2021 New Year's Message from the President (Summary)

Ryoichi Oka, President & CEO and Representative Director of Mitsui E&S Holdings Co., Ltd., has delivered his New Year's message to all personnel, including those of Group companies. It is summarized below.

Happy New Year to you all.
Last year, we saw dramatic changes in our lifestyle, workstyle and concept of work due to the COVID-19 pandemic. Our Group had another difficult year. I extend my heartfelt gratitude to you for your outstanding work amid these conditions, day and night, at your workplaces and in remote locations. This year is the mid-point of the Mid-Term Business Plan 2020 announced last year. It will be an important year when we must accelerate our efforts to achieve the plan. At the very beginning of the year, I would like to discuss three points.

Current business challenges and efforts to overcome them

In light of our current business conditions, I strongly request that you reaffirm a sense of crisis. Last year, we steadily advanced an alliance strategy toward business structural reform, in addition to selling assets and taking personnel measures. We achieved some success from these initiatives and survived the state of emergency.
However, we face difficulties in terms of financial aspects, which were damaged by the large deficit posted for two consecutive years. In addition, there is concern that even profitable business divisions could face worse business conditions due to the COVID-19 pandemic.
In order to overcome this crisis and lay out the path to future development, it is essential to accomplish the business revival plan quickly, improve our financial standing, increase our financial strength, and reform our business structure to become a company that can continue to produce profit. Currently, blue-chip companies worldwide are desperately taking bold measures.
While facing even more difficult conditions than those companies, we are still too optimistic. Act with a strong sense of crisis.

About the Mid-Term Business Plan 2020

Our mainstay business model was based on a one-time fee, in which we receive an order for each project whenever it arises and manufacture and sell a product or conduct EPC. This enables the production of a large profit depending on the market conditions. However, it also has negative aspects. For example, the number of orders received fluctuates greatly, and we suffer a lack of jobs when the market conditions are bad, resulting in excessive competition where profitability is ignored.
On the other hand, the subscription business model, in which profit is produced over the long term by providing services to customers continually, allows us to expect stable earnings although the amount of fees per project is small.
In addition, I anticipate the arrival of the era of power mechatronics, or power machinery embedded with electronic control components and digital modules, as a major future trend. All products and services will be digitalized and linked virtually, enabling services to be provided over the lifecycle of products using IoT and AI. Our Group already has the infrastructure for a subscription business model targeting power mechatronics, including a system for monitoring the condition of marine diesel engines. Take advantage of the infrastructure to provide new value that transcends the category of after-sales services and expands our businesses. Under the Mid-Term Business Plan 2020, we aim to pursue a shift to the subscription business model in addition to the one-time-fee business model.

Market creation through alliances is another goal under the Mid-Term Business Plan 2020. For example, in the merchant ship business, we will focus on fabless business, in which we take advantage of our design and development capacity, to avoid being lost in the waves of market conditions.

Safety and health, compliance, and information security

First, I will discuss safety and health. In May, there was a fatal accident at the Oita Factory of Mitsui E&S Machinery Co., Ltd., resulting in the loss of valuable life. Thinking about the victim and their family, I feel great remorse. I request that supervisors and all employees working on the frontline to work on safe management and ensure safe work with a renewed determination to prevent this accident from happening again. In the head office area, working from home has been established as a countermeasure against the spread of COVID-19. Because this is likely to weaken engagement with other people, the mental health of employees is becoming more important. Take creative measures to improve communication between superiors and subordinates and between co-workers despite the COVID-19 pandemic.
It goes without saying that compliance is essential for corporate behavior and indispensable for earning the trust of society and surviving. Continue asking yourselves if your behavior is right, instead of behaving as you have always done.
Regarding information security, we are exposed to the threat of cyberattacks daily. In addition, you have more opportunities to handle important information outside office, such as while teleworking. Information security is not completely ensured by having a system but requires appropriate actions from everyone. Therefore, please remain alert and vigilant every day.

In conclusion

While the environment will remain difficult for a while due to the COVID-19 pandemic, we must take this crisis as an opportunity, accomplish the business revival plan, and advance the strategy in the Mid-Term Business Plan 2020. When we work hard and overcome this situation, we will see the future of our Group that was envisioned in the Mid-Term Business Plan 2020, blooming into a big flower.
Let's try hard together this year while remembering safety and remaining careful about health.