Happy New Year!

 

I hope you all enjoyed the New Year break. Although we are not completely out of the pandemic, I believe most were at least able to spend the New Year's holidays in your location of choice with fewer travel restrictions than recent years. I am very happy to welcome in the New Year with all of you, revitalized and full of energy.Last year was a challenging year with a rapidly changing environment, but even so, our company still expects to achieve record profits of over 1 trillion yen for FY2022. Once again, I would like to express my sincere gratitude for your efforts in steadily and diligently executing day to day tasks in your respective areas.I look forward to continuing to work vibrantly and vigorously with all of you, toward the goals set out in the Midterm Corporate Strategy 2024.As we enter the New Year, I am deeply motivated to build on last year and work together to meet even greater challenges of the year ahead and to achieve further growth.And as we get back to work, I would like to take this opportunity to share my views on the ① Outlook for the World and Japan in 2023 and ②Important Themes to Tackle in 2023.Last year can be accurately defined as "Turbulent 2022.”I am sure you have all been reminded that unforeseen changes in the business environment can occur with unexpected impact. As we look ahead to 2023, I would like to mention two important consider①ations: geopolitical risk and decarbonization.

 

①Outlook for the World and Japan in 2023

Geopolitical Risk:

The Russian invasion of Ukraine in February last year: The global supply chain, which was expected to recover following the exit from the corona pandemic, was further exposed by the Russia-Ukraine conflict.And amidst historically high inflation, the U.S. and Europe turned rapidly to monetary tightening and we experienced unprecedented exchange rate rises.The future of the Russia-Ukraine conflict remains unclear, and it seems that China is moving further toward prioritizing domestic governance over economic growth. We have to assume that growth will remain low for the time being due to the lagging negative impact of their zero-corona policy.We must also recognize that geopolitical uncertainties in general will continue and ask ourselves if there are any choke points in our supply chains, food and energy and others, that are vulnerable to such shocks. This highlights the necessity to calmly evaluate the situation from a variety of perspectives.Our assumptions concerning the external environment have remained within the range of our expectations since the formulation of the midterm corporate strategy announced last May. However, since the environment remains highly uncertain, it is important to be prepared and to stay half a step or one step ahead of developments.

 

Decarbonatization & Carbon Neutral:

With the implementation of the Inflation-Reduction Act in the U.S., we believe there will be an acceleration in decarbonization-related projects and technological innovations.In Europe, the current difficult situation may result in a slowdown in the short-term.However, it is certain that their green transition will also continue to accelerate based on a clear agenda to achieve both decarbonize and reduce dependency on Russia. We already knew that the worldwide trend toward low/zero carbon across all industries was irreversible, but I believe that the Russia-Ukraine conflict has only reinforced this trend and this will definitely present us with huge opportunities.On the other hand, in Japan, for the past 30 years, although Japanese companies have been returning profits generated overseas to Japan, they have been unable to successfully channel those profits back into domestic capital investment for growth, leading to a prolonged economic stagnation.This, combined with the recent depreciation of the yen and rising resource prices, has widened the trade deficit, and further reduced the growth potential of the Japanese economy. We are acutely aware that the Japanese economy is at a critical juncture.

Based on this recognition, in our Midterm Corporate Strategy 2024, we have set forth the Creation of the Future through Integrated Promotion of EX/DX as a challenge to rebuild a Strong Japan and to create new industries through EX/DX. I would like to make 2023 a year of growth for our company by realizing our three agendas of building a carbon neutral society, ensuring a reliable & stable energy supply, and maintaining and improving industry competitiveness, thereby making a tangible contribution to the recovery of the Japanese economy.

 

② Important Themes to Tackle in 2023

1.The continued implementation of the value-added cyclical growth model.We must ensure that each of our business operations, whether in Japan or overseas, is constantly working to review and eliminate unnecessary & ineffective tasks and respond to changes in the business environment. I would like to see us make a renewed effort to strengthen our portfolio by the improvement of existing businesses competitiveness and the steady execution of sustained investments.

Moreover, in this era of rapid change, we must be prepared to proactively replace investments whose business models are likely to become obsolete or have no further growth potential, and to execute such decisions quickly.

In parallel with the replacement of businesses, it is important to fully use our business creation ability to identify and steadily implement growth strategies that will become future earnings pillars.

I would like to reiterate once again that the value-added cyclical growth model will continue to be implemented in combination with investment in growth projects.

Last year, I had the opportunity to speak directly with various stakeholders, including shareholders, investors, and the media, and they left me with a firm impression of the strong market expectations placed in our company.

By strengthening our portfolio, we would like to increase the real ability of the company and become a company that can maintain our current 1 trillion yen earnings level. In addition, I would like you to be more alerted to technological innovations and structural changes of industries in your search for growth opportunities.

Increasing intelligence in technological innovation and the potential for industry transformation through further advancements in digital technology is an extremely important approach in considering new business strategies for the future.

Technological innovations and structural changes in industry will occur sporadically and at a faster pace than expected in various industries and fields, including changes in the automotive industry structure due to the adoption of EVs, the energy service sector as it incorporates renewable energy, and the logistics, medical, and financial sectors as they apply digital technology.

It is necessary to leverage our intelligence in response to these developments, to conceptualize business, and to make constant efforts to link these concepts to the realization of actual business.

I would like you to keep your antennae on the lookout for changes in the external environment, including technological innovation, and connect across organizational boundaries to co-create new business models for further growth of our company in every direction.

When I became CEO, I emphasized the importance of employees working together as one  connections. In order to create new business models in this rapidly changing business environment, it is essential for everyone to actively connect with one another and engage in lively communication. Whether in Japan or overseas, I intend to shape our regional offices to become an organizer that connects our group companies and actively creates shared values. To that end, I ask everyone to be mindful of staying connected across the company.

 

2. EX;

This is one of the growth strategies within the Midterm Corporate Strategy 2024, and through discussions among related business groups led by the EX Task Force, a short list of priorities for action over the next three years has been broadly developed from a long list of about 200 items.Of course, management will be constantly reviewing this strategy, while considering policy trends in each region, but this year is finally the time to put our strategy into action.As you will have seen in the news, the energy sector has been exposed to various distortions around the world as a result of the recent surge in resource prices.In light of our company's past achievements and contributions to the natural resources and energy sectors, I would ask you to undertake EX-initiatives with a sense of mission and pride, cognizant of the fact that it is crucial for the Japanese economy, where energy self-sufficiency is extremely low, to regain its strength.

 

3. The adoption of DX to revitalize local communities in Japan

With the expansion of digital touch points through smartphones and apps, the importance of integration between the digital and real world is increasing day by day. Digital companies are accelerating their penetrations into real businesses, and real-world companies are doing the same into digital businesses.We will leverage our strong BtoB network, to access customer bases while accompanying real-world companies and municipalities in their DX initiatives.Through frequent contact with customers and deep data analysis, we will develop and offer multiple attractive services in an agile manner, through a trial-and-error approach. By doing so, we will provide a highly satisfying customer experience.With our real businesses combined with the ability to drive DX, we are committed to seriously solving issues of society by improving convenience for residents and realizing regional revitalization.

 

Finally, I would like to take this opportunity to reiterate the importance of compliance.Last year, when we announced Midterm Corporate Strategy 2024, my message was Back to Basics.Needless to say, our company foundation is our corporate philosophy, the Three Corporate Principles. They are the cornerstone that connects the entire MC Group even in an era of rapid change and increasing diversity both within and outside the company.Among these, Integrity and Fairness (Shoji Komei), with an emphasis on compliance, is essential to enhance our corporate value. Being a corporate group that is trusted and respected by our various stakeholders, including partners and customers, enables us to create new connections, which in turn leads to the next business opportunity and attraction of human resources.

To this end, it is essential that all of us, including all group companies, reaffirm the importance of compliance and conduct our business activities with the spirit of Shoji Komei. Therefore, I would like to ask you, in this New Year’s greetings, to keep this in mind once again.This year's Chinese zodiac sign is the year of the Water Rabbit. It is said that this will be a year in which past efforts will bear fruit and we will grow vigorously and make great strides forward.In these turbulent times, when the world is changing at a dizzying pace, we should be able to take full advantage of our collective capabilities equipped through a variety of businesses in this spirit.Last year, to directly communicate our management policy to as many employees as possible, I held town hall meetings in Tokyo, Midterm Corporate Strategy briefings around the world, and various other events.This year, I will continue to build on these connections with employees. I am confident that we will be able to make this a year of great progress by bringing together the power and wisdom of the MC Group's diverse and multi-talented human resources.And since we are setting out to achieve these goals, I would like us to make this a year with results.Let us all work together to achieve these results in the year ahead.