Happy New Year to all of you!
At the beginning of the year, I would like to extend my best wishes for the New Year and express my hopes for 2024.

Let's start with last year. Profitability was worse than expected due to cost pressures, mainly driven by a sharp increase in steel prices. On the other hand, while enquiries for container ships, which had been strong until the year before last, suddenly slowed down, the demand for newbuildings of bulk carriers, chemical tankers and LPG carriers recovered rapidly thanks to speculation about the future and replacement demand driven by the weak yen, resulting in a generally favorable year for the newbuilding market.

Under these circumstances, our newbuilding division successfully completed five 1,096 TEU container ships in a row as a result of diligent efforts to improve efficiency in each department. In addition, last year we were able to hold a launching ceremony for an electric-propelled whaling mothership, with many guests including Mr. Hayashi, the Chief Cabinet Secretary, and Mr. Maeda, the Mayor of Shimonoseki.

On the order front, we received new orders for a total of seven vessels. In addition to the four ocean-going vessels, two units of 1,096 TEU container ships and also two units of LPG carriers which have long been popular with customers, we received orders for three domestic/coastal vessels, including a RO/RO vessel equipped with an innovative cargo handling system that reduces the workload of stevedores and a container ship for an autonomous vessel project that will reduce the workload of seafarers.

A new challenge for Kyokuyo is the construction of an advanced coastal vessel that will help solve the chronic shortage of seafarers in the coastal shipping industry, which is suffering from the retirement of baby boomers and the difficulty of recruiting younger workers to fill this shortage.

Our other mainstay, the repair ship business, continues to perform well, thanks to the patronage of many companies and a stable volume of construction work.

Next, I would like to discuss our challenges and aspirations for this year. The first is the delivery of an advanced electric propulsion vessel for a sustainable society. All related departments are working diligently on this extremely challenging ship, which has never been built before, with advanced factory facilities and reefer container handling equipment, for example.

The second is to promote the development of a new standard design for container carriers. Given the physical limitations of dock construction, the biggest challenge for our design team is to develop a type of ship that can carry as many containers as possible, and we are excited to see the results of several years of research come to fruition and to add a brand new feeder container ship to our menu.

The third is to strengthen purchasing power, a perennial challenge for manufacturers. Faced with rising prices for materials and equipment, especially steel materials, which account for the majority of manufacturing costs, we have hired a purchasing professional from other industries to curb cost increases as much as possible. We intend to maintain and improve our stable and even stronger purchasing power from a new perspective.

Finally, the fourth issue is securing human resources. For a shipbuilder, which is a labor-intensive industry, the biggest challenge is to secure the labor force to maintain production volume. However, with the decline in the number of young workers, combined with social restrictions on working conditions, it is becoming increasingly difficult to maintain the existing production volume year after year. Although there is no silver bullet, we will do our utmost to attract young local talent by continuously improving the attractiveness of the company as a whole.

We would like to share with you some information about our Group companies.

Straits Investment Inc. made a profit from the sale of its first time charter vessel business and purchased a new type of vessel to secure a source of income. It also invested in two overseas affiliates engaged in the bareboat chartering business with newly built vessels, thereby establishing a structure for future capital gains. Straits Capital Inc. is in the process of rapidly increasing its own enterprise value as the companies in which it provides management guidance have performed better than originally planned.

In conclusion, I would like to express my sincere gratitude to the shipowners who have placed orders with us, the trading companies and brokers who have mediated our business negotiations, and all related companies for their kindness and efforts that have enabled Kyokuyo Shipbuilding to continue to operate so soundly. I would like to take this opportunity to express my sincere gratitude to all of you.
And may the New Year be a wonderful year of health and success for all of you!

We look forward to working with you again in the New Year.

Katsuhiko Ochi
President
Kyokuyo Shipyard Corporation