Message from President and CEO Asada at the start of 2013

Jan. 15. 2013
Marubeni Corporation

The following is a message from President and CEO Teruo Asada delivered at 09:00 am on January 4, 2013, at the Tokyo Headquarters.



Congratulations on the start of the New Year. I would like to make a few remarks to all members of Marubeni Group around the world as we start 2013.

1. Economic outlook for 2013
We expect the global economy to be slightly stronger compared to last year, but the recovery will remain a slow and gradual one. In the U.S. the housing market and automobile sales are showing signs of improving, and consumers’ balance sheets continue to improve. Furthermore, after getting past the “fiscal cliff” the U.S. may be a driver for world economic growth in 2013. Looking to China, the slowdown in exports seems to have stabilized and turned around after bottoming out in the autumn of 2012, and the Chinese economy should keep improving going forward. However, it is unlikely that China can achieve the kind of double-digit economic growth rates that drove the world economy directly after the Lehman Brothers bankruptcy.

In Japan the Liberal Democratic Party returned to power in the recent Lower House election after campaigning on its commitment to revive the economy. The stock market has risen and the value of the yen has fallen in recent days as the market prices in its expectations for the new government. At the same time, the Japanese economy requires a real growth strategy in order to achieve a lasting revival, and participation in the TPP trade arrangement as well as a stable supply of electricity are absolutely necessary to achieve this. The new government must successfully execute in these areas in order to turn expectations into real results.

2. SG-12
Next, I will speak about our progress toward achieving the goals of our current mid-term management plan SG-12.

(1) Revenue
SG-12 began in fiscal year 2010, following the Lehman Brothers bankruptcy in 2008 and the resulting worldwide drop in demand for goods and services in 2009. Although Marubeni shifted to a more defensive footing in 2009 and made improving the company’s financial standing the most important objective, by 2010 and the start of SG-12 we once again returned to a more aggressive position. For FY 2010 we achieved a consolidated net profit of 136.5 billion yen, and for FY 2011 we grew even further to a consolidated net profit of 172.1 billion yen, a record amount for a single year surpassing the previous record of 147.2 billion yen from FY 2007. For FY 2012, so far we are on course to achieve our goal of 200 billion yen, the final goal under SG-12.

By achieving 200 billion yen in consolidated net profit for the first time and also keeping a net debt to equity ratio of around 1.8 times we will achieve all of the quantitative targets for SG-12 and establish the foundation for our next leap forward. Over the next three months all must continue to make their fullest efforts toward achieving our goals.

(2) New Investments
In SG-12 we originally planned to invest 750 billion yen over three years. However, as our consolidated net profit exceeded our initial expectations we made upward revisions to our investment plan, and including the Gavilon acquisition, we now expect that the total for new investments in SG-12 to reach almost 1 trillion yen.

Looking at this 1 trillion yen in more detail, we see that around 25% is invested in natural resource fields, 20% in infrastructure, 35% in lifestyle, and 20% in environmental and other fields. These figures show that our investments have resulted in a very well-balanced portfolio. The good balance between resources and non-resources businesses is a characteristic of our company, and through SG-12 we have set the stage for even further growth.

As we begin a new management plan from the next year, I expect that further expansion in the scale of our businesses and growth in productive assets will be the keys to achieving the further growth of Marubeni.

3. Points to keep in mind
I want us all to keep the following points in mind throughout 2013.

(1) Promoting growth in each business field
Marubeni handles a vast range of products and serves a vast range of customers. Continuing on a set path is never sufficient; we must always be looking for new ways to grow our businesses by correctly appraising our current state, the market situation around us now and in the future, and then the way that we can act to add the most value to our partners and customers.

In order for Marubeni to take the next step forward we must create as many industry-leading business models as possible. In order to do so, we must continue to strengthen our trading functions. By becoming stronger traders we will become more knowledgeable of our customers and products, as well as the markets overall. With this strong trading base, we can then complete the overall growth strategy with investments in the fields that we know well.

We are now in intense discussions regarding the growth strategies for each of our businesses in the next management plan, but even now there are many things to be done in preparation for the next steps. Please continue to prepare, so that all will be ready to execute with speed when the time comes to move into action.

(2) Never forget the lessons of “A”Plan
Marubeni announced its “A” Plan in 2001. This plan was a restructuring plan on a scale never before seen by our company. Over the ten years that followed all of Marubeni Group came together to work to realize a stronger Marubeni. The results are well-known to us all – a dramatic improvement in the financial standing and revenue strength of our company. Nonetheless, we must all continue to keep in mind the lessons of “A” Plan and stay humble, avoiding the temptation to become loose in the operation and management of our company.

One example is the careful management of costs to improve our revenue generating ability. Another is the management of our productive assets so that no item however small is overlooked and all possible improvements can be made as soon as possible. These steps are of course necessary at such a time as “A” Plan in order to avoid a crisis, but they are also important to keep in mind even now as we look to continue to achieve sustainable growth.

(3) Compliance
Legal compliance is the absolute prerequisite for all of our business. This idea is found in Marubeni’s company creed of “Fairness, Innovation and Harmony”. All members of Marubeni Group must always act in a fair and correct manner in their work. Please take this opportunity at the start of the year to once again remember the importance of the spirit of our company creed.

4. Conclusion
2013 has now begun. There are only a few months left for SG-12. I want us all to put forth our best efforts to the very end, and after achieving our goal of consolidated net profit of 200 billion yen I want to share the joy with everyone. Another of the goals of SG-12 is to achieve a “strong Marubeni”, and we have made sure progress toward that goal.

By achieving all of our goals for SG-12 we are also setting the stage for Marubeni’s next challenge. In recent year the strong growth in earnings for the trading companies has been driven by natural resources related businesses. But going forward, a continued decrease in demand caused by a slower global economy, oversupply caused by many resource development projects, as well as high costs due to the natural resource boom may lead to lower growth for resource businesses. Under the circumstance we must continue to make strategic investments and grow our value-added trading businesses in order to keep accelerating our growth and achieve sustainable growth for our company.

This past November the company athletic fair was the most well attended one since we restarted the event in 2010. Watching the participants I felt the strong sense of unity among our employees all pursuing the same goal.

I wish that 2013 is a year of health and success for all of our employees and their families. Thank you.

Message from President and CEO Asada at the start of 2013