CEO Message

Renewed on November 7, 2013

For the six months ended September 30, 2013, we saw consolidated net sales record a year-on-year gain, supported by increased sea freight volume while air freight market has been still sluggish. Japanese yen's performance during the period also had certain effect. Meanwhile, operating income posted a year-on-year decline, affected by the declining air freight volume and lackluster business in East Asia and Southeast Asia. As a result, net sales increased 5.4% year on year to 134,121 million yen, operating income declined 7.5% year on year to 6,238 million yen, ordinary income decreased 7.6% year on year to 6,805 million yen and net income fell 15.9% year on year to 4,064 million yen.

During the first six months under review, the KWE Group achieved a 17% year-on-year gain in sea freight volume in line with its target. Major customer's transportation mode has been shifting from air to sea and those customers now prefer NVO carrier's service like ours. Under such circumstances, we succeeded in securely seizing the opportunity to tap such sea freight demand. Our new organization for sales introduced in Japan in April 2011 enabled us to actively generate business concerning priority items such as automobile- and retail-related goods as well as off-shore business (tripartite transportation). Moreover, although air freight volume remained stagnant during the six months resulting in the year-on-year decrease, increase in its sea freight volume allowed us to move a step closer to attaining a balanced business portfolio.

We have been adding its facilities in Southeast Asia, East Asia and Latin America for further growth in these markets. Particularly in Southeast Asia, we have been making investment at an accelerated pace as its logistics facilities in Thailand, Indonesia and Vietnam. In Singapore and Taiwan, large-sized warehouses are now under construction (scheduled to come into operation in January 2014 and March 2014). We seek to briskly increase our freight volume, with our high-quality logistics services, in these state-of-the-art facilities (temperature control, security). Meanwhile, our joint venture in India, established last year, has been expanding its business steadily. We aim for higher presence in the country.

In Latin America, two subsidiaries in Mexico and Brazil launched their operations in January and April 2013. Especially in Mexico, we saw rising level of freight service demand by automobile-and electronics-related customers. We have started to offer logistics service there as well as freight forwarding in October 2013. In the coming years, we intend to tap the transportation demand in these counties.

While the uncertain economic climate will likely persist in the second half of the fiscal year ending March 31, 2014, our forecasts for the year announced on May 9, 2013 remain intact with net sales forecast at 270,000 million yen (an increase of 8.9% year on year), operating income at 14,500 million yen (an increase of 9.1% year on year), ordinary income at 14,500 million yen (an increase of 2.0% year on year) and net income at 9,200 million yen (a decline of 0.7% year on year).

We keep going forward as a team to implement the business initiatives set out in the Medium-Term Management Plan in our efforts to achieve the targets as well as enhanced competitiveness in the global market.

November 2013
Satoshi Ishizaki, President and Chief Executive Officer

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