with "persistently high bunker prices" to make things difficult for the industry.

The company has already made "bold business reforms," including moving its dry bulkers to Singapore, restoring competitiveness in that sector, Muto said.

MOL now intends to expand business from the Singapore hub, targeting emerging markets, while also improving service quality for Japanese customers.

"To ensure profitability in the current fiscal year, we must reduce our exposure to market risk in order to mitigate the risk of a downturn in earnings should market conditions deteriorate," Muto said.

"While the desirable way to do this is to win cargo shipping contracts, we will use all options at our disposal to reduce free tonnages to an optimal size, including sales and redelivery of vessels."

The company may also withdraw from unprofitable businesses and dispose of some assets while growing its LNG carrier, offshore business, and containership divisions, he said.

In January, Muto said the company is facing a second fiscal year of major losses, driven partly by free tonnages.