COMPANY RESEARCH AND ANALYSIS REPORTIINO KAIUN KAISHA, LTD.
9119
Tokyo Stock Exchange First Section/ Fukuoka Stock Exchange

26-Jul.-2019
FISCO Ltd. Analyst

Masanobu Mizuta

FISCO Ltd.
http://www.fisco.co.jp

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

IINO KAIUN KAISHA, LTD.
9119 Tokyo Stock Exchange First Section/ Fukuoka Stock Exchange

26-Jul.-2019
http://www.iino.co.jp/kaiun/english/■ Index■Summary---------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 01
1. Aiming for sustainable, stable growth from the twin axes of the historical shipping
and real estate business .. ...................... ......................................................................................................

01

2. Both recurring and final profit increased in FY3/19,
while the Company expects both to decline in FY3/20................................................................................

01

3. Accumulating stable earnings foundations ahead of the Company’s 125th anniversary. .............................

02

4. Aims for stable profit distribution of a dividend of ¥8 to ¥12. .......................................................................

02■Company profile -------------------------------------------------------------------------------------------------------------------------------------------------------- 03
1. Company profile .. .................................. ......................................................................................................

03

2. History .................................................. ......................................................................................................

03

3. Group companies.................................. ......................................................................................................

05■Business overview, features, and strengths ----------------------------------------------------------------------------------- 06
1. Business overview ......................................................................................................................................

06

2. Shipping Business.......................................................................................................................................

07

3. Real estate business....................................................................................................................................

08

4. IINO Building. . ..............................................................................................................................................

09

5. Earnings profile/risk factors and countermeasures. .....................................................................................

10■Business performance------------------------------------------------------------------------------------------------------------------------------------------ 11
1. Overview of FY3/19 consolidated results. ....................................................................................................

11

2. Business performance and initiatives by segment. ......................................................................................

13

3. Financial overview. . ................................ ......................................................................................................

14■Outlook-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 16
1. Overview of consolidated results outlook for FY3/20. ..................................................................................

16

2. Initiatives by segments.. ......................... ......................................................................................................

17■Medium- to long-term growth strategy------------------------------------------------------------------------------------------------ 18
1. Mid-term Management Plan, Be Unique and Innovative Toward our 125th Anniversary in 2024..................

18

2. Outlook for achievement of the Mid-term Management Plan. ......................................................................

19

3. Growth scenario and ESG management......................................................................................................

22■Shareholder return policy---------------------------------------------------------------------------------------------------------------------------------- 22■Information security------------------------------------------------------------------------------------------------------------------------------------------------ 23

We encourage readers to review our complete legal statement on “Disclaimer” page.

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

IINO KAIUN KAISHA, LTD.
9119 Tokyo Stock Exchange First Section/ Fukuoka Stock Exchange

26-Jul.-2019
http://www.iino.co.jp/kaiun/english/██Summary
Accumulating stable earnings foundations ahead of the Company’s
120th anniversary
1. Aiming for sustainable, stable growth from the twin axes of the historical shipping and real estatebusiness
IINO Kaiun Kaisha, Ltd. <9119> (hereafter, also “the Company”) is a shipping company with a history of 120 years
since it was founded in 1899 (IINO Shokai, Maizuru, Kyoto). Currently, it is aiming for sustainable, stable growthby developing its business on the twin axes of the shipping businesses (the oceangoing shipping business andthe coastal and regional shipping business), which mainly involve the transportation of resources and energy, andthe real estate business for the rental of office buildings, mainly the head office of the IINO Building. The Company
celebrates the 120th anniversary of its foundation in July 2019.
The Company has three business segments; the oceangoing shipping business, the coastal and regional shipping
business, and the real estate business. In FY3/19, these three business segments accounted for 76.3%, 11.1%,
and 12.6% of total revenue, respectively, and 12.2%, 19.4%, and 68.4% of operating profit, respectively. Earnings
from the shipping business tends to fluctuate as they are influenced by elements including FOREX rates, shipping
market conditions, and the price of fuel oil, but in FY3/19, earnings from the shipping business accounted forapproximately 30% of Company-wide earnings despite the weak shipping market conditions. The Company’s
distinguishing characteristic and strength in the shipping business is its fleet of chemical tankers, which is one of thelargest scale in the industry. In particular, the Company boasts a top-class market share in terms of transport volumeof petrochemical products originating in the Middle East. In the real estate business, earnings have temporarily
declined due to the impact of the demolition of an owned building in conjunction with the Shimbashi Tamura-cho
District Urban Redevelopment Project, but this business continues to be a stable source of earnings.
2. Both recurring and final profit increased in FY3/19, while the Company expects both to decline in FY3/20
In the FY3/19 consolidated results, revenue increased 4.3% year on year (YoY) to ¥84,843mn, operating profit
declined 15.4% to ¥4,782mn, recurring profit increased 1.5% to ¥4,701mn, and profit attributable to owners ofparent increased 10.4% to ¥4,685mn. Revenue increased in all business segments, thanks to the increase inoperating chemical tankers, the rise in market conditions in regional gas transport, and the acquisition of the NS
Toranomon Building. Operating profit increased considerably in the coastal and regional shipping business due tothe renewals of contracts at favorable terms and other factors, but operating profit in the real estate business wasroughly flat, while there was a significant decline in operating profit in the oceangoing shipping business due to thedelay in the recovery of market conditions for chemical tankers. Recurring profit increased due to the improvementin FOREX gains as well as the rise in dividends received, while profit attributable to owners of parent increased asa result of gains on sales of non-current assets.

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COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

IINO KAIUN KAISHA, LTD.
9119 Tokyo Stock Exchange First Section/ Fukuoka Stock Exchange

26-Jul.-2019
http://www.iino.co.jp/kaiun/english/

Summary

The forecasts for the FY3/20 consolidated results are for revenue to increase 4.9% YoY to ¥89,000mn, operating
profit to rise 0.4% to ¥4,800mn, recurring profit to decline 12.8% to ¥4,100mn, and profit attributable to owners ofparent to decline 18.9% to ¥3,800mn. The forecast for an increase in revenue is due to an increase in the numberof operating vessels resulting from the completion of new vessels, the compensatory effect from the BAF (Bunker
Adjustment Factor – price adjustment clause in conjunction with fluctuations in fuel oil prices), as well as a recovery
in the chemical tanker market. Overall operating profit is expected to move roughly sideways, as the expectations fora recovery in the chemical tanker market will be offset by negative factors such as an increase in docking expenses
and a temporary decline in occupancy rates in the real estate business. Recurring profit is expected to decline withthe decline in dividend income as non-operating income, while profit attributable to owners of parent is expected
to decline due to the non-recurrence of extraordinary income from the sale of vessels.
3. Accumulating stable earnings foundations ahead of the Company’s 125th anniversary
There has been no change to the Company’s policy of realizing a growth scenario from the twin axes of the shipping
business and the real estate business. In its Mid-term Management Plan, it set the theme of the Plan as Taking up
the Challenges of Balanced Management and Advancement (achieving a balance between the twin axes of theshipping businesses and the real estate business, stable earnings and next-generation businesses, and numerical
growth targets with a good balance), and the Company’s priority strengthening measures are Pursuing Greater
Business Differentiation, Solidifying Stable Earnings, and Challenges of Next-Generation Business. The Company
is expected to achieve its consolidated revenue target in FY3/20, the final fiscal year of the Mid-term Management
Plan, but is unlikely to reach the consolidated profit line targets due to the delay in the recovery of shipping market
conditions, the decline in occupancy rates in the real estate business, and other factors. However, heading towards
its 125th anniversary in 2024, the Company is steadily building up a stable earnings base. Earnings growth isexpected over the medium to long term, and we will keep a close eye on the Company’s ESG (environment, society,and governance) efforts.
4. Aims for stable profit distribution of a dividend of ¥8 to ¥12
As the results in the shipping business is significantly influenced by trends in market conditions and FOREX rates,
the Company’s basic policy for the distribution of profits is to continuously pay a dividend while also strengthening its
financial structure and supplementing the internal reserves it will need, while giving full consideration to the prospects
for the business environment in the future. Also, it intends to supplement the funds for internal reserves in order toinvest in strategic fields in the shipping businesses and excellent properties in the real estate business, to maintainand improve the fleet and buildings, and to enter into promising businesses. Under the Mid-Term Management Plan
Be Unique and Innovative, the Company aims to pay a stable dividend of ¥8 to ¥12 per year as shareholder returns.
Key Points
Aiming for sustainable, stable growth on the twin axes of the shipping business and the real estate businessIn the shipping business, the main businesses are chemical tankers, for which it has the largest fleet in theindustry, and oil tankers and gas carriers, which are mainly on medium- to long-term contracts• The real estate business chiefly involves the rental of office buildings in prime districts of Metropolitan Tokyo,
such as the IINO Building••

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02 23

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

IINO KAIUN KAISHA, LTD.
9119 Tokyo Stock Exchange First Section/ Fukuoka Stock Exchange

26-Jul.-2019
http://www.iino.co.jp/kaiun/english/

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Source: Prepared by FISCO from the Company's financial results██Company profile
A shipping company with a history of 120 years on the twin axes ofthe shipping business and the real estate business1. Company profile
The Company is a shipping company with a history of 120 years since it was founded in 1899 (Iino Shokai, Maizuru,
Kyoto). Currently, it is aiming for sustainable, stable growth by developing its business on the twin axes of theshipping businesses (the oceangoing transport shipping business and the coastal and regional transport shipping
business), which mainly involves the transportation of resources and energy, and the real estate business for therental of office buildings, primarily the head office of the IINO Building.
At the end of FY3/19, capital was ¥13,092mn, the equity ratio was 32.8%, net assets per share was ¥689.25, andthe number of outstanding shares was 111,075,980 shares (of which 5,268,871 were treasury shares).
2. History
In 1899, the founder Torakichi Iino established IINO Shokai in Maizuru, Kyoto, and began transportation of coal andstevedoring business. In 1944, the Company changed its name to its current name of IINO Kaiun Kaisha, Ltd., andin 1949 the Company listed on the Tokyo Stock Exchange.

We encourage readers to review our complete legal statement on “Disclaimer” page.

03 23

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

IINO KAIUN KAISHA, LTD.
9119 Tokyo Stock Exchange First Section/ Fukuoka Stock Exchange

26-Jul.-2019
http://www.iino.co.jp/kaiun/english/

Company profile

In 1964, the Company separated and transferred its liner department upon the consolidation of the shipping industry.
After this, it shifted to focus on the management of tanker and tramp services. The Company began the chemical
tanker business in earnest in the 1980s. In 1991, it participated in an Indonesian-produced LNG project and began
an LNG transportation business. In 1993, the Company participated in a Qatar-produced LNG project, while in 2001
it participated in the world’s largest methanol production project in Saudi Arabia.
In 2004, the Company simultaneously obtained ISO9001 and ISO14001 certification in the shipping business. In
2005, it simultaneously obtained the ISO9001 and ISO14001 certification in the office building leasing business. In
2011, the Company completed phase 1 of the IINO Building rebuilding construction work and the building started
operations. The head office became the first in Japan to acquire the LEED Platinum Certification. In 2014, theCompany completed phase 2 of the IINO Building construction work and held the grand opening. In 2018, theShimbashi Tamura-cho District Urban Redevelopment Project, which includes the former Tokyo Sakurada Building,made a full-fledged start, and the IINO Building office standard floors (Floors 7-27) received the 5-star ranking in
the Building-Housing Energy-efficiency Labeling System (BELS) assessment. The Company celebrates the 120th
anniversary of its founding in July 2019.
Company history
Year

Major event

1899

Torakichi IINO, established IINO Shokai in Maizuru, Kyoto, and began a harbor loading and coal transportation business.

1918

Established IINO Shoji Kaisha, Ltd., which succeeded all of the businesses of IINO Shokai.

1922

Established IINO Kisen Kaisha Ltd, and it inherited the separated IINO Shoji outsourcing maritime transportation business.

1931

Fujisan Maru, Japan’s first full-scale oceangoing transport tanker was built.

1941

Changed the name of IINO Shoji to IINO Kaiun Sangyo Kaisha, Ltd., and it was merged with IINO Kisen.

1944

Changed the name of IINO Kaiun Sangyo to IINO Kaiun Kaisha, Ltd, the current company name.

1949

The company's stock was listed on the Tokyo Stock Exchange.

1950

Built Ryuho Maru, Japan’s first post-war large-scale tanker.

1951Entered fully into the liner business.

1953

Established IINO Fudosan Kaisha, Ltd.

1960

Completed building of the former IINO Building, transferred the head office to this building, and started the IINO Hall business

1963

Built Toyosu Maru, the Company’s first oceangoing LPG tanker.

1964

Separated and transferred the liner business department on the consolidation of the marine transportation industry. Since then, it has
focused on the management of tankers and cargo trampers.

1967

Completed Tokyo Sakurada Building.

1970

Built Zenkoren Maru No.5, the Company’s first Panamax- dry bulk carrier.

1974

Established IINO Marine Service Co., Ltd., to conduct ship management operations.

1983

Completed Tokyo Fujimi Building.

1988

Completed IINO Takehaya Building.

1991

Participated in an Indonesia LNG project and began an LNG transportation business.

1993

Participated in a Qatar LNG project.

1995

Completed Sasazuka Center Building.

1997

Merged with IINO Fudosan Kaisha, Ltd.
Established IINO Media Pro Co, Ltd., a company managing photo studios and conducting design and advertising production.

1999

100th anniversary of its foundation
Completed building of the Ryuho Maru, the Company’s first double-hull tanker.

2000

Completed building of BLUE ISLAND, the Company’s first cape size-type dry bulk carrier.

2001

Participated in the world’s largest methanol production project in Saudi Arabia (started operations in 2004).

2002

Established IINO SINGAPORE PTE. LTD., as a local subsidiary in Singapore

2003

Built SK SUNRISE, the Company’s first self managing LNG tanker.
Opened the Dubai Representative Office.

2004

Acquired integrated certification for ISO9001 and ISO14001 in the marine transportation industry.
Established IINO UK LTD., as a local subsidiary in London.

2005

Established a joint venture with Mitsui & Co., Ltd., and QATAR SHIPPING COMPANY.
Acquired integrated certification for ISO9001 and ISO14001 for office-leasing business.
Built NORTH PIONEER, the Company’s first and Japan’s second regional shipping LNG tanker.

2006

Completed Shiodome Shiba-Rikyu Building.
Started ship operations at IINO SINGAPORE.

2007

Integrated the Small Gas Tanker Division into IINO Gas Transport, Ltd.

2009

Started the IINO Building construction (rebuilding) work.
Started transportation of bio-ETBE (ethyl tertiary butyl ether) by chemical tanker.

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COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

IINO KAIUN KAISHA, LTD.
9119 Tokyo Stock Exchange First Section/ Fukuoka Stock Exchange

26-Jul.-2019
http://www.iino.co.jp/kaiun/english/

Company profile
Year

Major event

2011

Completed phase 1 of the IINO Building construction project. The building opened in October.
The head office (the IINO Building) is the first office space in Japan to receive the LEED Platinum Certification.
The Iino Building was awarded the top ranking of platinum, while the Shiodome Shiba-Rikyu Building received the gold ranking, in the
DBJ Green Building Certification by the Development Bank of Japan.

2014

Expanded facilities at the North America base and established the Houston office.
Completed phase 2 of the IINO Building construction project and held the grand opening.

2016

The IINO Building was certified as being a workplace excelling in specified global warming countermeasures (top-level workplace) in theTokyo Metropolitan Government Environmental Protection Ordinance.
The IINO Building was awarded the 1st ABINC Special Award.

2017

Formulated the new Mid-Term Management Plan (3-year period)

2018

Concluded a time charter contract for a newly constructed methanol ship equipped with a dual-fuel main engine, the Company’s first.
The IINO Building acquired the Tokyo Fire Department’s Fire Safety Building Certification (common name: Excellence Mark).
The IINO Building was registered by the Tokyo Metropolitan Government Bureau of Environment as an Edo no Midori Registered Green
Area (Excellent Green Area).
Fully fledged start of the Shimbashi Tamura-cho District Urban Redevelopment Project, which includes the site of the former Tokyo
Sakurada Building.
The IINO Building was awarded 5 stars by the Building-Housing Energy-efficiency Labeling System (BELS) for the office floor portion(7th floor through 27th floor).
The NS Toranomon Building was awarded Honorable Mention at the FY2018 Minato-ku “Scenic Town Awards.”
Acquired additional shares of Northern LNG Transport Co., I Ltd. and Northern LNG Transport Co., II Ltd. in the Snohvit LNG project.

2019

Completed a VLGC for Astomos Energy Corporation.
IINO Building kept the top ranking of 5 stars, while the Shiodome Shiba-Rikyu Building kept a 4-star ranking in the DBJ Green Building
Certification by the Development Bank of Japan.

Source: Prepared by FISCO from the Company's materials

3. Group companies
At the end of FY3/19, the Group consisted of 71 companies, of the Company and 70 Group companies (56consolidated subsidiaries, 5 equity-method affiliates, and 9 affiliates outside the scope of consolidation). Overseas,
it has 7 bases, including local subsidiaries and representative offices (in Singapore, Houston, London, Connecticut,
Dubai, Busan, and Manila).
The main Group companies
Oceangoing Shipping Business
Ship Operation

IINO Singapore Pte. Ltd. / IINO Shipping Asia Pte. Ltd.

Ship Management

IINO Marine Service Co., Ltd.

Ship Brokerage, Ship Equipment Sales

IINO Enterprise Co., Ltd.

Ship Equipment Sales

Godo Senpaku Kogyo Co., Ltd.

Regional Shipping Business
IINO Gas Transport Co., Ltd.

Ship Operation, Leasing, and Management
Real Estate Business
Building Management

IINO Building Technology Co., Ltd.

Warehousing

Taiho Marine Co., Ltd.

Photography Studios and Photo Retouching Services

IINO Mediapro Co., Ltd.

Hall and Conference Center Management

IINO Hall Co., Ltd.

Other Businesses
Accounting Service Commissioned Business

IINO Management Data Processing Co., Ltd.

IT-related Business

IINO System Co., Ltd.

Insurance Agency, Support for General Affairs andHuman Resources-related Operations

IINO Business Service Co., Ltd.

Source: Prepared by FISCO from the Company’s 2018 business report

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COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

IINO KAIUN KAISHA, LTD.
9119 Tokyo Stock Exchange First Section/ Fukuoka Stock Exchange

26-Jul.-2019
http://www.iino.co.jp/kaiun/english/██Business overview, features, and strengths
Engaged in the oceangoing transport shipping business, the coastal
and regional transport shipping business, and the real estate business
1. Business overview
A feature of the Company is that its earnings are from the twin axes of the shipping business (the oceangoingshipping business and the coastal and regional shipping business) and the real estate business. The Company has
three business segments; the oceangoing shipping business, the coastal and regional shipping business, and thereal estate business. In FY3/19, these three business segments accounted for 76.3%, 11.1%, and 12.6% of total
revenue, respectively, and 12.2%, 19.4%, and 68.4% of operating profit, respectively.
In the shipping business, earnings tend to fluctuate as they are influenced by factors including FOREX rates, shipping
market conditions, and the price of fuel oil, but these businesses still secured around 30% of Company-wide profits
in FY3/19 despite the poor market conditions. In the real estate business, earnings have temporarily declined dueto the impact of the demolition of an owned building in conjunction with the Shimbashi Tamura-cho District Urban
Redevelopment Project, but this business continues to be a stable source of earnings.
Consolidated results(¥mn)
FY3/15

FY3/16

FY3/17

FY3/18

FY3/19100,177

94,843

83,32081,334

84,843Operating profit

7,986

8,115

6,591

5,651

4,782

Recurring profit

7,194

7,655

5,105

4,631

4,701

Profit attributable to owners of parent

5,213

3,659

3,885

4,243

4,685

EPS (¥)

46.98

32.97

35.01

38.53

44.28

Dividend (¥)

10.00

10.00

10.00

10.00

15.00

BPS (¥)

593.72587.51

619.18653.29689.25

Revenue

Source: Prepared by FISCO from the Company's financial results

Trends in revenue and operating profit and percentages of the totals by segment(before adjustment for consolidation)
Revenue and percentages of total revenue by segment(¥mn)
FY3/15

FY3/16

FY3/17

FY3/18

FY3/19100,177

94,843

83,32081,334

84,843

Oceangoing shipping business

78,91272,36462,572

61,86564,873

Regional shipping business

9,695

9,424

8,514

9,012

9,427

Real estate business

11,653

13,13812,314

10,545

10,669100,260

94,92583,39981,422

84,968

-83

-82

-80

-88

-125

Oceangoing shipping business

78.7

76.2

75.0

76.0

76.3

Regional shipping business

9.7

9.9

10.2

11.1

11.1

Real estate business

11.6

13.8

14.8

13.0

12.6

Consolidated revenue

Total
Adjustment%

Source: Prepared by FISCO from the Company's financial results

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COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

IINO KAIUN KAISHA, LTD.

26-Jul.-2019

9119 Tokyo Stock Exchange First Section/ Fukuoka Stock Exchange

http://www.iino.co.jp/kaiun/english/

Business overview, features, and strengths

Operating profit and percentages of total operating profit by segment(¥mn)
FY3/15

FY3/16

FY3/17

FY3/18

FY3/19

7,986

8,115

6,591

5,651

4,782

3,285

3,767

2,626

1,713

583

650

364

180

700

926

4,051

3,984

3,786

3,238

3,273

7,986

8,115

6,591

5,651

4,782

-

-

-

-

-

Oceangoing shipping business

41.1

46.4

39.8

30.3

12.2

Regional shipping business

8.1

4.5

2.7

12.4

19.4

Real estate business

50.7

49.1

57.4

57.3

68.4

Consolidated operating profit
Oceangoing shipping business
Regional shipping business
Real estate business
Total
Adjustment%

Source: Prepared by FISCO from the Company's financial results

In the shipping business, chemical tankers for which the Company
has one of the largest fleets in the world, and gas carriers are thecore businesses
2. Shipping Business
The Oceangoing shipping business involves the transportation of cargo across the water worldwide by oil tankers,
which transport crude oil; chemical tankers, which transport petrochemical products; large gas carriers, whichtransport LNG (liquefied natural gas) and LPG (liquefied petroleum gas); dedicated coal and wood chip carriers; andsmall- and medium-sized dry bulk carriers, which transport cereals, steel materials, and fertilizer. The coastal andregional shipping business involves the transportation of cargo mainly in Japan’s coastal and regional marine areas,
including by small gas carriers that transport LNG, LPG, and petrochemical gas. These businesses also include
other operations, such as a ship management business and sales of maritime equipment.
With the main operations being resources- and energy-related transportation by chemical tankers, gas carriers, andother ships, these businesses utilize the Company’s global network to provide efficient marine transportation services
over a wide range of marine areas, from open oceans to regional waters. The Company also leads the industry interms of shares of the domestic markets for the transportation of LPG and petrochemical gas. Moreover, it is oneof the very few companies in Japan operating coastal shipping LNG carriers.
At the end of FY3/19, the Group’s number of operating ships (including shared equity interests) was a total of 107
ships. Breaking this down, in the oceangoing shipping business, it had 80 ships (2 oil tankers, 43 chemical tankers,
17 large gas carriers, and 18 dry bulk carriers), while in the coastal and regional shipping business, it had 27 ships,
mainly small gas carriers. Its fleet of chemical tankers is one of the largest in the industry.
The Company’s main business partners include Astomos Energy Corporation (an LPG trading company created fromthe integration of the LPG departments of the Idemitsu Kosan <5019> Group and the Mitsubishi Corporation <8058>
Group), Idemitsu Kosan, Oji Holdings Corp. <3861>, JXTG Nippon Oil & Energy Corporation (a JXTG Holdings<5020> Group company), National Federation of Agricultural Cooperative Associations (ZEN-NOH), J-POWER<9513>, Tosoh Corporation <4042>, Zeon Corporation <4205>, Hokkaido Gas Co., Ltd. <9534>, and SABIC(Saudi Arabia Basic Industries Corporation).

We encourage readers to review our complete legal statement on “Disclaimer” page.

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COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

IINO KAIUN KAISHA, LTD.
9119 Tokyo Stock Exchange First Section/ Fukuoka Stock Exchange

26-Jul.-2019
http://www.iino.co.jp/kaiun/english/

Business overview, features, and strengths

In October 2017, the Company concluded a time charter contract for the transportation of methanol with Methanol
Holdings (Trinidad) Ltd., of Trinidad and Tobago, which is one of the world’s leading methanol manufacturing
companies. Under this contract, the Company will deploy one 37,000 DWT-type chemical tanker. In the Midterm Management Plan, the global deployment of the chemical tanker business, and in particular, acquiring moreshale-derived cargoes on regular US-bound routes, was set as a priority strengthening measure, and this contract
will provide the foothold for this.
Also, in February 2018, the Company concluded a time charter contract for a newly built methanol-fueled vessel
with Waterfront Shipping Company Ltd, which is a wholly-owned subsidiary of Methanex Corp., the world’s largest
producer of methanol. This vessel is equipped with a dual-fuel main engine, meaning in addition to the usual heavy
oil, it can also use methanol as fuel, and the Company is working toward the commercialization of next-generationfuel vessels in order to reduce the burden on the environment.
Moreover, in April 2018, the Company concluded a dedicated vessel transportation contract with Tohoku ElectricPower <9506> for PEGASUS ISLAND, which is an 88,000 DWT-type coal vessel whose construction was completed
in February 2018. It plays a role in Tohoku Electric Power stably procuring coal.
The Company’s distinguishing characteristic and strength is one of the largest chemical tanker fleets in the industry.
In particular, the Company has a leading share in transport volume of petrochemical products originating from theMiddle East.
Many of the chemical tankers that the Company operates have stainless-steel tanks. Compared to normal irontankers, stainless-steel tankers have strong resistance to corrosion, so they have the advantage of being able totransport cargo such as sulfuric acid. The Company is also working to realize efficient operations for the transportation in its chemical tankers not only of petrochemical products, but also of cargo such as palm oil.
In addition to stainless-steel tankers, the Company possesses advanced ship management expertise that is required
for the transportation of petrochemical products, such as for tank cleaning, and moreover expertise in transportingcargo efficiently, which leads to it having a competitive advantage.

The real estate business involves the leasing of office buildings inprime areas in the center of Metropolitan Tokyo
3. Real estate business
The real estate business mainly involves the rental, management and maintenance of office buildings. A feature ofthis business is that the Company owns rental office buildings in the center of Metropolitan Tokyo, such as the IINO
Building (including the IINO Hall & Conference Center), which is the head office building. It is also deploying related
business including a rental photo studio business (Hiroo studio and Minami Aoyama studio).
In addition to the Tokyo Fujimi Building (Metropolitan Tokyo, Chiyoda Ward) completed in 1983, the IINO Takehaya
Building (Metropolitan Tokyo, Bunkyo Ward) completed in 1988, and the Shiodome Shiba-Rikyu Building (Metropolitan
Tokyo, Minato Ward) completed in 2006, in 2009 the Company began work to rebuild the IINO Building (Metropolitan
Tokyo, Chiyoda Ward), and it completed phase 1 of the IINO Building construction project in October 2011 and thebuilding opened for business, and then in November 2014, it completed phase 2 of this project and held the grandopening. In December 2017, it acquired partial equity interest to the NS Toranomon Building (Metropolitan Tokyo,
Minato Ward), which was completed in 2016.

We encourage readers to review our complete legal statement on “Disclaimer” page.

08 23

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

IINO KAIUN KAISHA, LTD.
9119 Tokyo Stock Exchange First Section/ Fukuoka Stock Exchange

26-Jul.-2019
http://www.iino.co.jp/kaiun/english/

Business overview, features, and strengths

In March 2017, the Company sold the Sasazuka Center Building following a review of its real estate business target
area strategy and its portfolio of owned buildings, which it had set out it STEP FORWARD 2020, its previous Midterm Management Plan. Also, in order to participate in the Shimbashi Tamura-cho District Urban Redevelopment
Project (construction began in April 2018 and is scheduled to be completed in March 2021), in FY3/18 it demolishedthe Tokyo Sakurada Building (Metropolitan Tokyo, Minato Ward , completed in 1967).
As a result, as of the end of FY3/19, the Company owned five rental buildings (IINO Building, Tokyo Fujimi Building,
Shiodome Shiba-Rikyu Building, NS Toranomon Building, and the IINO Takehaya Building).

The IINO Building is pursuing advanced environmental performance
4. IINO Building
The IINO Building, which opened in 2011 (grand opening in 2014), has become an earnings pillar based on theconcept of being a “building that will still be loved 100 years in the future,” and it is equipped with hall and conferencefunctions. The building also pursues advanced environmental performance. For example, on the outside of the usual
outer wall (the inner skin) has been built one more outer wall (the outer skin), and the adoption of this “double-skinexterior” reduces the thermal load by creating an air-heat insulating layer.
It was the first building in Japan to acquire the Platinum Certification, which is the highest certification for LEED-CI(environmental compliance evaluation system by the U.S. Green Building Council). Also, in 2015 it acquired theCertification of Site Symbiosis with Ikimono (living things) (Association for Business Innovation in harmony with Nature
and Community (ABINC) certification), which evaluates the efforts of office buildings and commercial facilities toprotect biodiversity. In 2016, within the sites that had acquired ABINC certification, this building was awarded the
1st ABINC Special Award as a facility that is contributing greatly to the spread in the awareness of ABINC and tothe mainstream acceptance of biodiversity.
Also, in 2016 it was certified as being a workplace excelling in specified global warming countermeasures (toplevel workplace) in the 2015 Tokyo Metropolitan Government Environmental Protection Ordinance. In February
2018, it acquired the Fire Safety Building Certification (common name: Excellence Mark), based on the Tokyo Fire
Department’s system to show which buildings had been certified as being excellent for fire safety. Then, in March
2018, the building was registered as an Edo-Midori Green Space (Excellent Green Space) by the Tokyo Metropolitan
Government Bureau of Environment in its native plants registration system. In October 2018, the IINO Building’s
office floor portion (7th floor through 27th floor) received the highest rank of five stars under the Building-Housing
Energy-efficiency Labeling System (BELS).
Furthermore, in March 2019, in the DBJ Green Building certification by the Development Bank of Japan, the IINO
Building kept a top rank of five stars, while the Shiodome Shiba-Rikyu Building maintained its four-stars ranking.

We encourage readers to review our complete legal statement on “Disclaimer” page.

09 23

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

IINO KAIUN KAISHA, LTD.
9119 Tokyo Stock Exchange First Section/ Fukuoka Stock Exchange

26-Jul.-2019
http://www.iino.co.jp/kaiun/english/

Business overview, features, and strengths

Countering the impact of fluctuating market conditions with pricechanges, etc.
5. Earnings profile/risk factors and countermeasures
In terms of earnings profile and risk factors, the shipping business, and the oceangoing shipping business inparticular, is impacted by elements including shipping market conditions, the price of fuel oil, and FOREX rates.
Moreover, for the mainstay chemical tankers, the effects of fluctuating market conditions on spot freight cannot be
avoided.
To counter these factors, for chemical tankers, the Company aims to maximize profits by combining multiple,
approximately one-year COA (contract of affreightment), which constitute about 70% of the total, and spot freight.
Contracts of affreightment generally have a price adjustment clause tied to fluctuations in the price of fuel oil, but
depending on the contract, if the fuel oil price increases by a small amount, the increase may not be transferred tothe price, and this may impact profitability.
Oil tankers and gas carriers are the mainly deployed on medium- to long-term time charter contracts. The Company
is promoting the accumulation of stable long-term revenue sources with oil tankers and gas carriers, and in December
2018 the Company acquired additional shares in Northern LNG Transport Co., I Ltd. and Northern LNG Transport
Co., II Ltd. (hereinafter, “NLTC I” and “NLTC II”) – special purpose companies formed for the purpose of owning
LNG tankers in the Snohvit LNG project – from Mitsui & Co., Ltd. <8031>, thereby increasing its ownership stake inthese two companies. Also, including the coastal and regional shipping business, the Company is working to renew
contracts on favorable terms to handle the increase in costs, and is aiming to boost profitability.
From January 2020, the International Maritime Organization (IMO) will start to implement tighter international
regulations on sulfur content in marine fuels. Specifically, cap on the concentration of sulfur included in marine fuelwill be lowered from the current level of “no more than 3.5%” to “no more than 0.5%.” As response options, theCompany can install scrubbers (desulfurization units) and/or use low-sulfur fuel oil (fuel that is compliant with the
new regulation).
The negative impacts of the tougher regulation include the increased costs of ship equipment and servicing required
to ensure that vessels can use compliant fuel oil and cost increases related to differences between the cost of
conventional fuel and compliant fuel oil. The Company will mainly respond by using fuel oil that is compliant with theregulations, but plans to negotiate with cargo owners to reflect the increased costs in contracts of affreightment andother contracts. Meanwhile, the positive impact of the tougher regulation is expected to lead to an improvement inmarket conditions for product tankers and chemical tankers due to demand for the transport of compliant fuel oil
and an improvement in the supply-demand balance due to the scrapping of vessels that cannot comply with thetighter regulation.
In the real estate business, earnings tend to be influenced by factors including real estate market conditions, vacancy
rates, and rent, but all of the rental buildings that the Company owns are located in prime locations in the centerof Metropolitan Tokyo. In the center of Metropolitan Tokyo (the five wards of Chiyoda, Chuo, Minato, Shinjuku, andShibuya), office building rents are firm.

We encourage readers to review our complete legal statement on “Disclaimer” page.

10 23

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

IINO KAIUN KAISHA, LTD.
9119 Tokyo Stock Exchange First Section/ Fukuoka Stock Exchange

26-Jul.-2019
http://www.iino.co.jp/kaiun/english/

Business overview, features, and strengths

The IINO Building, the pillar of earnings in the real estate business, not only is located in a good area, but its
advanced environmental performance is also a strength. The IINO Building should continue to be a source ofstable earnings. Moreover, based on its target-area strategy, the Company is advancing the replacement of owned
assets and participating in redevelopment projects. Construction of the Shimbashi Tamura-cho District Urban
Redevelopment Project (Metropolitan Tokyo, Minato Ward) is scheduled to finish in the spring of 2021.
Both the shipping business and the real estate business are impacted by fluctuating market conditions. In responseto this risk, the Company is accumulating stable revenue sources with the aim of building robust business bases
in both businesses, and aims for sustainable, stable growth from the twin axes of the shipping business and thereal estate business.

██Business performance
Recurring profit and final profit increased in FY3/19
1. Overview of FY3/19 consolidated results
In the FY3/19 consolidated results, revenue increased 4.3% YoY to ¥84,843mn, operating profit declined 15.4%
to ¥4,782mn, recurring profit increased 1.5% to ¥4,701mn, and profit attributable to owners of parent increased
10.4% to ¥4,685mn. The average FOREX rate was ¥110.67/USD (versus ¥111.19/USD in the previous fiscal year),and the average price of fuel oil was 430USD/MT (versus 337USD/MT in the previous fiscal year).
Overview of FY3/19 consolidated results(¥mn)
FY3/18

FY3/19

Revenue

81,334

84,843

4.3%

Operating profit

5,651

4,782

-15.4%

Recurring profit

4,631

4,701

1.5%

Profit attributable to owners of parent

4,243

4,685

10.4%

EPS (¥)

38.53

44.28

-

Dividend (¥)

10.00

15.00

-

BPS (¥)

653.29689.25-

Average FOREX rate (¥/USD)

111.19110.67

-

337

430

-

Average price of fuel oil (USD/MT)

YoY

Source: Prepared by FISCO from the Company's financial results

Looking at the comparison with FY3/18, revenue increased in all business segments, as the increase in operatingchemical tankers contributed to revenue in the oceangoing shipping business, while in the coastal and regional
shipping business revenue increased due to the upturn in market conditions in regional gas transport while revenue
increased in the real estate business due to factors including the acquisition of the NS Toranomon Building. Overall
revenue increased by 4.3%. In terms of operating profit, in the coastal and regional shipping business there wasa significant increase in operating profit, aided by renewals of contracts on favorable terms and other factors,
but operating profit in the real estate business was flat and there was a large decline in the oceangoing shipping
business due to the delayed recovery in market conditions for chemical tankers, along with other factors. Thus,
overall operating profit declined 15.4%.

We encourage readers to review our complete legal statement on “Disclaimer” page.

11 23

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

IINO KAIUN KAISHA, LTD.
9119 Tokyo Stock Exchange First Section/ Fukuoka Stock Exchange

26-Jul.-2019
http://www.iino.co.jp/kaiun/english/

Business performance

The overall ¥870mn decline in operating profit was the result of positive factors including oil tankers (+¥0.07bn), drybulk carriers (disposal of unprofitable vessels and other structural reforms, market recovery; +¥0.86bn), coastal andregional transport shipping business (favorable contract renewals, efficient allocation of vessels; +¥0.23bn), andreal estate (+¥0.04bn). On the other hand, negative factors included gas carriers (decline in operating vessels due
to vessel sales, the impact of certain VLGC for which contracts were entered into based on prices in the previous
year when market conditions were weak; -¥0.80bn), chemical tankers (sluggish market and higher docking costs;-¥1.1bn), and exchange rate and other (-¥0.16bn).
Changes in operating profit (FY17 vs. FY18)

Source: The Company's results briefing materials

For recurring profit, there was an increase of 1.5%, aided by the improvement in forex gains in non-operating
income (up ¥789mn; ¥378mn in gains in FY3/19 versus ¥411mn in losses in FY3/18), and the increase in dividend
income (up ¥399 mn; ¥1,257mn in FY3/19 versus ¥858mn in FY3/18). Profit attributable to owners of parent
increased10.4%. Total extraordinary losses were ¥1,605mn, which included an impairment loss of ¥1,146mn, while
total extraordinary income was ¥2,161mn, including gains on the sales of non-current assets of ¥2,155mn.
When compared to forecast values (revised values announced on January 31, 2019: revenue of ¥84,000mn,
operating profit of ¥5,100mn, recurring profit of ¥5,100mn, and profit attributable to owners of parent of ¥4,900mn),
revenue exceeded the forecast, while all profit lines fell short of the forecasts.

We encourage readers to review our complete legal statement on “Disclaimer” page.

12 23

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

IINO KAIUN KAISHA, LTD.
9119 Tokyo Stock Exchange First Section/ Fukuoka Stock Exchange

26-Jul.-2019
http://www.iino.co.jp/kaiun/english/

Business performance

Significant decline in profit in the oceangoing shipping business due
to sluggish chemical tanker market conditions and higher docking
expenses, large increase in profit in the coastal and regional
shipping business due to renewals of contracts on favorable terms
and other factors
2. Business performance and initiatives by segment
The overview by segment (before adjustment for consolidation) is as follows.
Overview of FY3/19 results by segment(¥mn)
FY3/18

FY3/19YoY

81,334

84,843

4.3%

Oceangoing shipping business

61,86564,873

4.9%

Regional shipping business

9,012

9,427

4.6%

Real estate business

10,545

10,6691.2%

81,422

84,968

4.4%

-88

-125

-

5,651

4,782

-15.4%

1,713

583-66.0%

700

926

32.3%

3,238

3,273

1.1%

5,651

4,782

-15.4%

Consolidated revenue

Total
Adjustment
Consolidated operating profit
Oceangoing shipping business
Regional shipping business
Real estate business
Total
Source: Prepared by FISCO from the Company's financial results(1) Shipping BusinessIn the oceangoing shipping business, revenue increased 4.9% YoY to ¥64,873mn, while operating profit declined
66.0% YoY to ¥583mn. The increase in revenue was due to an increase in operating vessels following thecompletion of new chemical tankers, while the Company continued to deploy oil tankers and gas carriers on
medium- to long-term contracts. However, overall profit declined, as the positive impacts from structural reforms
such as disposing of unprofitable vessels, and timing the deployment of vessels to match improvements in market
conditions were offset by a drop in profitability in each area, including weak market conditions and higher docking
expenses for chemical tankers, while in the large gas carrier division there was a decline in operating vessels dueto the sale of a vessel and the impact of certain VLGC entered into a contract based on market prices during atime of weak market conditions in FY3/18.
Conditions in the oil tanker market rose sharply from the fall of 2018, but softened towards the end of the fiscal
year. Conditions in the chemical tanker market were sluggish throughout the fiscal year, due to influx of producttankers into the chemical tanker market. The conditions in the large LPG carrier market were firm due to theincrease in transport from the U.S. to Asia. Conditions in the large LNG carrier market started to soften toward
the end of the period with the trail off of winter season demand and the influx of new vessels. In dry bulk carriers,
market conditions weakened compared to the previous fiscal year at some points, but recovered towards theend of the period.

We encourage readers to review our complete legal statement on “Disclaimer” page.

13 23

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

IINO KAIUN KAISHA, LTD.
9119 Tokyo Stock Exchange First Section/ Fukuoka Stock Exchange

26-Jul.-2019
http://www.iino.co.jp/kaiun/english/

Business performance

In terms of the status of initiatives, for chemical tankers, the recovery in market conditions were delayed more than
expected, the Company expanded its market share in the mainstay Middle East routes through the acquisitionof new COAs (three contracts acquired during FY3/19) and fleet upgrades (seven vessels delivered in FY3/19). In
order to accumulate foundations for stable growth, the Company continued to deploy oil tankers, gas carriers, anddry bulk carriers (dedicated vessels) on medium- to long-term contracts. In gas carriers, in December 2018 theCompany acquired additional shares and thereby increased its ownership stake in LNG vessel holding companies
NLTC1 and NLTC2, which are involved in the Snohvit LNG Project. For dry bulk carriers, in February 2018 theCompany completed construction of one 88,000 DWT-type vessel which has excellent operating efficiency.
In the coastal and regional shipping business, revenue increased 4.6% YoY to ¥9,427mn, while operating profit
increased 32.3% to ¥926mn. Transport volume was a bit low in both coastal and regional shipping, but profitability
improved due to renewals of contracts at more favorable terms in the coastal gas shipping business, while inregional gas shipping operations, profitability improved due to time charter contract renewals on favorable terms
in conjunction with the upturn in market conditions at the beginning of the fiscal year. As a result, operating profit
increased significantly.
(2) Real Estate BusinessIn the real estate business, revenue increased 1.2% YoY to ¥10,669mn and operating profit increased 1.1% to¥3,273mn. Although there was a temporary decline in the number of operating buildings due to the sale of the
Sasazuka Center Building (March 2017) and the demolition of the Tokyo Sakurada Building in association with the
Shimbashi Tamura-cho District Urban Redevelopment Project (construction work started in 2018 and is scheduled
to finish in the spring of 2021), performance was aided by the steady occupancy in existing buildings and the
NS Toranomon Building (the Company acquired a partial stake in the building in December 2017). This businessremains a stable source of earnings.

Net assets are steadily accumulating toward realizing the mediumterm target
3. Financial overview
For profitability, in FY3/19, the gross profit margin was 13.8%, down 1.6 percentage points compared to theprevious fiscal year. The selling, general and administrative expenses ratio declined 0.3 percentage points to 8.1%,
and the operating profit margin declined 1.3 percentage points to 5.6%. Recurring profit increased slightly due
to the improvement in non-operating income. While the recurring profit margin declined 0.2 percentage points to
5.5%, the extent of the decline was smaller than that of the operating profit margin. Profit attributable to ownersof parent increased by double digits due to the improvement in extraordinary income. As a result, the net income
margin attributable to owners of parent rose 0.3 percentage points to 5.5%, and ROE (return on equity) increased
0.4 percentage points to 6.6%.
Financially, at the end of FY3/19 total assets were up ¥12,198mn on the end of the previous fiscal year, including due
to increases in ships, land, and construction in progress, while the equity ratio fell 0.1 to 32.8%. Net assets increased¥3,840mn to ¥73,077mn and they are steadily accumulating toward achieving the Company’s medium-term target of
more than ¥100bn. Based on its strengths of the twin axes of the shipping businesses and the real estate business,there would seem to be no problems in terms of the Company’s financial soundness.

We encourage readers to review our complete legal statement on “Disclaimer” page.

14 23

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

IINO KAIUN KAISHA, LTD.

26-Jul.-2019

9119 Tokyo Stock Exchange First Section/ Fukuoka Stock Exchange

http://www.iino.co.jp/kaiun/english/

Business performance

Key management indicators
(¥mn)
Item

FY3/15

FY3/16

FY3/17

FY3/18

FY3/19

Revenue

100,177

94,843

83,32081,334

84,843

Cost of sales

85,79979,97469,88068,816

73,160Gross profit

14,37814,86913,44012,518

11,683Gross margin (%)

14.4

15.7

16.1

15.4

13.8

SG&A expenses

6,392

6,754

6,848

6,867

6,901

SG&A expenses ratio
Operating profit

6.9

7.1

8.2

8.4

8.1

7,986

8,115

6,591

5,651

4,782

Operating margin (%)

8.0

8.6

7.9

6.9

5.6

Non-operating income

1,844

2,643

742

1,153

1,721

Non-operating expenses

2,636

3,103

2,229

2,173

1,802

Recurring profit

7,194

7,655

5,105

4,631

4,701

Recurring margin (%)

7.2

8.1

6.1

5.7

5.5

Extraordinary income

1,657

633

3,776

3,577

2,161

Extraordinary losses

3,548

4,022

5,027

3,599

1,605

Profit before income taxes

5,302

4,267

3,854

4,609

5,257

94

602

-19

344

467

5,213

3,659

3,885

4,243

4,685

Total income taxes
Profit attributable to owners of parent
Net income margin attributable to owners of parent (%)
Comprehensive income

5.2

3.9

4.7

5.2

5.5

8,446

497

4,607

4,780

4,814
222,435

228,693230,278

203,969

210,237(Current assets)

31,45529,12525,14524,711

24,365(Non-current assets)

197,238

201,153

178,824

185,526

198,070

Total assets

162,785

164,993

135,195

140,999

149,359(Current liabilities)

36,41635,342

38,03941,68851,607(Non-current liabilities)

126,369

129,651

97,15699,31197,752

65,90765,285

68,774

69,23773,077(Shareholders’ equity)

58,76761,32264,09864,03667,801(Capital stock)

13,092

13,092

13,092

13,092

13,092

111,075,980

111,075,980

11,075,980

11,075,980

11,075,980

105,119

106,024

106,737

5,267,927

5,268,871

EPS (¥)

46.98

32.97

35.01

38.53

44.28

BPS (¥)

593.72587.51

619.18653.29689.25

Dividend per share (¥)

10.00

10.00

10.00

10.00

15.00

Equity ratio (%)

28.8

28.3

33.7

32.9

32.8

ROE (return on equity) (%)

8.4

5.6

5.8

6.2

6.6

Cash flows from operating activities

16,10718,804

11,075

12,117

14,549Cash flows from investing activities-13,022-18,551

12,788-15,399-21,202

Cash flows from financing activities-8,5942,475-27,242

3,350

5,826

Cash and cash equivalents at end of period

11,965

14,326

10,71910,536

9,826

Ratio of cash flow to interest-bearing debt (years)

7.8

6.9

9.7

9.5

8.1

Interest coverage ratio (times)

6.2

7.9

5.4

7.1

9.0

Number of employees

617

619

626

622

629

Total liabilities

Net assets

No. of shares outstanding at the end of the fiscal period,
including treasury shares
No. of treasury shares at the end of the fiscal period

Source: Prepared by FISCO from the Company's financial results

We encourage readers to review our complete legal statement on “Disclaimer” page.

15 23

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

IINO KAIUN KAISHA, LTD.

26-Jul.-2019

9119 Tokyo Stock Exchange First Section/ Fukuoka Stock Exchange

http://www.iino.co.jp/kaiun/english/██Outlook
Forecast is for lower recurring profit and final profit in FY3/20
1. Overview of consolidated results outlook for FY3/20
The FY3/20 consolidated results forecasts are for revenue to increase 4.9% YoY to ¥89,000mn, operating profit torise 0.4% to ¥4,800mn, recurring profit to decline 12.8% to ¥4,100mn, and profit attributable to owners of parent
to decline 18.9% to ¥3,800mn. The assumed average exchange rate is 1USD/¥110, and the assumed average
price of fuel oil is 430USD/MT (the FY3/19 results were an average exchange rate of 1USD/¥110.67 and an average
price of fuel oil of 430USD/MT).
Overview of consolidated forecast for FY3/20(¥mn)
FY3/19 results

FY3/20 forecast

YoY

Revenue

84,84389,000Operating profit

4,782

4,800

0.4%

(Shipping Business)

1,509

2,300

52.4%

(Real Estate Business)

4.9%

3,273

2,500

-23.6%

Recurring profit

4,701

4,100

-12.8%

Profit attributable to owners of parent

4,685

3,800

-18.9%EPS (¥)

44.28

35.91

-

Dividend (¥)

15.00

10.00

-

Average FOREX rate (¥/USD)

110.67110.00

-

430

430

-

Average price of fuel oil (USD/MT)

Source: Prepared by FISCO from the Company's financial results and results briefing materials

Revenue is expected to increase 4.9% YoY due to factors including an increase in the number of operating vessels
resulting from the completion of new vessels, the compensatory effect from the Bunker Adjustment Factor (BAF) in
conjunction with fluctuations in fuel oil prices, as well as a recovery in the chemical tanker market. Overall operating
profit is expected to move sideways, as in the oceangoing shipping business the expectations for a recovery in thechemical tanker market will be offset by an increase in docking expenses and a profit decrease in real estate businessdue to a temporary decline occupancy with the departure of tenants. Recurring profit is expected to decline withthe drop in dividend income as non-operating income, while profit attributable to owners of parent is forecast to
decline due to the non-recurrence of extraordinary income from the sale of vessels.
Overall operating profit is expected to increase by ¥0.02bn. The positive factor is chemical tankers (fleet enhancement, market recovery; +¥2.7bn), while negative factors include oil tankers (docking expenses; -¥0.9bn), dry bulk
carriers (vessel sales, docking, market conditions; -¥0.4bn), coastal and regional shipping (docking, -¥0.3bn), realestate (temporary decline in occupancy due to tenants leaving; -¥0.8bn), gas carriers (-¥0.1bn) and forex/other(-¥0.3bn).

We encourage readers to review our complete legal statement on “Disclaimer” page.

16 23

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

IINO KAIUN KAISHA, LTD.
9119 Tokyo Stock Exchange First Section/ Fukuoka Stock Exchange

26-Jul.-2019
http://www.iino.co.jp/kaiun/english/

Outlook

Changes in operating profit (FY18 result vs. FY19 forecast)

Source: The Company's results briefing materials

The forecasts for 1H consolidated results are for revenue to increase 4.8% YoY to ¥44,000mn, operating profit todecrease 54.6% to ¥1,500mn, recurring profit to decline 66.4% to ¥1,100mn, and profit attributable to owners ofparent to decline 80.6% to ¥900mn. The expectation is that the effects of the improvements in market conditions
for chemical tankers will emerge in earnest from 2H, while in the real estate business the Company expects new
tenants to move into buildings from 2H as well. As a result, the revenue and profits are expected to concentrate
more in 2H than in 1H.
In the shipping business, there is a lot of uncertainty, including the impacts of U.S.-China trade friction as well as
the impacts of the tightening of the IMO’s marine fuel sulfur regulation (the SOx regulation), but the Company plans
to increase the profitability of operations by renewing existing contracts on favorable terms and deploying vessels
efficiently, among other measures.

Expecting a recovery in chemical tanker market conditions in theoceangoing shipping business2. Initiatives by segments
The Company’s initiatives by segment are as follows.
(1) Shipping businessIn the oceangoing shipping business, the Company is expecting a large increase in operating profit for chemical
tankers. Profits declined in FY3/19 due to the delay in the market recovery, but the market is expected to recover in
FY3/20, as there has been no change to the upward trend in marine transport volume for petrochemical products,
the supply of newly-built ships has settled down, and product tankers should return to the petroleum products
market in conjunction with the arising of demand for transport of fuel oil compliant with the IMO regulation. The
Company plans to negotiate with cargo owners to reflect the increased costs due to compliant fuel oil use incontracts of affreightment and other contracts. The Company will also improve profitability by efficiently deploying
its fleet. The Company is also planning to complete the construction of a new methanol tanker (time charter) witha dual-fuel main engine in 2H.

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17 23

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

IINO KAIUN KAISHA, LTD.
9119 Tokyo Stock Exchange First Section/ Fukuoka Stock Exchange

26-Jul.-2019
http://www.iino.co.jp/kaiun/english/

Outlook

For oil tankers, the Company expects a decline in profit due to docking expenses, but will work to secure stableearnings from medium- to long-term contracts that are not affected by market conditions. The Company isalso expecting to deploy one new VLCC in 2H. For gas carriers, profit is expected to move sideways, but theCompany will respond flexibly while keeping a close watch on changes in market conditions in order to securestable earnings. In dry bulk carriers, the Company is expecting profit to decline YoY due to the impact of docking
expenses as well as market conditions, but the Company will work to optimize its fleet size and cultivate newcontracts.
In coastal and regional shipping, operating profit is expected to decline due to higher docking expenses, but theCompany will work towards stable earnings.
(2) Real Estate Business
The Company is expecting operating profit to decline YoY due to the temporary decline in occupancy rates
caused by the sale of the Sasazuka Center Building (March 2017), the demolition of the Tokyo Sakurada Buildingin conjunction with the Shimbashi Tamura-cho District Urban Redevelopment Project (construction work started
in April 2018 and is scheduled to be completed in March 2021), as well as the impact of the temporary decline in
the IINO Building’s occupancy rate in FY3/20 due to some tenant departures. However, the real estate businessremains a stable source of earnings, and the Company will work on leasing activities for the IINO Building.
Furthermore, the value of the Nishi-Shimbashi and Toranomon areas is expected to increase due to large-scale
redevelopment projects. The Company expects operating profit to start to increase again in FY3/22, the year that
the Shimbashi Tamura-cho District Urban Redevelopment Project begins operating.

██Medium- to long-term growth strategy
Advancing balanced management and taking on the challenge of
having a spirit of innovation
1. Mid-term Management Plan, Be Unique and Innovative Towards our 125th Anniversary in 2024
Toward the 125th anniversary of its foundation in 2024, the Company formulated its Mid-term Management Plan,
Be Unique and Innovative, for April 2017 to March 2020. There has been no change to its policy of realizing a
growth scenario from the twin axes of the shipping business and the real estate business, while it set the theme of
the Plan as Taking up the Challenges of Balanced Management and Advancement (achieving a balance between
the twin axes of the shipping business and the real estate business, stable earnings and next-generation business,and growth numerical targets with a good balance). Toward this, it has set the priority strengthening measures asPursuing Greater Business Differentiation, Solidifying Stable Earnings, and Challenges of Next-Generation Business.

We encourage readers to review our complete legal statement on “Disclaimer” page.

18 23

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

IINO KAIUN KAISHA, LTD.
9119 Tokyo Stock Exchange First Section/ Fukuoka Stock Exchange

26-Jul.-2019
http://www.iino.co.jp/kaiun/english/

Medium- to long-term growth strategy

Toward Pursuing Greater Business Differentiation, in the shipping business the Company is responding to diversifying
needs and accelerating its global business development, while in the real estate business, it is further deepening
its target-area strategy. In order to deal with the uncertainty of conditions in the shipping market, in terms of
Solidifying Stable Earnings, in the real estate business it is advancing the stable operations of existing buildings andthe concentration of assets within the target areas, while in the shipping business, it is stabilizing earnings throughmedium- to long-term contracts. Also, for the Challenges of Next-Generation Business, the Company is researchinga new energy-related business, entering-into promising niche markets, and next-generation office buildings.
In terms of the specific measures, in the chemical tanker business, it is acquiring more shale-derived cargoes onregular U.S. bound routes, providing high quality services throughout the world, maintaining and expanding market
share in the Middle East, and continuously improving its fleet. In the oil tankers and gas carriers businesses, it isfocusing on acquiring new contracts, responding to logistical changes due to the shale revolution, responding todiversifying gas cargo transport, continuing high quality ship management and securing competitive advantages.
In the dry bulk carriers business, it is aiming to utilize medium- to short-term carriers to build an optimized fleet,accumulate stable earnings through dedicated carriers for cargo including coal and wood chip, expand Middle
East-related cargo, and diversify the routes for fleet deployment. In the real estate business, the Company’s policy
is to continue measures for the target-area strategy based on a long-term viewpoint, provide high quality building
management, strengthen the leasing structure, and implement thorough cost management for the Shimbashi
Tamura-cho District Urban Redevelopment Project.

The Company expects to fall short of its profit targets set in the MidTerm Management Plan, but is accumulating foundations for stable
growth ahead of its 125th anniversary
Accumulating stable earnings foundations ahead of the Company’s
125th anniversary
2. Outlook for achievement of the Mid-term Management Plan
The targets in the Mid-term Management Plan for its final fiscal year of FY3/20 include revenue of ¥89,000mn,
operating profit of ¥9,000mn, recurring profit of ¥7,800mn, profit attributable to owners of parent of ¥7,400mn, net
assets of ¥82,500mn, and ROE of approximately 9%. The assumptions for the shipping businesses are an exchange
rate of 1 U.S. dollar to ¥110 and a price of fuel oil of 370 U.S. dollar/MT.
The Company is aiming to realize growth while maintaining a balance between profitability (increasing operating profit
and cash from operating activities, and realizing sustainable growth), efficiency (improving the efficiency of owned
assets, diversifying fund-raising methods, and replacing assets) and financial soundness (accumulating own capitaland prioritizing an investment balance). Within the Goals for 2024, which is the 125th anniversary of its foundation,
the Company is aiming for net assets of more than ¥100,000mn.
The Company’s plans call for total growth investments of ¥38bn in the three-year period (¥28bn in vessels, ¥9bn inbuildings, and ¥1bn in the environment and systems). In FY3/18, the Company made ¥15.4bn in growth investments,
while it made ¥21.2bn in growth investments in FY3/19.

We encourage readers to review our complete legal statement on “Disclaimer” page.

19 23

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

IINO KAIUN KAISHA, LTD.
9119 Tokyo Stock Exchange First Section/ Fukuoka Stock Exchange

26-Jul.-2019
http://www.iino.co.jp/kaiun/english/

Medium- to long-term growth strategy

In FY3/20, the final fiscal year of the Mid-term Management Plan, the Company expects revenue to almost reach thetarget, but expects all profit lines to fall short of the targets due to the delay in the market recovery in the shipping
business, the decline in occupancy in the real estate business, and other factors.
Numerical Targets

Source: The Company's results briefing materials

Cash flow plan and dividend payout

Source: The Company's results briefing materials

We encourage readers to review our complete legal statement on “Disclaimer” page.

20 23

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

IINO KAIUN KAISHA, LTD.
9119 Tokyo Stock Exchange First Section/ Fukuoka Stock Exchange

26-Jul.-2019
http://www.iino.co.jp/kaiun/english/

Medium- to long-term growth strategy

Investment plan

Source: The Company's results briefing materials

The Company is steadily accumulating a stable earnings base ahead of its 125th anniversary (2024).
In the oceangoing shipping business, for chemical tankers the Company acquired three new contracts of affreightment in FY3/18 and three new contracts of affreightment in FY3/19, while in terms of improving its fleet, the Company
built three vessels in FY3/18 and built seven vessels in FY3/19. The Company is also making progress acquiring
medium- to long-term contracts for its oil tankers, gas carriers, and dry bulk carriers.
In the coastal and regional shipping business, the Company is servicing a new domestic transport gas carrier for aleading domestic chemicals manufacturer. The Company earned high praise from cargo owners for its strengths,
including its consistent deployment of vessels, and thus the Company is making progress on revising contracts at
more favorable terms, aiming to increase profitability.
In the real estate business, the IINO Building’s occupancy rate is expected to temporarily decline, but its advanced
environmental performance is a strength, and it should continue to be a base for stable earnings going forward.
Furthermore, aided by the increase in the value of the Nishi-Shimbashi and Toranomon districts, the Company
expects operating profit to start to increase again in FY3/22, the year that the Shimbashi Tamura-cho District Urban
Redevelopment Project begins operations.

We encourage readers to review our complete legal statement on “Disclaimer” page.

21 23

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

IINO KAIUN KAISHA, LTD.
9119 Tokyo Stock Exchange First Section/ Fukuoka Stock Exchange

26-Jul.-2019
http://www.iino.co.jp/kaiun/english/

Medium- to long-term growth strategy

No change to the Company’s policy of realizing a growth scenario
based on the twin axes of the shipping business and the real estatebusiness, while also focusing on ESG management
3. Growth scenario and ESG management
There has been no change to the Company’s policy of aiming to realize sustainable, stable growth on the twin axesof the shipping business and the real estate business, while medium-term growth in earnings is expected.
In the oceangoing shipping business, in February 2018 the Company concluded a time charter contract for a
newly-built methanol-fueled vessel. Under this contract, the Company will build the vessel equipped with a dual-fuelmain engine (heavy oil and methanol), which will be a first for the Company, and is working towards reducing theburden on the environment. Also, the Company has begun a demand survey of LNG-fueled vessels and LNG
bunkering vessels through the fuel conversion of existing domestic LNG carriers. In the real estate business, there
has been strong praise for the IINO Building’s advanced environmental performance.
This management with a strong focus on ESG (environment, society, governance) will continue to be closely watched.

██Shareholder return policy
Aims for a stable annual dividend of ¥8 to ¥12
As the results in the shipping business are greatly influenced by trends in market conditions and FOREX rates, theCompany’s basic policy for the distribution of profits is to continuously pay a dividend while also strengthening its
financial structure and supplementing the internal reserves it will need, while giving full consideration to the prospects
for the business environment in the future. Also, the Company intends to supplement the funds for internal reserves inorder to invest strategically in the shipping business and excellent properties in the real estate business, to maintainand improve the fleet and buildings, and to enter into new, promising businesses. In the Mid-term Management
Plan, Be Unique and Innovative, the Company aims for a stable annual dividend of ¥8 to ¥12 to return profits toshareholders.
Based on this basic policy, the FY3/19 dividend per share was an annual dividend of ¥15 (interim dividend of ¥5,
period-end dividend of ¥5, and 120th anniversary commemorative dividend of ¥5), which is ¥5 more than theprevious fiscal year. The consolidated dividend payout ratio was 33.9%. The FY3/20 dividend forecast is for anannual dividend of ¥10 (interim dividend of ¥5 and period-end dividend of ¥5). This will be a ¥5 decline comparedto the previous fiscal year, due to the non-recurrence of the 120th anniversary commemorative dividend of ¥5.

We encourage readers to review our complete legal statement on “Disclaimer” page.

22 23

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

IINO KAIUN KAISHA, LTD.
9119 Tokyo Stock Exchange First Section/ Fukuoka Stock Exchange

26-Jul.-2019
http://www.iino.co.jp/kaiun/english/██Information security
Formulated information security-related regulations considering thelatest situation
In a situation in which large-scale cyber attacks against companies are increasing and interest in companies’
information security measures is rising, the Company is aware that conducting information security and appropriately
protecting its information assets are one of its most important management issues. Therefore, it has formulated
information-related regulations. In January 2019, it has revised an information security policy.
Also, together with IINO Systems Co., Ltd., a subsidiary that is responsible for systems development, maintenance,and management for the Group, in addition to restricting Web access, changing passwords and other measures,
the Group as a whole is implementing various information security measures, including holding Risk Management
Committee meetings and conducting risk management response checks.

We encourage readers to review our complete legal statement on “Disclaimer” page.

23 23

Disclaimer
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