Current Situation and Management Policies of Nippon Express (1)

All Rights Reserved,copyright 2006 Nippon Express CO.,LTD1

1. Measures taken in the second half of FY March 2006 and onwards

- Promote measures that will serve as stepping stones for medium/long term business expansion -

・Aggressive investment in warehousing businessDeveloped and improved warehouses in Dusseldorf and Munich, Germany (December 2005) New distribution warehouse rolled out in Shanghai, China (January 2006) New SCM warehouse launched in Chiba, Japan (June 2006)

・ Business expansionsSet up Nippon Express Tijuana, Mexico (March 2006) Set up Nippon Express St. Petersburg, Russia (July 2006) Opened a representative office in Wroclaw, Poland (March 2006)

・Business expansions through alliances Establish MC NITTSU CHINA HOLDINGS CO., LTD. (holding company jointly established by Nippon Express and Mitsubishi Corporation) (September 2005) Launched regular truck transportation linking 80 cities in China (March 2006)Made investment in a new air freight company jointly set up by All Nippon Airways and Japan Post (April 2006)

1.Measures taken in the second half of FY March 2006 and onwards

□　Aggressive development of measures in global cargo business


□　Deployment of small cargo business

・Improved qualityStarted “e-Issue Series”, a new invoice issuance system for Pelican Service (July 2005) Expanded designated delivery zone to 6 zones from 4, thus improving quality (November 2005)

・Reinforced sales activitiesAssigned to each branch a sales representative dedicated to handle small cargo Promoted sales for short distance transport and small cargo

- The handling volume has seen a year-on-year upturn since April 2006 　 Domestic air cargo concentrated on B-to-B. A new product of specified mail delivery launched 　　

(February 2006)　 Expanded sales of Privacy Guard

・Boosted operational efficiency 　 Jointly handle terminal work and distribution work with domestic 　 air cargo division and Nippon Express Group Companies.



・Cost reductions Implemented career change support measure (favorable treatment for early retirement)

- involving 541 people and an annual effect of 4.6 billion yen

・Improved unit rates Response to increasing costs due to steep rise in fuel pricesTrack, domestic shipping, air-freight forwarding from November 2005

・Company-wide use of IT in accounting work Process completed in October 2005

- Administrative Center functions will be developed and expanded in future

・ Create a new business division for heavy haulage and construction work.

□　Various measures to improve domestic revenues and reduce payments

— Although we were successful in substantially reducing labor costs, negotiations with our customers on raising unit freight rates did not see sufficient progress —



□　Financial results for the past three years and projections for this fiscal year

Consolidated segment information　　

FY March 2005

FY March 2006

Japan 2.3 2.2

Americas 4.6 4.5

Europe 4.8 5.5

Asia/Oceania

4.24.0

Operating margin



2.New Medium-Term Management Plan: Power-up Three-year Plan(from April 2006 to March 2009)

□　Five Power-up Items

Power-up in sales Try to strengthen sales by implementing measures based on the characteristics of each business.Expand global business, enhance 3PL business, services specially made for each regions, and develop new businesses

Power-up at operational frontsDevelopment of human resources, quality improvement, sales promotion capability, and improvement of operational efficiency, etc.

Power-up in CSR practices Compliance, risk management/security control, and environmental management

Power-up in management practicesEffective use of assets, low cost, efficient use of funds, and IT, etc.

Power-up in small cargo businessTry to solve management issues by promoting reforms in businesses.

2.New Medium-Term Management Plan: Power-up Three-year Plan (from April 2006 to March 2009)


□　Target value



Consolidated Sales Ordinary profit

FY March 2006 Results1,793.9

(Balance after deduction of on-consolidated profit: 497.7）

49(Balance after deduction of non-

consolidated profit: 17.3）

Increase in revenue on non-consolidated basis 87.8

Overseas business 46.0

Overseas new consolidated companies

Nittsu Shoji, etc.

Consolidated/eliminations

Total

35.0

55.0

(17.7)

206.1

Target for FY March 20092,000

(Total of all companies excluding non-consolidated companies: 616）

60(Total of all companies excluding non-

consolidated companies: 19）

11(Balance after deduction of

non-consolidated profit: 1.7）

31.71,296.2FY March 2006 Results

Ordinary ProfitOperating RevenuesNon-consolidated

Total

Reduction in handling volume, etc.

Regional, new service

３ＰＬ Business

Global Business

41.01,384Target for FY March 2009

9.3

(42.2)

87.8

44.0

49.0

37.0　

(Unit: Billions of Yen)□　Direction of business

Rev

enue

s C

hang

esR

even

ues

Cha

nges



□　Outline of New Management Plan

* International revenues = Sales by location (Americas＋Europe＋Asia/Oceania) + overseas operating revenues of parent company

・Boost the percentage of revenues from international business within total revenues (to 30% or 600billion yen of total sales of 2 trillion yen after three years)

・Reinforce competitive edge of region-specific business (revitalize overall domestic business by strengthening cost performance, quality, marketability and proposal capabilities; undertakingconcentration, elimination and consolidation of organizations; and realigning sales force and workload)



Ranking Company name Market share（％）

Handling weight(1,000t)

1 Nippon Express 20.8 60

2 Kintetsu World Express 13.7 40

3 Yusen Air & Sea Service 12.4 36
















・Expansion of international and overseas business

□　Currently ongoing activities in accordance with the Management Plan

Ranking of market share in air cargo business (export from Japan) for FY March 2006 (JAFA)

To USA

ToEurope

To Asia

Total



・Business expansion in logistics within regions

Region AreaJapan (Nippon Express Sales Warehouse) 2,439

Americas 435

Europe 297

Asia/Oceania 459

(Unit: 1,000m2）

Comparisons of warehouse area



U.S.A.MEXICOBRASILCHILICANADA

NETHERLANDSU.K.

IRELAND

GERMANY

AUSTRIA

HUNGARY

CZECH

FINLAND

POLAND

SWITZERLAND

BELGIUM

LUXEMBOURG

SPAIN

PORTUGAL

FRANCE

ITALY

SOUTH AFRICA

UNITED ARAB EMIRATES

TURKEY

RUSSIAN FEDERATION

SINGAPORE

MALAYSIA

AUSTRALIA

NEW ZEALAND

CHINA

KOREA

TAIWAN

THAILAND

VIETNAM

INDONESIA

PHILPPINES

INDIA

・Business expansion into more countries

37 Countries where our corporate group have made inroads



・Expanding the number of consolidated companies by acquiring interests of joint companies

Current situations in Asia/Oceania RegionFY March 2006 Consolidated Results

Transport segment-Asia/Oceania Region 80,728 Million Yen

19,320 Million Yennon-equity method affiliates

23,731 Million YenEquity method affiliates

2,181 Million YenNon-consolidated company

Breakdown

45,232 Million YenTransport segment-Asia/Oceania Region

FY March 2006 Non-consolidated Results



・Expansion of 3PL (3-Party Logistics) business Construction of new distribution warehouses

- response to demand for larger facilities and need for distribution warehousesBuilding up human resources and know-how – through education, new hiring and M&ABusiness deployments leveraged on the overall capabilities

- networks, warehouse, transport modes, operations, and information system 　　　　

Major investments in buildings

Location Usage Size(m2) Scheduled completion

Chiba Air Cargo 16,668 June 2006

Tokyo Trunk room 22,737 January 2007

Osaka Warehousingservice 47,242 April 2007

Kanazawa Warehousingservice 18,965 April 2007

Yokohama R & D facility 10,860 February 2007

Kyoto Distribution center 14,536 August 2007

Tokyo(lease) Terminal 38,481 May 2006

Tokyo(lease)

Warehousing service 56,710 December 2007



★Sales trend of differentiated services

★Response to new demands

・Improving services and expanding sales in regions 　 Expand businesses which can be differentiated 　 Response to new demands 　 Cost reductions

- handle work mainly by local employees and reduce management and clerical work 　 Efficient organizational structure



3. Strengthening management structure in medium/long term

・Strengthening capabilities of operational fronts → Expand revenues at local regions in Japan

Full scale entry into manpower dispatching service Direct hiring of technical employees, who would be the future leaders of the company Reduce the number of office clerks and improve their standards with the use of information technology and hiring mid-career specialists

　　・Effective use and reorganization of assets → Boosting efficiency of assets

　　 Concentration of small warehouses into large distribution warehouses 　　 Use of smaller urban sites for multiple purposes 　　 Draw up a plan for assets disposal or use from medium/long term perspectives

・Shift of business compositions → Improve profit margin

　　 Towards general logistics including warehousing from transportation service mainly by vehicles　　 Shift our focus from transportation to forwarding service 　　 Shift our focus from domestic business to international business

3. Strengthening management structure in medium/long term

Current Situation and Management Policies of Nippon Express (1)

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