9025 Konoike Transport Co., Ltd.
May 2026
Q&A Highlights, Financial Results Briefing for the Fiscal Year Ended March 2026
This Q&A session is a summary of the main questions asked by attendees at the analyst and institutional investor meetings. Certain sections have been edited to facilitate understanding.
Impact of the Situation in the Middle East
Q1) What impact has the situation in the Middle East had on your domestic and overseas locations, and what concerns do you anticipate going forward?
A1) Reduced flights to and from the Middle East have had a direct impact on our locations in Japan and overseas. However, the impact on overall business performance remains minimal at this time.
We also believe conditions are gradually improving for flights, as Emirates resumed services in May and Qatar Airways resumed services in June.
As for the indirect impact, we are concerned about higher costs resulting from rising fuel prices. Our plan is to mitigate this impact by reviewing commercial terms and improving our cost structure.
We also recognize the potential for broader impacts, including fluctuations in ocean and air freight rates and weaker consumer spending resulting from higher food and other prices. However, the outlook remains uncertain at this time.
Business in India
Q2) Has the shift from negotiated contracts to competitive bidding following FSNL's privatization differed from your original expectations?
Given the high costs customers incur when switching contractors and your strong competitive position, we had assumed the impact of the shift to competitive bidding would be limited. Now that the bidding process is underway, has your view of FSNL's competitiveness changed?
Also, has your policy of maintaining a minimum profit margin when bidding changed? A2) To be frank, bidding has become more competitive than we originally anticipated.
We expected bids to incorporate some degree of discounting and lower pricing, but the bidding environment has been more cost-focused than we had anticipated. In particular, we did not expect cost considerations to play such a significant role.
We believe the stronger-than-expected focus on cost was partly due to the fact that the current bidding process prioritized cost.
That being said, our assessment of FSNL's competitiveness has not changed.
The fiscal year ended March 31, 2026, was our first year of consolidation. We improved productivity in India by applying the technologies and expertise we have developed in our domestic steel business.
We intend to win new orders by clearly communicating these achievements and the added value we provide during the bidding process.
We also aim to achieve strong profitability and support medium- to long-term growth by expanding business with private steelworks, developing our new mining business, and transferring technologies from Japan to India.
As for our bidding policy, we intend to continue bidding while ensuring an appropriate profit margin.
Even for projects that competitors have already won by prioritizing price, we believe FSNL still has a strong chance of being selected as quality reviews progress.
Airport-Related
Q3) Is it correct to assume that flights to and from China will gradually recover from November onward following the transition to the winter flight schedule?
Is it also correct to assume that personnel costs will increase as you continue employee development regardless of the current flight reductions?
A3) We do not expect flights to and from China to recover during the first half of the fiscal year ending March 31, 2027. Our assumption is that flight frequency will gradually recover to approximately half of pre-reduction levels between November and the end of the year.
Despite the current reduction in flights to and from China, our basic policy is to steadily build the foundation for future growth. We are establishing a structure that can respond quickly when demand recovers by continuing to focus on recruiting and developing employees and accelerating the development of new hires in preparation for the recovery of flight services and the addition of new routes.
Q4) What is the breakdown of the increase in Airport-Related operating profit from the fiscal year ending March 31, 2027 to the fiscal year ending March 31, 2028? Specifically, how much is attributable to the recovery in flights to and from China and the impact of flights to and from the Middle East?
A4) The overall impact of reduced flights to and from the Middle East is minimal.
As for flights to and from China, current flight frequency has fallen to just below 50% of last year's winter schedule. We assume that level will gradually recover to approximately 70% during the second half of the fiscal year.
If flight frequency remains at around 50%, we estimate that operating profit would be reduced
by several hundred million yen.
Accordingly, we believe a 2 billion yen recovery in operating income is achievable in the fiscal year ending March 31, 2028, if flights to and from China fully recover.