There are two medium- to long-term challenges facing the Japanese transportation industry. One is that, due to the declining birthrate and aging population in Japan, the need for logistics is shrinking, and there is a permanent shortage of labor engaged in truck driving operations, meaning that both supply and demand are shrinking, and the market is truly shrinking. The other is that we have not been able to develop overseas businesses to offset the decline. In light of these issues, the main topic of discussion at in meetings of the Board of Directors this fiscal year was growth strategy. Where should we invest now to achieve sustained growth in addition to providing drivers with returns to maintain logistics quality. We also have not ruled out options such as M&A and alliances with external companies, and I think we were able to have discussions from a medium- to long-term perspective on where to create added value.

SG Holdings is sufficiently conscious of the efficient use of capital in investment decisions for each project, including the establishment of hurdle rates. Going forward, we believe that we can expect further growth by moving from project-based to company-wide portfolio management and by conducting business with a further consciousness of the cost of capital. For example, by being conscious of the balance between the capital invested and the profits made in each business, we will be able to see which businesses in which we should invest our limited resources, and which businesses we should make additional investments in or wind down. In order to maximize corporate value and achieve sustained growth, I would like to continue to make statements that are more conscious of this perspective.

We believe it is better to show stakeholders the Company's thinking on the policy of cash allocation in more detail and at the earliest possible time. The dividend policy for the end of the fiscal year ended March 31, 2024 was “aim for a payout ratio of 30% or more and to increase dividends from the previous year,” but as a result of considering the overall cash allocation, such as strengthening growth investment and distribution to drivers to increase future corporate value amid a challenging business environment due to factors such as inflation, the dividend remained unchanged from last year (annual dividend: 51 yen). Aiming to increase dividends is a commitment we have made to our shareholders, so if the situation has changed, we need to communicate such as promptly explaining it to our shareholders. We consider this to be an issue that we will need to address in the future.

In May this year, the revised versions of the Act on Advancement of Integration and Streamlining of Distribution Business and the Motor Truck Transportation Business Act (the two logistics laws) were promulgated. In the future, consignors and consignees will be required to make continuous improvements to reduce waiting and loading times and improve cargo loading rates, and it is expected that primary transportation operators will also be required to make various efforts in terms of actual transportation management.

I appreciate that the SG Holdings Group is making every effort to create a comfortable working environment for drivers within the Company and in partner companies. Such comments are often made in meetings of the Board of Directors. We believe that the first step for the Company to deal with the 2024 problem is to raise wages, create an organization where harassment does not occur, and make the workplace a place where people can feel growth and joy.

In addition to this, the SG Holdings Group has established a system to ensure that partner companies are not treated unfairly, as a responsibility of the primary contractor. We are already holding meetings to promote appropriate transactions and have established consultation contacts, and making an effort to ensure that transactions are carried out at fair prices.

Meanwhile, dealing with the 2024 problem will be a factor in increasing costs for our company. For this reason, the entire Group is working to be conscious of initiatives to ensure that we receive appropriate freight tariffs. As part of our efforts to absorb rising costs, we are also working to improve the productivity of our logistics operations. DX is being promoted as an investment with a longer-term perspective, including further productivity improvements through the operation of X FRONTIER and the introduction of swap body vehicles as short-term initiatives. The results of the loading robots, which are currently in the experimental stage, and the expected future development of automatic truck driving are important initiatives that will take time to put into practice.

However, there are limits to how much cost can be absorbed by improving efficiency. The most important thing is to continue to expand the top line by receiving appropriate freight charges from the senders and by cultivating growth areas.

I agree. There will be a shortage of transport capacity of around 34% by 2030, and the shortage of workers and will lead to rising wages of drivers, which is a very serious situation for Japan as a whole. Customers (senders) will be the ones who will suffer the most as a result. They must be feeling a lot of anxiety, such as the possibility that they may not be able to transport their company's products with the current lead time, or whether they will be able to pass on the increased logistics costs to consumers. From what I hear, there are many manufacturers who are thinking about reviewing their production and logistics sites for the first time in decades.

I think that the Company's GOAL is to solve this. Although some of this is still being implemented, in the future there will be an increasing need to make optimal proposals by looking at the entire supply chain, including not just the transportation of goods, but also the selection of factory and warehouse locations, inventory management, lead time calculations, shipping routing, and the means of transportation to be used. I hope that SG Holdings will be able to expand its business opportunities even further by actively proposing comprehensive solutions through GOAL.

We recognize that the development of core human resources who will be responsible for the management of SG Holdings, as well as the drivers who support transportation, will be a key issue that will determine our future growth. Educational systems such as “Next Generation Leader Training” and the “Next Generation Management Training Program” have also been implemented, and training programs for overseas personnel have also begun. It is also necessary to rapidly promote education for leaders in growth areas.

We have a history of actively engaging in diversity since 2011, and we have a good reputation, being recognized with the highest rank multiple times in the “D&I AWARD.” I think it's wonderful that the company has a corporate culture that is willing to make use of a diverse range of human resources, including women.

Personally, the words that have left a lasting impression on me from Chairman Kuriwada's teachings are the saying “When a prince's personal conduct is correct, his government is effective without the issuing of orders. If his personal conduct is not correct, he may issue orders, but they will not be followed,” from the Analects of Confucius that means “If the actions of those in positions of authority are correct, things will be done even without being ordered, but if the actions of those in positions of authority are not correct, the employees will not follow no matter how many orders are given.” I remember thinking that people in each position within an organization thinking for themselves about what their role is and fulfilling it is the foundation for strengthening organizational capabilities, and that this truly the idea of human capital.

In order to get core personnel to do the right thing, as in this passage from the Analects, it is necessary for them to acquire the ability to manage not only by using their specialist knowledge, but also by looking their subordinates in the eye, understanding their feelings, and thinking about the families behind them. Director Akiyama also mentioned improving communication skills, but I would like to see the Company actively providing training to improve the skills and viewpoints of managers. I think that if superiors fulfill their roles properly, their subordinates will also work hard of their own accord, and a good corporate culture will be fostered where people can encourage each other through friendly competition.

This year is the final year of the Mid-Term Management Plan, and progress is falling far behind in terms of business performance, and the environment surrounding the Group is extremely adverse. This year, we hope to leave behind the sprouts that will lead to the next Mid-Term Management Plan.

As I mentioned earlier, in order to improve the productivity of logistics, it is necessary to not only increase efficiency, but also raise the top line, and I feel that it is necessary to develop growth areas both in Japan and overseas. In Japan, we will focus on low-temperature logistics, the distribution of pharmaceuticals and hazardous materials with high added value. Overseas, we will actively invest in growth areas after carefully assessing the domains, and we will build a foundation for obtaining returns while always considering the balance with the cost of capital.

A company is managed with the thoughts of various people in mind, including customers, shareholders, employees, partner companies, local communities, and the relevant government agencies. By listening to the voices of stakeholders, we may discover issues that we were not aware of, or strengths that we were not aware of. We want to be an organization that values dialogue and continues to change.