Kyushu Railway : Main Questions and Answers from JR Kyushu IR Day 2025（173 KB）

(Translation)

December 3, 2025 Kyushu Railway Company

Q. How much cost reduction is expected from implementing communications-based train control (CBTC)? Also, Could you instead explain your overall approach and the timeframe for implementation?

A. What we are aiming for is not just a conventional CBTC system, but one developed with the use of general-purpose wireless communication in mind. Since there are various issues to address, such as technological development, safety validation, and compliance with railway technical standards, we are advancing the project with the help of experts. The introduction of this system is intended to reduce the need for equipment such as signals and cables. We are currently considering initial implementation on routes with relatively low train frequency.

Q. In addition to CBTC, you mentioned general-purpose wireless. Do you plan to use commercial carrier networks? Or will you be using unlicensed frequencies? Does that mean you won’t need to install your own communication infrastructure, and one of your key aims is to significantly cut equipment costs?

A. Exactly. We’re envisioning the use of carrier networks. We are proceeding with development while also consulting experts on how to overcome technical challenges and ensure compliance with applicable standards.

Q. Regarding increased revenue, with no increase in train frequency or fare revisions, are you expecting to raise yields?

A. We’re aiming to increase both the number of users and the average revenue per customer. In terms of ridership, we intend to stimulate demand among new customers while also securing repeat users. To do this, we will work on better understanding customer behavior.

Q. Has the product development framework been strengthened compared to before? Also, you’ve mentioned that revenue growth is driven by “number of customers × unit price,” but is the framework in place for data organization to visualize each of these elements, as well as for data marketing including Kyupo? Is it correct to assume that the revenue growth impact will be

visualized in terms of LTV?

A. First, we aim to have people register as JR Kyushu web members to understand customer behavior and use that data for marketing purposes. We are currently considering how to visualize LTV.

Q. Regarding open innovation, autonomous driving, CBM, and maintenance, are there any efforts underway to accelerate development or reduce development costs by collaborating with industry peers? Could you share the current status and outlook?

A. While there are ongoing exchanges of information, each company pursues different directions and faces different business environments. Therefore, we intend to move forward by taking into

account JR Kyushu’s unique circumstances and those specific to the Kyushu region, and to

pursue collaboration with companies, such as Tokyo Artisan Intelligence.

Q. Regarding the impact on the Medium-Term Business Plan, could you elaborate on the expected increase in revenue: how much, and from what sources? Also, what types of investments are you anticipating?

A. We are aiming for approximately ¥9.0 billion in earnings improvement by the end of fiscal 2027, with about half of that coming from increased transportation revenue. The remaining half is expected to come from cost reductions, including maintenance expenses. As for investments, we anticipate investing in projects such as the wireless systems currently in development.

Q. Considering current inflation and rising costs in various areas, how much profit will actually remain by the future railway project? Also, given the current cost trends, are there any areas you think need to be adjusted?

A. From a cost perspective, we are seeing increases due to rising prices and higher personnel expenses, including employee compensation. That is precisely why initiatives like the Future Railway Project, which aim to improve our profit/loss balance, are essential to securing the necessary funding. We intend to deliver the profits in line with the Medium-Term Business Plan.

Q. It appears you are already likely to exceed your profit target for this fiscal year and that conditions remain favorable. Does that mean you plan to continue on the current path?

A. Some initiatives are still under development. As we work toward ¥14.0 billion target, we are moving forward by distinguishing between initiatives with high feasibility and those with lower feasibility. We intend to manage these efforts carefully as we proceed.

Q. Regarding the virtuous cycle of enhancing the value of railways and achieving growth, you have non-financial information, such as the number of employees participating in the project over time,

how service delivery through project initiatives has improved customer satisfaction, alongside fiscal information, such as ¥9.0 billion in earnings improvement by fiscal 2027. I think linking these KPIs would help tell a clear value creation story through the Future Railway Project. Could you consider building that kind of comprehensive framework?

A. The Future Railway Project has been driven by all employees involved in the railway business, including those on the ground, in headquarters, and in regional offices. Many ideas have come from field staff, and by implementing those ideas, we are contributing directly to corporate management. Participating in the project and being involved in development work provides a sense of fulfillment and fosters individual growth. In terms of customer-focused initiatives, for instance, we’ve alleviated congestion at ticket windows through ticketless systems, which also creates opportunities for employees to think and act independently. We want to continue promoting employee growth through such efforts.

Q. The news has even reached Tokyo that Nintendo Fukuoka opened in November and is doing very well. How do you assess its impact? I imagine it will contribute significantly to Hakata City's performance in the second half. Could you comment on the current situation and future prospects?

A. It has only been about two weeks since the opening, so it's difficult to predict the future at this point. However, tenant sales are trending over 110% of plan. The store opened as the result of consolidating six previous tenant spaces, and we expect not only increased rent revenue but also a spillover effect on neighboring shops. While we need a bit more time to assess the full impact, we believe it will certainly have a positive effect.

Q. You decided to cancel the project utilizing the space above the tracks at Hakata Station. What are your thoughts on future development or property acquisition opportunities around Hakata Station?

A. There is still considerable potential for property acquisition around Hakata. As presented today, we have plans for a new hotel and an office development on the side of the Chikushi Exit. In addition, we have other projects currently in the pipeline. However, the challenge lies in the fact that rent levels around Hakata Station have risen and the vacancy rate is low, meaning property owners are reluctant to sell. We are proactively pursuing property acquisition around Hakata Station, including by proposing property exchanges with assets we hold in Tokyo, Osaka, and other locations, and by reaching out directly to individual property owners.

Q. I understand you are updating the Medium-Term Business Plan. How do you plan to update your

initiatives in the real estate and hotel segment? I request that you update not only the figures but also the initiatives.

A. This fiscal year, we revised our operating income target upward from ¥32.7 billion to ¥33.1 billion, an increase of ¥400 million. That leaves ¥900 million to reach our fiscal 2027 target of ¥34.0 billion. We now need to consider how to allocate the surplus funds from the canceled project utilizing the space above the tracks at Hakata Station to other assets or value-enhancement initiatives. We are still working on the specifics, so please give us a little more time.

Q. Assuming an inflationary environment, rents will naturally rise as a baseline, and considering

capital costs, unless the real estate business drives profit growth, the company’s overall ROE will likely decline. I believe business growth in the range of 5% to 10% will be required, possibly through accelerated investment. As the person in charge, how do you view the positioning of this business within the company?

A. We consider it our responsibility to lead growth through the real estate business. As you pointed out, it’s crucial in an inflationary context to find ways to increase rents and enhance the value of existing properties. With offices, we’ve been able to raise rents by at least 2–3% each time contracts are revised, and in the case of rental apartments, some locations have seen increases of around 5% to even 10%. We aim to drive the company forward by both enhancing value and reaping the returns of growth investments.

Q. Given the current business climate and rising construction costs, how has your target equity IRR for pipeline projects and your internal hurdle rate changed, or how do you think it should change going forward?

A. We recognize that the current environment is challenging for the real estate business. While interest rates are rising, cap rates are trending downward. Meanwhile, the WACC, which forms the basis for our internal hurdle rate, is rising, so how to exceed that is a key challenge. First, we aim to increase rents by enhancing the value of existing assets. In terms of growth investment, we plan to raise unit prices, such as rent or sales price, by incorporating added value unique to JR Kyushu. We’ll need to manage this by combining existing and new assets, as well as short-term and longterm assets within the new ones.

Q. Regarding your asset mix, does increasing the share of logistics facilities raise the overall return of your business? Or are you planning to focus more on core segments like offices? What kind of portfolio are you aiming for?

A. As of the end of fiscal 2027, we are targeting a portfolio composition of 30% commercial, 20% office, and about 15% each for logistics, rental apartments, and hotels. For logistics and rental apartments, we anticipate selling off 30–50% of those holdings in the future to realize returns. The share of rental logistics warehouses in Kyushu is still relatively low compared to the Tokyo metro

area, so we believe there is still room for acquisition and development. While that is our vision for fiscal 2027, we plan to take a more flexible approach for our 2030 target, depending on market trends.

Q. I understand that the majority of the ¥230 billion in growth investments are being allocated to the real estate segment. In addition to driving profit growth, I’d like to hear your thoughts on the impact this will have on overall capital efficiency. I imagine that controlling capital via asset-light approaches and a recycling-type business model will be increasingly important—what is your view on this?

A. We recognize that we need to pursue asset-light strategies and property sales more actively. Doing so will allow us to more easily pursue other growth investments as well. However, during the difficult management environment of the COVID-19 pandemic, we significantly restrained pipeline development outside of station buildings, and as a result, while we do have some properties like rental apartments ready for sale, our rotation model has not yet reached its ideal state. It will take more time before the portfolio achieves a more favorable structure for asset rotation. That said, for our asset-light strategy, we are seeing multiple inquiries beyond VIORO for new property management contracts, and these could become a fee-based business. By expanding these efforts, we believe we can move toward more capital-efficient management.

Q. I understand you’ve been visiting sites, including Group companies, to better understand the realities on the ground. Have you noticed any gaps between what the Board of Directors understood and what you see in the field? President Furumiya and other members of management seem to be actively engaging with frontline employees, so could you share any observations on changes over the past few years?

A. (Yamamoto) So far, I haven’t felt any significant gaps. That said, by visiting sites in person and hearing directly from senior management, I’ve been able to recognize that some of the issues the

executive side has identified are indeed urgent, and that some situations are quite severe. I believe it’s essential to communicate these issues quickly to the executive side so that appropriate countermeasures can be implemented. The site visits were originally initiated in response to the board effectiveness evaluation, where strengthening Group governance emerged as a key challenge. JR Kyushu wanted outside directors to gain a deeper understanding of operations through hands-on learning and to provide objective input from an external perspective. As outside directors, we

intend to continue listening to voices on the ground, identifying issues from various angles, sharing them with the executive team, and working together to build JR Kyushu to create even greater value.

Q. Regarding the incident at JR Kyushu Jet Ferry Inc., how does the Board of Directors plan to monitor the dissemination of safety awareness throughout the Group? Also, from the perspective of an outside director, how are you working to instill this at the level of corporate culture? Please share your thoughts in a way that external stakeholders such as investors can also understand.

A. (Yamamoto) The railway business has a long-established and deeply rooted safety culture. On the other hand, that culture hasn’t permeated to the same extent in companies newly acquired through M&A. To enhance safety awareness across the Group, we are now appointing safety officers at each company and launching safety committees, allowing us to monitor progress going forward.

Because our Group operates across a variety of business types, the risks we face are broad in scope. That’s why we want to first identify and prioritize the most critical risks, then horizontally deploy best practices across the Group. The goal is for each Group company to take ownership of safety as a personal responsibility and ensure their daily operations are carried out with integrity in a way that fosters a safe environment. We want to verify whether that mindset is truly being implemented in practice.

Q. While efforts to strengthen Group governance are underway, I understand that post-merger integration (PMI) is challenging, but are these issues arising because it takes time to instill corporate culture? Or are we seeing these issues now because past experiences have enabled

effective early detection before risks escalate? Or do you still feel there’s much work to be done?

A. (Yamamoto) We’ve had several incidents recently, and I do feel there’s still much to be done. I believe we must urgently step up efforts to horizontally roll out initiatives that foster a safety-oriented corporate culture across the Group companies.

A. (Fujibayashi) This doesn't apply only to newly acquired companies through M&A, but also to long-standing Group companies. JR Kyushu’s corporate culture is strongly rooted in being a railway company, and that perspective tends to be the starting point for how we view other businesses. But for areas like real estate and construction, each has its own unique safety management and risk management needs. I believe JR Kyushu needs to further enhance its human resource development and systems so that we can adopt those perspectives.

Q. I believe that the most important role of the Board of Directors is to support a proactive management strategy. What kind of discussions has the Board had regarding growth strategy? I believe the source of medium- to long-term corporate value should be clarified by the Board—what does that consist of? Is your growth strategy aligned with JR Kyushu’s strengths, including

potential strengths? Has the Board had sufficient discussion when it comes to reshuffling the business portfolio and making growth investments? Does it monitor progress and outcomes and work to prevent excessive risk-taking? Or, if the Board perceives that management is overly focused on short-term performance and underinvesting for the long term, does the Board push them forward?

A. (Fujibayashi) I recognize that the role of the Board of Directors is precisely to support proactive management and thereby contribute to corporate growth. One distinctive feature of our Medium-Term Business Plan is that outside directors were involved from the development stage, and the process was shared throughout. The source of our corporate value lies in being a company that is rooted in and deeply connected to Kyushu. While this can be seen as both a strength and a

weakness, I believe it’s more important to focus on how we can make the most of our strengths. For example, in railway and real estate, we’ve spent many years building regional networks throughout our Group. Strengthening our ability to seize business opportunities that leverage those networks is crucial. As for portfolio reshuffling, it is an ongoing topic of discussion at the Board. We regularly consider how to position Group companies and, specifically in the real estate segment, what assets to retain and what to divest.

A. (Yamamoto) The current Medium-Term Business Plan was finalized after about 10 Board discussions, and I believe it is a plan we can all stand behind with confidence. We reviewed every word, incorporating considerations about our future direction. As for what could become a “third business pillar” to follow railways and real estate, we’re currently in the trial-and-error stage with various initiatives, and we’ll be monitoring this closely. From a growth strategy standpoint, the

Board will continue to engage in thorough discussion. I believe JR Kyushu’s greatest strength is its people. Going forward, I’d like the Board to further discuss how to link our HR strategy with our management strategy, and also with our finance and governance frameworks, to determine how we can contribute to and enhance corporate value. Currently, we have many Group companies, but we feel it is necessary to further strengthen those that will drive the future growth of the JR Kyushu Group, and to proceed while also reassessing the Group structure. Therefore, we intend to discuss these matters with the Board of Directors.

* Please note that this document is a brief summary prepared at the discretion of the Company rather than a verbatim transcript of the questions posed and answers given on the day of the presentation.

Furthermore, the statements in this document are judgments made by JR Kyushu based on

information and projections available as well as assumptions at the time of the presentation’s preparation. Please be advised that actual operating results could greatly differ from the statements in this document due to the economic situation both inside and outside Kyushu and Japan as a whole, real estate market conditions, the progress of our projects, changes in laws and regulations, and a

wide range of other risk factors.