COMPANY RESEARCH AND ANALYSIS REPORTIINO Kaiun Kaisha, Ltd.
9119
Tokyo Stock Exchange First Section/ Fukuoka Stock Exchange

27-Jul.-2020
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

27-Jul.-2020
https://www.iino.co.jp/kaiun/english/ir/■ Index■Summary---------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 01
1. Dual pillars of the historical shipping business and the real estate business................................................

01

2. Sales increased while profit declined in FY3/20,
and the Company expects both recurring and final profit to increase in FY3/21.........................................
3. Formulated ambitious new Mid-term Management Plan with a focus on ESG and SDGs. ..........................

01
01

4. Will strengthen shareholder returns dependent on profit growth by combining a stable dividendwith a performance-linked dividend based on a payout ratio of 30%..........................................................

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

03
03■Business overview, features, and strengths------------------------------------------------------------------------------------ 05
1. Business overview................................. ......................................................................................................
2. Shipping business. . ................................ ......................................................................................................
3. Real estate business....................................................................................................................................
4. IINO Building. . ..............................................................................................................................................
5. Earnings profile/risk factors and countermeasures. .....................................................................................

05
07
08
08
09

■Business performance------------------------------------------------------------------------------------------------------------------------------------------ 10
1. Overview of FY3/20 consolidated results. ....................................................................................................
2. Overview by segment............................ ......................................................................................................
3. Financial overview. . ................................ ......................................................................................................

10
12
13

■Outlook-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 15
1. Overview of consolidated results outlook for FY3/21. ..................................................................................
2. Outlook by segment. . ...................................................................................................................................

15
16■Medium- to long-term growth strategy------------------------------------------------------------------------------------------------ 16
1. Review of previous Mid-Term Management Plan. ........................................................................................
2. Overview of new Mid-Term Management Plan. ............................................................................................
3. Priority strengthening measures. . ........... ......................................................................................................
4. Response to ESG and SDGs................. ......................................................................................................
5. Acceleration of DX.......................................................................................................................................
6. Numerical targets................................... ......................................................................................................

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17
17
19
20
21

■Shareholder return policy---------------------------------------------------------------------------------------------------------------------------------- 23■Information security------------------------------------------------------------------------------------------------------------------------------------------------ 24

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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

27-Jul.-2020
https://www.iino.co.jp/kaiun/english/ir/█ SummaryPursuing IINO MODEL and IINO QUALITY heading towards 2030
1. Dual pillars of the historical shipping business and the real estate business
IINO Kaiun Kaisha, Ltd. <9119> (hereafter, also “the Company”) is a shipping company with a history of over 120
years since it was founded in 1899 (IINO Shokai, Maizuru, Kyoto). Currently, it is developing its business on the
dual pillars of the shipping businesses (the oceangoing shipping business and the regional shipping business),which mainly involve the transportation of resources and energy, and the real estate business for the rental of officebuildings, mainly the head office of the IINO Building. The Company’s distinguishing characteristics and strengths
in the shipping business include its fleet of chemical tankers, which is one of the largest in the industry, and its
gas carriers which accumulate medium- to long-term contracts as a stable source of earnings. The distinguishing
characteristic of the real estate business is that it owns multiple rental office buildings in prime areas in the centerof Metropolitan Tokyo, including the IINO Building, which is the Company’s head office building (including the IINOHall and Conference Center).
2. Sales increased while profit declined in FY3/20, and the Company expects both recurring and final profit
to increase in FY3/21
In the FY3/20 consolidated results, revenue increased 5.1% year on year (YoY) to ¥89,179mn, operating profit
declined 16.8% to ¥3,976mn, recurring profit decreased 26.5% to ¥3,455mn, and profit attributable to owners ofparent declined 19.1% to ¥3,788mn. An improvement in market conditions in the large gas carriers and chemical
tankers in the shipping business was a factor for higher earnings, but overall profit declined due to a number offactors, including the increase in docking expenses in the shipping business and an increase in equipment renewal
costs in the real estate business.
The forecasts for the FY3/21 consolidated results are for revenue to decline 1.3% YoY to ¥88,000mn, operating
profit to drop 4.4% to ¥3,800mn, recurring profit to increase 4.2% to ¥3,600mn, and profit attributable to ownersof parent to increase 18.8% to ¥4,500mn. In terms of the impacts of the novel coronavirus disease (COVID-19)(on the assumption that the impacts of COVID-19 will continue for the April–September period), the Company
expects a roughly minus ¥2,000mn impact at the operating profit stage (roughly ¥1,600mn in the shipping businessand ¥400mn in the real estate business), and thus is forecasting a decline in operating profit, but the Company
is forecasting increases in both recurring profit and final profit due to the improvement in non-operating income/expenses and the booking of extraordinary income (realization of foreign currency translation adjustment due to thecompletion of the liquidation of an overseas subsidiary).
3. Formulated ambitious new Mid-term Management Plan with a focus on ESG and SDGs
The Company has formulated a new Mid-Term Management Plan spanning April 2020 through March 2023. The
plan is named “Be Unique and Innovative.: The Next Stage - Towards 2030-” To achieve the goals for 2030 (IINO
VISION for 2030) the Company will further pursue the creation of its own unique business model, IINO MODEL, andthe provision of high quality service, IINO QUALITY, to increase the economic value of the Group, while at the sametime as creating social value and responding to social needs including environmental preservation through proactive
initiatives on sustainability and thereby creating shared value.

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01 24

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

IINO Kaiun Kaisha, Ltd.
9119 Tokyo Stock Exchange First Section/ Fukuoka Stock Exchange

27-Jul.-2020
https://www.iino.co.jp/kaiun/english/ir/

Summary

In the new Mid-Term Management Plan, there is no change to the basic scenario of pursuing growth on thetwo pillars of the shipping business and the real estate business. However, we get the strong impression that
the Company is focusing not only on numerical targets (FY3/23 recurring profit of ¥7,000–¥8,000mn, EBITDA of¥19,500–¥20,500mn, ROE of 8–9%), but that the plan also places a strong emphasis on addressing ESG and SDGs,
as well as accelerating DX. We find this point to be appealing, and we expect the Company to grow its earnings
and increase its corporate value over the medium-term.
4. Will strengthen shareholder returns dependent on profit growth by combining a stable dividend with aperformance-linked dividend based on a payout ratio of 30%
Regarding profit distribution, the performance of the shipping business is significantly impacted by market conditions.
Therefore, the Company previously had a basic policy of aiming to pay a stable dividend of ¥8 to ¥12 per year,
paying close attention to strengthening its financial position, keeping the necessary internal reserves, and studying
the outlook for the future business environment. However, in conjunction with the formulation of the new Mid-Term
Management Plan, from FY3/21, in addition to the existing policy of maintaining a stable dividend, the Company
will pay performance-linked dividends based on a consolidated payout ratio of 30%. This will provide greater clarity
on the link between dividend amounts and profit growth, as the Company aims to improve business performanceand increase dividends.
Key Points
Dual pillars of the historical shipping business and the real estate business
Forecasting higher recurring profit and final profit in FY3/21 consolidated results• Pursuing the IINO MODEL and IINO QUALITY heading towards 2030
• Proactive sustainability initiatives••

Result trends（¥mn）
120,000

Revenue (left)

Operating profit (right)

（¥mn）
9,000

8,115

100,000

7,500
6,591
5,651

80,000

6,000
4,782
3,976

60,00040,00094,843
83,32081,334

84,84389,179

3,800

4,500

88,0003,000

20,0001,500

00FY3/16

FY3/17

FY3/18

FY3/19FY3/20FY3/21E

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.
9119 Tokyo Stock Exchange First Section/ Fukuoka Stock Exchange

27-Jul.-2020
https://www.iino.co.jp/kaiun/english/ir/█ Company profile
Dual pillars of the historical shipping business and the real estatebusiness
1. 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 developing its business on the dual pillars of the shipping businesses (the oceangoing shipping
business and the 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 (Metropolitan
Tokyo, Chiyoda Ward).
At the end of FY3/20, capital was ¥13,092mn, the equity ratio was 31.7%, net assets per share was ¥692.63, andthe number of outstanding shares was 111,075,980 shares (of which 5,269,276 were treasury shares).
At the end of FY3/20, the Group consisted of 73 companies, including the Company and 72 Group companies (58consolidated subsidiaries, 5 equity-method affiliates, and 9 affiliates outside the scope of consolidation). Overseas, it
has local subsidiaries and representative offices in Singapore, Houston, London, Connecticut, Dubai and Shanghai.
2. History
In 1899, the founder Torakichi Iino established IINO Shokai in Maizuru, Kyoto, and began transportation of coaland stevedoring business. In 1944, the Company changed its name to its current name of IINO Kaiun Kaisha, Ltd.,and in 1949 the Company listed on the Tokyo Stock Exchange. In 2004, the Company simultaneously obtained
ISO9001 and ISO14001 certification in the shipping business. In 2005, it simultaneously obtained the ISO9001 andISO14001 certification in the office building leasing business. The Company celebrated the 120th anniversary of its
founding in July 2019.
In the shipping business, in 1964, the Company separated and transferred its liner department upon the consolidationof 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
December 2019, the Company delivered its first methanol tanker with a dual-fuel main engine, while in March 2020,
the Company completed its first VLCC equipped with a SOx scrubber (desulfurization unit). In 2021, the Company
plans to complete its first VLGC equipped with a dual-fuel main engine which can use LPG as a fuel. These are
initiatives that the Company is proactively introducing to use technologies that reduce the burden on the environment.

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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

27-Jul.-2020
https://www.iino.co.jp/kaiun/english/ir/

Company profile

In the real estate business, in 2011 the Company completed phase 1 of the IINO Building construction project andthe building opened. That year, the head office (the IINO Building) became the first office space in Japan to receive
the LEED Platinum Certification. In 2014, the Company completed phase 2 of the IINO Building construction projectand held the grand opening. In 2018, the Shimbashi Tamura-cho District Urban Redevelopment Project, which
includes the site of the former Tokyo Sakurada Building, got started in earnest, while the IINO Building’s office floor
portion (7th floor through 27th floor) received the highest rank of five stars under the Building-Housing Energyefficiency Labeling System (BELS). In 2019, in the DBJ Green Building certification by the Development Bank ofJapan, which is awarded to office buildings that are friendly to the environment and society, the IINO Building received
a top rank of five stars, while the Shiodome Shiba-Rikyu Building received a four-star ranking. Furthermore, in March
2020, the Company acquired an office building in London, adding overseas real estate to the business portfolio.
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.

2011Completed 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.

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.

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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

27-Jul.-2020
https://www.iino.co.jp/kaiun/english/ir/

Company profile
Year

Major event

2017

Formulated Mid-Term Management Plan (FY2017–FY2019).

2018

Concluded a time charter contract for a newly constructed methanol tanker 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 obtained the top ranking of 5 stars in the DBJ Green Building Certification by the Development Bank of Japan.
The Shiodome Shiba-Rikyu Building obtained a 4-star ranking in the DBJ Green Building Certification by the Development Bank ofJapan.
Donated credits (excess reduction of CO2) based on the Tokyo Cap-and-Trade Program.
Completed its first ship (methanol tanker) equipped with a dual-fuel main engine.

2020

Acquired an office building in London, U.K.
Completed its first VLCC equipped with a SOx scrubber.
Concluded a time charter contract for a newly-built very large gas carrier (VLGC) with Equinor ASA, and made the decision to build theCompany’s first VLGC equipped with a dual-fuel main engine that can use LPG as fuel.
JP CORAL, a bulk carrier managed and operated by the Company, won the Best Quality Ship Award for 2019.
Formulated the mid-term management plan “Be Unique and Innovative.: The Next Stage - Towards 2030-” looking ahead to 2030.

Source: Prepared by FISCO from the Company’s materials█ Business overview, features, andstrengths

Engaged in the shipping business (oceangoing shipping business,regional transport shipping business), and the real estate business
1. Business overview
A feature of the Company is that its earnings are from the dual pillars of the shipping business (the oceangoingshipping business and the regional shipping business) and the real estate business. In FY3/20, these three businesssegments accounted for 76.6%, 10.4%, and 13.1% of total revenue, respectively, and 16.4%, 14.3%, and 69.3%
of operating profit, respectively. Meanwhile, the operating margin in each business segment was 1.0%, 6.2%, and23.6%, respectively.

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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

27-Jul.-2020
https://www.iino.co.jp/kaiun/english/ir/

Business overview, features, and strengths

Results by segment
Revenue and percentages of total revenue(¥mn)
FY3/16

FY3/17

FY3/18

FY3/19FY3/2094,843

83,32081,334

84,84389,179

Oceangoing shipping business

72,36462,572

61,86564,873

68,391

Regional shipping business

9,424

8,514

9,012

9,427

9,244

Real estate business

13,13812,314

10,545

10,66911,667

94,92583,39981,422

84,96889,302

-82

-80

-88

-125

-123

Oceangoing shipping business

76.2%

75.0%

76.0%

76.3%

76.6%

Regional shipping business

9.9%

10.2%

11.1%

11.1%

10.4%

Real estate business

13.8%

14.8%

13.0%

12.6%

13.1%

FY3/16

FY3/17

FY3/18

FY3/19FY3/20

8,115

6,591

5,651

4,782

3,976

3,767

2,626

1,713

583

651

364

180

700

926

570

3,984

3,786

3,238

3,273

2,755

8,115

6,591

5,651

4,782

3,976

-

-

-

-

-

Oceangoing shipping business

46.4%

39.8%

30.3%

12.2%

16.4%

Regional shipping business

4.5%

2.7%

12.4%

19.4%

14.3%

Real estate business

49.1%

57.4%

57.3%

68.4%

69.3%

FY3/16

FY3/17

FY3/18

FY3/19FY3/20

8.6%

7.9%

6.9%

5.6%

4.5%

Oceangoing shipping business

5.2%

4.2%

2.8%

0.9%

1.0%

Regional shipping business

3.9%

2.1%

7.8%

9.8%

6.2%

Real estate business

30.3%

30.7%

30.7%

30.7%

23.6%

Consolidated revenue

Total
Adjustment%

Source: Prepared by FISCO from the Company's financial results
Operating profit and percentages of total operating profit
Consolidated operating profit
Oceangoing shipping business
Regional shipping business
Real estate business
Total

(¥mn)

Adjustment%

Source: Prepared by FISCO from the Company's financial results
Operating margin
Consolidated operating margin

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

In looking at the last five years of results, there has not been a major change in the ratio of revenue by segment,
but there has been a change in operating margins. In the oceangoing shipping business, the operating margin
has been declining due to factors including changes in market conditions and increasing docking expenses. In
the regional shipping business, operating margin has been trending upwards due to stable revenue based on
medium- to long-term contracts and efficient deployment of vessels, but operating profit declined in FY3/20 as aresult of an increase in docking. In the real estate business, operating margin declined in FY3/20 due to the increasein equipment renewal costs, but the operating margin was in the 30% range excluding this temporary factor, andthe business is a source of stable earnings.

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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

27-Jul.-2020
https://www.iino.co.jp/kaiun/english/ir/

Business overview, features, and strengths

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 grains, steel materials, and fertilizer. The regional 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, suchas a ship management business and sales of maritime equipment.
At the end of FY3/20, the Group’s number of operating ships was a total of 105 ships (54 owned ships and 51
chartered ships, including shared equity interests and short-term charters). Breaking this down, in the oceangoingshipping business, it had three oil tankers, 43 chemical tankers, 17 large gas carriers, and 16 dry bulk carriers, whilein the regional shipping business, it had 26 small gas carriers.
The Company’s main business partners include Astomos Energy Corporation (an LPG trading company createdfrom the integration of the LPG departments of the Idemitsu Kosan <5019> Group and the Mitsubishi Corporation<8058> Group), Idemitsu Kosan, Oji Holdings Corp. <3861>, ENEOS Corporation (ENEOS Holdings, Inc. <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).
With the main operations being resources- and energy-related transportation by chemical tankers, gas carriers,and other 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’s distinguishing
characteristics and strengths include the fact that it has one of the largest chemical tanker fleets in the industry, andthat it has gas carriers on medium- to long-term contracts as a source of stable earnings. In particular, the Company
has a leading share in transport volume of petrochemical products originating from the Middle East. The Company
also has a leading share in the domestic transportation market for LPG and petrochemical gas. Moreover, it is oneof the very few companies in Japan operating coastal shipping LNG carriers.
Many of the chemical tankers that the Company operates have stainless-steel tanks. Compared to normal iron tanks,
stainless-steel tanks have a strong resistance to corrosion, so they have the advantage of being able to transportcargo 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 transporting cargo efficiently, whichleads to it having a competitive advantage.

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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

27-Jul.-2020
https://www.iino.co.jp/kaiun/english/ir/

Business overview, features, and strengths

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 prime areas 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 andthe building opened for business, and then in November 2014, it completed phase 2 of this project and held the
grand opening. In December 2017, the Company acquired partial equity interest of the NS Toranomon Building(Metropolitan Tokyo, Minato Ward), which was completed in 2016. In addition, in March 2020, the Company’s U.K.
consolidated subsidiary (established in January 2020) acquired the office building Bracton House in London, U.K.,
thus adding overseas real estate to the business portfolio.
In March 2017, the Company sold the Sasazuka Center Building (completed in 1995) following a review of its
business portfolio. 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 by the end of June 2021), in FY3/18 it
demolished the Tokyo Sakurada Building (Metropolitan Tokyo, Minato Ward, completed in 1967).
As a result, as of the end of FY3/20, the Company owned six rental buildings (IINO Building, Tokyo Fujimi Building,
Shiodome Shiba-Rikyu Building, NS Toranomon Building, IINO Takehaya Building, and Bracton House in London).
The real estate business is one of the main sources of a stable earnings for the Company from a long-term
perspective. Going forward, the Company will look to acquire excellent properties overseas as well as in regional
areas of Japan, rather than limiting its scope to its previous target area of central Tokyo.

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 source based on
the concept of being a “building that will still be loved 100 years in the future,” and it is equipped with hall andconference functions. The building also pursues advanced environmental performance. For example, the adoptionof a “double-skin exterior” by doubling the normal outer walls and window glass creates an air-heat insulating layer,
thus reducing thermal load.

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08 24

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

IINO Kaiun Kaisha, Ltd.
9119 Tokyo Stock Exchange First Section/ Fukuoka Stock Exchange

27-Jul.-2020
https://www.iino.co.jp/kaiun/english/ir/

Business overview, features, and strengths

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 received the highest rank of five stars, while the Shiodome Shiba-Rikyu Building maintained its four-stars
ranking.
5. Earnings profile/risk factors and countermeasures
In terms of the Company’s earnings profile and risk factors, all of the Company’s businesses are easily impacted bychanging market conditions. However, the Company aims to build a robust business foundation by accumulating
stable sources of revenue in each business.
In the shipping business, the oceangoing shipping business in particular, is impacted by elements including shipping
market conditions, the price of fuel oil, and FOREX rates. Moreover, for the mainstay chemical tankers, the effectsof 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 contract of affreightment (COA), which constitute about 70% of the total, and spot freight,
which constitute about 30%. COA generally have a price adjustment clause called bunker adjustment factors (BAF)
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 to the price, and this may impact profitability.
Oil tankers and gas carriers are mainly deployed on medium- to long-term time charter contracts, as the Company
is promoting the accumulation of stable long-term revenue sources with oil tankers and gas carriers. 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 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.

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

09 24

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

IINO Kaiun Kaisha, Ltd.
9119 Tokyo Stock Exchange First Section/ Fukuoka Stock Exchange

27-Jul.-2020
https://www.iino.co.jp/kaiun/english/ir/

Business overview, features, and strengths

From January 2020, the International Maritime Organization (IMO) started to implement tighter international regulations on sulfur content in marine fuels (SOx regulation). Specifically, cap on the concentration of sulfur included
in marine fuel will be lowered from the current level of “no more than 3.5%” to “no more than 0.5%.” As response
options, the Company 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. With respect to the increased costs from using compliant fuel oil, theCompany has worked to gain the understanding of cargo owners that this is a necessary cost in order to protect theenvironment, and has made progress in passing the increased costs along to cargo owners. Meanwhile, the positive
impact of the tougher regulation is expected to lead to an improvement in market conditions for product tankers andchemical tankers due to demand for the transport of compliant fuel oil and an improvement in the supply-demandbalance due to the scrapping of vessels that cannot comply with the tighter regulation.
In the real estate business, earnings tend to be influenced by factors including real estate market conditions, vacancy
rates, and rents, but all of the rental buildings that the Company owns are located in prime locations in the centerof Metropolitan Tokyo and London where office building rent levels are firm. 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 of stable earnings.

█ Business performance
Profits declined in FY3/20
1. Overview of FY3/20 consolidated results
In the FY3/20 consolidated results, revenue increased 5.1% YoY to ¥89,179mn, operating profit declined 16.8% to¥3,976mn, recurring profit declined 26.5% to ¥3,455mn, and profit attributable to owners of parent declined 19.1%
to ¥3,788mn. The average FOREX rate was ¥109.13/USD (compared to ¥110.67/USD in FY3/19), the average priceof fuel oil in Singapore was US$412/MT (versus US$430/MT in FY3/19), and compliant fuel oil was US$598/MT.
Overview of FY3/20 consolidated results(¥mn)
FY3/19FY3/20

Revenue

84,84389,179

5.1

Operating profit

4,782

3,976

-16.8

Recurring profit

4,701

3,455

-26.5

Profit attributable to owners of parent

4,685

3,788

-19.1

EPS (¥)

44.28

35.80

-

Dividend (¥)

15.00

12.00

-

BPS (¥)

689.25692.63-

Average FOREX rate (¥/USD)

110.67109.13

-

430

412

-

-

598

-

Average price of fuel oil (USD/MT)
Average price of compliant fuel oil (USD/MT)

YoY (%)

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

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

10 24

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

IINO Kaiun Kaisha, Ltd.
9119 Tokyo Stock Exchange First Section/ Fukuoka Stock Exchange

27-Jul.-2020
https://www.iino.co.jp/kaiun/english/ir/

Business performance

Looking at the comparison with FY3/19, an improvement in market conditions in the large gas carriers and chemical
tankers in the shipping business was a factor for higher earnings, but overall profit declined due to a number offactors, including the increase in docking expenses in the shipping business and an increase in equipment renewal
costs in the real estate business. The impact of the spread of COVID-19 was minimal on the whole.
The overall ¥800mn decline in operating profit was the result of positive factors including the improvement in themarket conditions for large gas carriers (+¥710mn), the better market conditions for chemical tankers (+¥790mn),
and negative factors including an increase in docking expenses for an oil tanker (-¥940mn), the sluggish market
conditions for dry bulk carriers (-¥310mn), an increase in docking expenses for regional shipping (-¥360mn), a decline
in occupancy due to tenants leaving and higher equipment renewal costs in the real estate business (-¥520mn),
and exchange rate and other (-¥180mn).
Breakdown of YoY change in operating profit

Source: The Company’s results briefing materials

In non-operating income, the Company booked ¥311mn in equity in earnings of affiliates, but dividend income
declined ¥498mn, and foreign exchange gains fell ¥370mn, resulting in a ¥440mn decline in total non-operating
income. Also, in extraordinary income, gain on sales of non-current assets declined ¥1,187mn, but in extraordinary
losses, impairment loss declined ¥1,146mn, and loss on valuation of investment securities declined ¥201mn,
resulting in a ¥182mn increase in overall extraordinary gains and losses.

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11 24

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

IINO Kaiun Kaisha, Ltd.

27-Jul.-2020

9119 Tokyo Stock Exchange First Section/ Fukuoka Stock Exchange

https://www.iino.co.jp/kaiun/english/ir/

Business performance

2. Overview by segment
The overview by segment (before adjustment for consolidation) is as follows
Overview of FY3/20 results by segment(¥mn)
FY3/19FY3/20YoY (%)
5.1

84,84389,179

Oceangoing shipping business

64,873

68,391

5.4

Coastal and regional shipping business

9,427

9,244

-1.9

Real estate business

10,66911,667

9.4

84,96889,302

5.1

Adjustment

-125

-123

-

Consolidated operating profit

4,782

3,976

-16.8

Oceangoing shipping business

583

651

11.8

Coastal and regional shipping business

926

570

-38.5

3,273

2,755

-15.8

4,782

3,976

-16.8

Consolidated revenue

Total

Real estate business
Total

Source: Prepared by FISCO from the Company's financial results(1) Revenue and profit increased in the oceangoing shipping businessIn the oceangoing shipping business, revenue increased 5.4% YoY to ¥68,391mn, while operating profit increased
11.8% YoY to ¥651mn. Negative factors included the increase in docking expenses for an oil tanker and sluggish
market conditions for dry bulk carriers. On the other hand, factors including stable accumulation of revenues andstronger market conditions and profitability improvements for large gas carriers and chemical tankers led to an
overall increase in revenues and profits.
In oil tankers, the market stayed at low level at the beginning of fiscal year, but it spiked from summer due toan attack on oil infrastructure in Saudi Arabia and other factors. The oil tanker market dipped temporarily at theend of the fiscal year due to the impact of COVID-19, but market conditions rose again as demand for offshore
oil storage increased. In chemical tankers, the market conditions were sluggish due to the downturn in global
economy, however, the market has been on a recovery track from autumn due to the impacts of a rise in the oiltanker market. However, the market softened slightly at the end of the fiscal year due to the impact of COVID19. For large LPG carriers, the market improved from summer due to factors such as an upturn in arbitragetransactions from the U.S. to Asia, and was generally favorable. For large LNG carriers, the market was generally
solid, supported by the usual demand for transport during periods of the year in which energy demand is high.
For dry bulk carriers, the market began the fiscal year on a soft note due to the impact of trade friction between
China and the U.S. and other factors. The market improved temporarily from summer through autumn, but turned
down again from winter. Subsequently, the market was in the doldrums by the end of the fiscal year due to thecontraction in economic activity caused by COVID-19.

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12 24

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

IINO Kaiun Kaisha, Ltd.
9119 Tokyo Stock Exchange First Section/ Fukuoka Stock Exchange

27-Jul.-2020
https://www.iino.co.jp/kaiun/english/ir/

Business performance

As key initiatives, the oceangoing shipping business accumulated medium- to long-term contracts as a sourceof stable revenue, enhanced profitability through efficient deployment of its fleet, and proactively introduced
technologies to reduce environmental impacts. In oil tanker operations, the Company saw a deterioration in
profitability due to docking expenses in the first quarter, but in March 2020 its first VLCC equipped with a SOx
scrubber (desulfurization unit) completed. In chemical tanker operations, the Company strove for efficient vessel
deployment through a combination of COA and spot cargo shipping. Also, in December 2019, a new methanol
tanker equipped with a dual-fuel main engine (a first for the Company) was completed and deployed on a longterm contract. For large gas carriers, the Company secured stable revenues through the ongoing operation oftankers deployed on existing medium- to long-term contracts. For dry bulk carrier operations, efforts were madeto deploy vessels efficiently, but the Company was unable to completely avoid an impact from the deteriorationin market conditions.
(2) Revenue and profit decreased in regional shipping businessIn the regional shipping business, revenue declined 1.9% YoY to ¥9,244mn, while operating profit fell 38.5% YoY
to ¥570mn. Market conditions in coastal gas shipping business were solid, but market conditions in regional
gas transport were soft. As key initiatives, the Company strove to maintain stable revenue based on medium- tolong-term contracts and efficient deployment of its fleet. However, the profit declined due to an increase in docking
expenses in coastal shipping.
(3) Real estate business revenue increased but profit declined
In the real estate business, revenue increased 9.4% YoY to ¥11,667mn, while operating profit declined 15.8%
to ¥2,755mn. The departures of some tenants in IINO Building resulted in a vacancy period, but the Company
succeeded in finding new tenants with the backdrop of a favorable office building leasing market. On the other
hand, LED lighting replacement work was carried out, and equipment renewal costs also increased at the IINO
Building, while at the IINO Hall & Conference Center, customers refrained from holding events due to COVID-19.
As a result, overall profit declined in the real estate business.
However, the decrease in occupancy and the increase in equipment renewal costs are temporary factors, andat the IINO Building, new tenants will move in by May 2020, and the building will be fully occupied. The businesswill remain a source of stable revenue. In March 2020, the Company acquired an office building in London, U.K.
(will be reflected in the consolidated financial statements from 1Q FY3/21) and added overseas real estate to thebusiness portfolio as an initiative to develop next-generation businesses.

Steadily accumulating net assets
3. Financial overview
In terms of profitability, revenues increased while profits declined in FY3/20, so all profit margins declined YoY. Also,
ROE (return on equity) dropped 1.4 percentage points to 5.2%.
Financially, at the end of FY3/20 total assets were up ¥8,652mn versus the end of the previous fiscal year, to¥231,088mn. This was mainly due to increases in the completion of vessels and in cash and deposits. The equity
ratio fell 1.1 percentage points to 31.7%. Net assets increased ¥351mn to ¥73,428mn and have been steadily
accumulating. Based on its strengths of the dual pillars of the shipping businesses and the real estate business,there would seem to be no problems in terms of the Company’s financial soundness.

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13 24

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

IINO Kaiun Kaisha, Ltd.

27-Jul.-2020

9119 Tokyo Stock Exchange First Section/ Fukuoka Stock Exchange

https://www.iino.co.jp/kaiun/english/ir/

Business performance

Key management indicators
(¥mn)
Item

FY3/16

FY3/17

FY3/18

FY3/19FY3/20

Revenue

94,843

83,32081,334

84,84389,179

Cost of sales

79,97469,88068,816

73,16078,074Gross profit

14,86913,44012,518

11,683

11,105Gross margin (%)

15.7

16.1

15.4

13.8

12.5

SG&A expenses

6,754

6,848

6,867

6,901

7,129

SG&A expenses ratio
Operating profit

7.1

8.2

8.4

8.1

8.0

8,115

6,591

5,651

4,782

3,976

Operating margin (%)

8.6

7.9

6.9

5.6

4.5

Non-operating income

2,643

742

1,153

1,721

1,157

Non-operating expenses

3,103

2,229

2,173

1,802

1,678

Recurring profit

7,655

5,105

4,631

4,701

3,455

Recurring margin (%)

8.1

6.1

5.7

5.5

3.9

Extraordinary income

633

3,776

3,577

2,161

969

Extraordinary losses

4,022

5,027

3,599

1,605

231

Profit before income taxes

4,267

3,854

4,609

5,257

4,193

Total income taxes
Profit attributable to owners of parent

602

-19

344

467

414

3,659

3,885

4,243

4,685

3,788

Net income margin attributable to owners of parent (%)

3.9

4.7

5.2

5.5

4.2

Comprehensive income

497

4,607

4,780

4,814

1,939
231,088

230,278

203,969

210,237

222,435(Current assets)

29,12525,14524,711

24,36529,884(Non-current assets)

201,153

178,824

185,526

198,070

201,204
157,660

Total assets

164,993

135,195

140,999

149,359(Current liabilities)

35,342

38,03941,68851,60747,563(Non-current liabilities)

129,651

97,15699,31197,752110,097

Total liabilities

65,285

68,774

69,23773,07773,428(Shareholders’ equity)

61,32264,09864,03667,80170,002(Capital stock)

13,092

13,092

13,092

13,092

13,092

111,075,980

111,075,980

111,075,980

111,075,980

111,075,980

106,024

106,737

5,267,927

5,268,871

5,269,276

EPS (¥)

32.97

35.01

38.53

44.28

35.80

BPS (¥)

587.51

619.18653.29689.25692.63

Dividend per share (¥)

10.00

10.00

10.00

15.00

12.00

Equity ratio (%)

28.3

33.7

32.9

32.8

31.7

ROE (return on equity) (%)

5.6

5.8

6.2

6.6

5.2

Cash flows from operating activities

18,804

11,075

12,117

14,54913,079Cash flows from investing activities-18,551

12,788-15,399-21,202-14,840

Cash flows from financing activities

2,475-27,242

3,350

5,826

6,234

Cash and cash equivalents at end of period

14,326

10,71910,536

9,826

14,208

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

6.9

9.7

9.5

8.1

9.7

Interest coverage ratio (times)

7.9

5.4

7.1

9.0

8.9

Number of employees

619

626

622

629

646

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.

14 24

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

IINO Kaiun Kaisha, Ltd.

27-Jul.-2020

9119 Tokyo Stock Exchange First Section/ Fukuoka Stock Exchange

https://www.iino.co.jp/kaiun/english/ir/█ Outlook
Forecast is for higher recurring profit and final profit in FY3/21
1. Overview of consolidated results outlook for FY3/21
The FY3/21 consolidated results forecasts are for revenue to decline 1.3% YoY to ¥88,000mn, operating profit tofall 4.4% to ¥3,800mn, recurring profit to increase 4.2% to ¥3,600mn, and profit attributable to owners of parent
to increase 18.8% to ¥4,500mn.
In terms of the impacts of COVID-19 (assuming the impacts of COVID-19 will continue for the April–September
period), the Company expects a roughly minus ¥2,000mn impact at the operating profit stage (roughly ¥1,600mn
in the shipping business and ¥400mn in the real estate business), and thus is forecasting a decline in operating
profit, but the Company is forecasting increases in both recurring profit and final profit due to the improvement in
non-operating income/expenses and the booking of extraordinary income (realization of foreign currency translation
adjustment due to the completion of the liquidation of an overseas subsidiary).
The assumed average exchange rate is ¥105.00/USD (FY3/20 average exchange rate was ¥109.13/USD). The
Company is forecasting that each one yen change in the exchange rate will have a ¥106mn impact on recurring
profit. The assumed average price of fuel oil (Singapore) is 305USD/MT (the FY3/20 average was 412USD/MT), anda compliant fuel oil price of 400USD/MT (versus 598USD/MT in FY3/20)
Overview of consolidated forecast for FY3/21(¥mn)
FY3/20FY3/21

YoY (%)

Revenue

89,17988,000-1.3

Operating profit

3,976

3,800

-4.4

(Shipping Business)

1,221

500

-59.0

(Real Estate Business)

19.8

2,755

3,300

Recurring profit

3,455

3,600

4.2

Profit attributable to owners of parent

3,788

4,500

18.8

EPS (¥)

35.80

42.53

-

Dividend (¥)

12.00

12.00

-

BPS (¥)

692.63--

Average FOREX rate (¥/USD)

109.13105.00-

Average price of fuel oil (USD/MT)

412

305

-

Average price of compliant fuel oil (USD/MT)

598

400

-

Source: Prepared by FISCO from the Company's financial results, results briefing materials, and Mid-Term
Management Plan presentation materials

The Company is assuming that the impacts of COVID-19 will continue from April to September 2020, so the 1H
consolidated results are for revenue of ¥42,000mn, operating profit of ¥1,100mn, recurring profit of ¥1,000mn,
and net income attributable to owners of parent of ¥1,200mn. As these forecasts indicate, the Company expects
revenue and profits to be concentrated in 2H.

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15 24

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

IINO Kaiun Kaisha, Ltd.
9119 Tokyo Stock Exchange First Section/ Fukuoka Stock Exchange

27-Jul.-2020
https://www.iino.co.jp/kaiun/english/ir/

Outlook

2. Outlook by segment
The outlooks for each segment are as follows.
(1) Concern about a dulling of transport volume and sluggish market conditions in the shipping business
The Company expects operating profit in the shipping business (total of the oceangoing shipping business andthe regional shipping business) to decline 59.0% YoY to ¥500mn. The Company will work to accumulate stablerevenue and promote efficient deployment of its fleet, but there is concern that freight movement will slow down,
and market conditions will become sluggish due to the global economic slowdown caused by COVID-19. The
Company is expecting this to result in a negative impact of approximately ¥1,600mn (approximately ¥1,100mn due
to the market slump and deterioration of revenues in dry bulk carriers and chemical tankers, and roughly ¥500mn
due to the increase in labor costs associated with the prolonged docking of ships due to immigration regulations).
Meanwhile, the oil tanker, large gas carrier and coastal/regional shipping divisions are expected to avoid any major
impacts from COVID-19, as their business operations are based on medium- to long-term contracts. With respect
to the ramp-up of SOx regulation by the IMO which went into effect from January 2020, the Company has worked
to gain the understanding of cargo owners that this is a necessary cost in order to protect the environment, andhas made progress in passing the increased costs due to the use of compliant fuel oil along to cargo owners.
(2) Full occupancy of the IINO Building in the real estate businessIn the real estate business, the Company is expecting operating profit to increase 19.8% YoY to ¥3,300mn. The
Company is forecasting that event postponements due to COVID-19 will have a roughly ¥400mn negative impact
due to a decline in utilization of IINO Hall and the photo studio, but new tenants finished moving into the mainstay
IINO Building by May 2020, resulting in full occupancy, so IINO Building will drive overall performance. These newleases are on more favorable terms for the Company than before, which will aid performance. Also, the officebuilding the Company acquired in March 2020 in London, U.K. is also expected to contribute to performance inthe real estate business.

█ Medium- to long-term growth strategy
Mid-Term Management Plan with an eye towards 2030
1. Review of previous Mid-Term Management Plan
Toward the 125th anniversary of its foundation in 2024, the Company formulated its Mid-term Management Plan,
Be Unique and Innovative, from April 2017 to March 2020. Under this plan, the theme was taking up the challenges
of balanced management and advancement (achieving a balance between the dual pillars of the shipping businessand the real estate business, stable earnings and next-generation business, and well-balanced numerical growthtargets). Toward this, it set the priority strengthening measures as pursuing greater business differentiation, solidifying
stable earnings, and challenges of next-generation business.

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

16 24

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

IINO Kaiun Kaisha, Ltd.
9119 Tokyo Stock Exchange First Section/ Fukuoka Stock Exchange

27-Jul.-2020
https://www.iino.co.jp/kaiun/english/ir/

Medium- to long-term growth strategy

In terms of results under the plan, the prolonged stagnation in the chemical tanker market and reduced occupancy
in the IINO Building due to the departure of tenants, along with other factors, led to results falling short of the targets(FY3/18–FY3/20 total operating profit target was ¥21,000mn, but the actual total operating profit was ¥14,400mn).
The measures implemented included improving COA ratio by acquiring new chemical tanker COAs, reducing theimpact of market conditions through medium- to long-term contracts of chemical tankers, and acquiring new tenants
for the IINO Building.
In terms of the status of efforts on key initiatives, for pursuing greater business differentiation, the Company focusedon strengthening competitiveness in oil tankers and maintaining a market-leading position in the regional gas shipping
business. In terms of solidifying stable earnings, the Company worked on initiatives in the energy resources shipping
business, maintained and expanded Middle East share in the chemical tanker market, and promoted redevelopmentof the Shimbashi Tamura-cho District Urban Redevelopment Project. In terms of challenges of next-generation
business, the Company acquired an office building in London (U.K.) and delivered a methanol tanker equipped witha dual-fuel main engine.
2. Overview of new Mid-Term Management Plan
Based on the results of the previous mid-term management plan, the Company has formulated a new Mid-Term
Management Plan spanning April 2020 through March 2023. The plan is named “Be Unique and Innovative.: The
Next Stage - Towards 2030-”.
In the plan, the Company set the goal towards 2030 (IINO VISION for 2030) with a view to establishing our position
as an independent global corporate group that continues to evolve with creative ideas in response to the demandsof the times. Therefore, during the period of the new mid-term management plan, the Company will further pursue
the creation of its own unique business model (IINO MODEL) and the provision of high quality service (IINO QUALITY)
to increase the economic value of the Group, while at the same time as creating social value and responding social
needs including environmental preservation through proactive initiatives on sustainability and thereby creating sharedvalue.
3. Priority strengthening measures
Under the priority strengthening measures (three measures) of the further promotion of global business, further
solidifying stable earnings, and sustainability initiatives, there are six foundation items in order to solidify the foundations of the Group. These foundation items include ship and building management quality improvement throughsafety management, strengthening of cost competitiveness, training and strengthening of human capital, further
use of overseas bases, acceleration of digital transformation (DX), and strengthening of measures to address ESG(Environment, Social, Governance) and the SDGs (Sustainable Development Goals).

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

17 24

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

IINO Kaiun Kaisha, Ltd.
9119 Tokyo Stock Exchange First Section/ Fukuoka Stock Exchange

27-Jul.-2020
https://www.iino.co.jp/kaiun/english/ir/

Medium- to long-term growth strategy

Reorganization of corporate philosophy system

Source: The Company’s Mid-Term Management Plan presentation materials

Overview of Mid-Term Management Plan

Source: The Company’s Mid-Term Management Plan presentation materials

In terms of further promotion of global business, for enhancing competitiveness to promote a global system, theCompany will strengthen measures to operate routes outside existing Middle East routes, while for gas carriers anddry bulk carriers the Company will strengthen measures for new cargoes and new routes. Meanwhile, in terms ofstrengthening organizational capability to support a global system, the Company will increase headcount at overseas
offices and strengthen functions, among other efforts.

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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

27-Jul.-2020
https://www.iino.co.jp/kaiun/english/ir/

Medium- to long-term growth strategy

With respect to further solidifying stable earnings, in terms of initiatives for strengthening the real estate business,
the Company will aim to acquire properties in central Tokyo that will become sources of stable earnings from along-term perspective, and focus on outstanding properties overseas and in regional areas in Japan to quickly
generate earnings. With respect to further strengthening energy transport, the Company will promote stable fleet
replacement, continue high-quality service to existing contracted shippers, and continue the ongoing supply of
stable and high-quality energy transport, among other efforts.
With respect to sustainability initiatives, in terms of investment in assets that contribute positively to the environment,
the Company will bolster investment in large vessels with fuel-efficient engines (reduces CO2 emissions and improve
economic efficiency), and promote the improvement of the energy mix in Company-owned buildings (switch torenewable energy, use LED, etc.). When it comes to strengthening initiatives on next-generation fueled ships, theCompany will invest in vessels fueled by LNG, LPG, and methanol, etc., as well as advance know-how on operating
and managing ships with dual-fuel engines. In terms of strengthening initiatives on sustainable cargo (cargo with low
environmental impact, as well as cargo that contributes to the eradication of hunger and poverty), the Company willaccumulate operational know-how for cargo such as LNG, grains, and fertilizers. The Company will also promote
new business development.
4. Response to ESG and SDGs
The new Mid-Term Management Plan lays out a strong response to ESG and the SDGs. Specifically, the Company
aims to create social value and economic value at the same time, and thereby improve corporate value, by bolsteringcommunication with stakeholders and seriously working to overcome environmental, social, and economic issues.
In terms of a response to greenhouse gases, as an emissions reduction target, in the shipping business, theCompany will work to reduce greenhouse gas emissions 40% by 2030 (compared to 2008) per transport unit. Goingeven further, the Company has set a target of reducing greenhouse gas emissions 50% by 2050 (compared to 2008).
Meanwhile, in the real estate business, the Company established a reduction target of 40% by 2030 (compared to2008) of CO2 emissions per unit area, and to reduce emissions 50% by 2050 (compared to 2008).
Initiatives to reduce greenhouse gases

Source: The Company’s Mid-Term Management Plan presentation materials

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

19 24

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

IINO Kaiun Kaisha, Ltd.
9119 Tokyo Stock Exchange First Section/ Fukuoka Stock Exchange

27-Jul.-2020
https://www.iino.co.jp/kaiun/english/ir/

Medium- to long-term growth strategy

Initiatives to reduce CO2 emissions

Source: The Company’s Mid-Term Management Plan presentation materials

In the shipping business, the Company is promoting initiatives aimed at reducing environmental impacts as wellas putting next-generation fueled vessels into use. Such efforts include switching to dual-fuel engine vessels andswitching to EEDI-compliant engines. In December 2019, Creole Sun, the Company’s first ever methanol tanker
equipped with a dual-fuel main engine, was delivered. Dual-fuel main engines can use not only compliant fuel (lowsulfur fuel oil), but can also use methanol as a fuel. The vessel is chartered to Waterfront Shipping Company Ltd., awholly-owned marine shipping subsidiary of Methanex Corporation, the world’s largest producer of methanol, in along-term contract. Also, in March 2020, the fifth generation Fujisan Maru, a VLCC equipped with a SOx scrubber,
was completed. This is the Company’s first vessel equipped with a SOx scrubber. The vessel will join Idemitsu
Tanker Co., Ltd.’s primary VLCC fleet. Furthermore, in April 2020, the Company announced the construction of
its first VLGC equipped with a dual-fuel main engine. The vessel is expected to be completed in 2021, and will be
deployed on a time charter contract to Equinor ASA.
In the real estate business, the Company has been maintaining a level of CO2 emission rates that is top-classin Japan, including the IINO Building. However, the Company will promote other initiatives, including additionalenergy-conserving building management efforts, upgrades to high-efficiency equipment, maintaining environmental
accreditation, and using renewable energy. Also, in November 2019, the Company donated 614 tons of credits(excess CO2 emissions reductions) to the Tokyo Metropolitan Government under the Tokyo Cap-and-Trade Program.
With respect to addressing the “S” in ESG, the Company will thoroughly establish safety and peace of mind (safevessel operation, safe building management), address BCP, and promote work style reform. With respect to “G,”the Company will promote the diversity of executives and employees (gender, race, nationality, etc.)
5. Acceleration of DX
In addition to responding to the rapidly changing business environment, the Company will accelerate the implementation of DX in order to create new value heading towards 2030.

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20 24

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

IINO Kaiun Kaisha, Ltd.
9119 Tokyo Stock Exchange First Section/ Fukuoka Stock Exchange

27-Jul.-2020
https://www.iino.co.jp/kaiun/english/ir/

Medium- to long-term growth strategy

The Company will upgrade its digitalization base, and aim to create new value such as improving the quality of safe
vessel navigation (real-time ship-to-land communication, optimal route monitoring, use of fault prediction technology),
ESG promotion support (CO2 reductions, better fuel efficiency, realizing diverse work styles, and operational reform(create an environment allowing employees to focus on high value-added work, bolster the organizational system
to pass down know-how). The Company expects to work on the renewal of its core system sequentially in phases
starting from FY3/21.
6. Numerical targets
As indicators emphasized in the Mid-Term Management Plan, in terms of profitability, recurring profit and EBITDA
are key indicators taking into consideration business investment income/loss and cash flow. For efficiency, ROE isthe key indicator with a focus on capital costs. For financial health, the D/E ratio will be the key indicator in orderto maintain discipline with the financial base. The Company aims to achieve sustainable growth, keeping a goodbalance between these three indicators.
Numerical targets Trends in indicators

Source: The Company’s Mid-Term Management Plan presentation materials

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

27-Jul.-2020
https://www.iino.co.jp/kaiun/english/ir/

Medium- to long-term growth strategy

Numerical targets Operating cash flow allocation

Source: The Company’s Mid-Term Management Plan presentation materials

Numerical targets Fleet and property projections

Source: The Company’s Mid-Term Management Plan presentation materials

The Company expects a decline in operating profit in FY3/21 under the assumption that the impacts of COVID-19
will continue from April to September 2020.

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22 24

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

IINO Kaiun Kaisha, Ltd.
9119 Tokyo Stock Exchange First Section/ Fukuoka Stock Exchange

27-Jul.-2020
https://www.iino.co.jp/kaiun/english/ir/

Medium- to long-term growth strategy

Regarding operating profit expectations between FY3/22 and FY3/23, in the shipping business (a forecast range
considering the impact of market fluctuations) the Company expects market conditions to improve, and will workto accumulate medium- to long-term contracts that will serve as a stable source of earnings, to improve profitability
through the efficient allocation of vessels, and to proactively introduce technologies that reduce environmental
impacts. In the real estate business, in addition to operating the main IINO Building at full capacity, against the
backdrop of the increasing value of the Nishi-Shimbashi/Toranomon area based on the large-scale redevelopment,
the Shimbashi Tamura-cho District Urban Redevelopment Project (Minato-ku, Tokyo, scheduled to be completed at
the end of June 2021), is expected to contribute to profits. In addition, the Company will transcend the conventionaltarget area strategy, and will also likely engage in multi-faceted aggressive development, including overseas.
The target for three-year total operating cash flow is ¥55,000mn, while the target for investment in business is¥45,000mn. The Company plans to invest with a good balance between growth, stability, and the environment.
In the new Mid-Term Management Plan, there is no change to the basic scenario of pursuing growth on the
dual pillars of the shipping business and the real estate business. However, we get the strong impression that
the Company is focusing not only on numerical targets (FY3/23 recurring profit of ¥7,000–¥8,000mn, EBITDA of¥19,500–¥20,500mn, ROE of 8–9%), but that the plan also places a strong emphasis on addressing ESG and SDGs,
as well as accelerating DX. We find this point to be appealing, and we expect the Company to grow its earnings
and increase its corporate value over the medium-term.

█ Shareholder return policy
Will strengthen shareholder returns dependent on profit growth bycombining a stable dividend with a performance-linked dividend
based on a payout ratio of 30%
The FY3/21 dividend per share forecast is the same amount as the FY3/20 dividend – an annual dividend of ¥12(interim dividend of ¥6, period-end dividend of ¥6). The forecast dividend payout ratio is 28.2%.
Regarding profit distribution, the performance of the shipping business is significantly impacted by market conditions.
Therefore, in the past, the Company had a basic policy of aiming to pay a stable dividend of ¥8 to ¥12 per year,
paying close attention to strengthening its financial position, keeping the necessary retained earnings, and studying
the outlook for the future business environment. However, in conjunction with the formulation of the new Mid-Term
Management Plan, from FY3/21, in addition to the existing policy of maintaining a stable dividend, the Company
will pay performance-linked dividends based on a consolidated payout ratio of 30%. This will provide greater clarity
on the link between dividend amounts and profit growth, as the Company aims to improve business performanceand increase dividends.

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

23 24

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

IINO Kaiun Kaisha, Ltd.
9119 Tokyo Stock Exchange First Section/ Fukuoka Stock Exchange

27-Jul.-2020
https://www.iino.co.jp/kaiun/english/ir/█ 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.

24 24

Disclaimer
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FISCO Ltd.
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