Kyushu Railway : Q&A Session of Financial Results Web Conference, Second Quarter（80 KB）

(Translation)

November 11, 2025 Kyushu Railway Company

Main Questions and Answers from the Financial Results Web Conference Second Quarter, FY2026/3

Q. Regarding the Hisatsu Line, although operations have been suspended due to "The heavy rains beginning August 6, 2025," and the affected rail section is expected to be restored, the line is operating at a loss. What is the rationale behind restoring it as a railway line?

A. Several lines were affected by "The heavy rains starting August 6, 2025," and we recorded an extraordinary loss of approximately ¥1.4 billion. The section of the Hisatsu Line in question involves complex construction and will require significant time to restore. However, we decided to pursue its restoration as a railway line after considering the scale of restoration costs and the use of the line by students and others.

Q. What is the impact of the extraordinary loss related to the cancellation of the project utilizing the space above the tracks at Hakata Station on cash flow? Also, how do you plan to use the surplus funds?

A. While we recorded an extraordinary loss of approximately ¥8.7 billion, about ¥6.0 billion of this relates to construction already completed and resulted in a cash outflow. Such as restoring temporary construction, are expected to involve cash outflows in the future. We had planned to invest about ¥10 billion during the period covered by the current Medium-Term Business Plan 2025-2027. Although we will determine the use of surplus funds going forward, we basically intend to redirect them into growth investments. We aim to seek and invest in quality projects, especially in areas with strong growth potential, such as Fukuoka and the Hohi Main Line area in Kumamoto.

Q. We often hear about soaring construction costs across Japan. While the decision to cancel the project utilizing the space above the tracks at Hakata Station seems appropriate, are there any other development projects that might be canceled for similar reasons?

A. At present, we are not aware of any such projects. Construction costs are indeed trending upward, but for properties such as condominiums, we are currently able to pass on the cost increases through higher selling prices.

Q. EPS has decreased due to the extraordinary loss, but you are maintaining the annual dividend of

¥115 per share. Some companies base their dividend decisions on EPS adjusted for non-cash extraordinary losses. Should we assume that JR Kyushu bases its dividend payout on unadjusted

EPS?

A. Your understanding is correct. Our dividend payout ratio has increased this time. We will continue to base dividend decisions on the policy of maintaining a consolidated dividend payout ratio of 35% or higher.

Q. Passenger transportation revenue appears to have exceeded the initial forecast. What factors contributed to this, and what assumptions underlie the revised second-half forecast?

A. When we applied for the fare revision, we assumed a deviation rate of 3.6%. We cannot draw definitive conclusions yet, as we are still analyzing commuter pass renewals and passenger volumes by area, but at this point, we believe the deviation rate was generally in line with expectations. For the first half, we believe demand was boosted by events such as concerts in the Fukuoka area and some influence from the Osaka/Kansai Expo. Additionally, active customer movement suggests a favorable trend. For the second half, we have revised our performance forecast by taking into account the continued increase in events and other upward trends.

Q. Looking ahead to the next fiscal year, do you expect passenger volume to remain stable? The effect of the Osaka/Kansai Expo in the first half was not particularly large, and event-related demand is unlikely to fall off dramatically. While commuter pass renewals could introduce some variability, can we basically assume there will be no major changes from the current situation and there is potential for modest growth?

A. Passenger volume has not yet returned to FY2018 pre-COVID levels on the basis of headcount. While demand in the Hakata area is quite strong, regional usage remains weak. c

Q. How long do you expect the decline in duty-free store sales to continue? Also, considering factors such as tenant turnover, when do you expect to see a significant year-on-year increase in sales?

A. Inbound demand at Hakata Hankyu was negative in Q1, but we are now tracking close to plan, and we believe demand in the Fukuoka area has already returned to last year's level. Although arrivals at Fukuoka Airport, our commercial facilities and hotels were temporarily affected in early July due to rumors of disasters, we believe conditions have since returned to normal.

Q. What is driving the projected decrease in profit for the real estate leasing segment in the second half?

A. It may be somewhat conservative, but this plan reflects the fact that we are expecting major renovations and repair work related to aging station buildings and other facilities.

Q. In the hotel business, Q2 saw slightly higher-than-expected occupancy and lower-than-expected

ADR. What are current booking trends?

A. Hotel demand in each region declined slightly due to rumors of disasters in July. Even then, we managed ADR to maximize revenue. Booking trends remain strong, and occupancy is rising. While labor costs are increasing as we secure staff, we believe performance will remain steady.

Q. You mentioned a possible revision to the Medium-Term Business Plan. Beyond numerical targets, do you see a need for other updates?

A. In addition to reviewing numerical targets, we expect to update the plan as needed to reflect upcoming development projects, particularly given the cancellation of the project utilizing the space above the tracks at Hakata Station.

Q. You are currently hosting an illumination event at Hakata Station Plaza as part of your collaboration with Nintendo. Have you seen any tangible effects?

A. During our previous collaboration ("PIKMIN × JR Kyushu"), events at station buildings in prefectural capital cities attracted visitors from various regions, and the wrapped trains also achieved high occupancy. We believe it helped stimulate demand. The Super Mario series appeals to a wide age range, so we anticipate an even greater effect this time.

Q. The overall loss from local lines disclosed this time has narrowed compared to last year. Some other companies are seeing losses grow due to rising maintenance costs. You have begun discussions about the Nichinan Line (between Aburatsu and Shibushi). Should we understand that your efforts are helping to reduce losses?

A. Following discussions on the Ibusuki-Makurazaki segment of the Ibusuki Makurazaki Line, we have also begun discussions on the Aburatsu-Shibushi segment of the Nichinan Line. Without setting a specific outcome in advance, we are engaging local communities in discussions about the future role of rail and regional transport systems. These discussions take time, but we aim to develop exit strategies with community buy-in. Since local line revenues are small to begin with, repair costs resulting from disasters significantly impact profitability. Overall passenger numbers are declining, so we will continue promoting ridership with local governments. We also intend to engage other areas, following the Ibusuki and Nichinan lines, in long-term discussions.

Q. You have described efforts to enhance transport capacity and expand business along the Hohi

Main Line. Can you share the scale of JR Kyushu's total investment and expected return?

A. The Hohi Main Line is a key area of focus. Although the cost of the airport access railway announced by Kumamoto Prefecture recently has increased significantly due to higher construction costs, this is largely unavoidable. The ¥6.0 billion transport capacity enhancement for the Hohi Line is also part of the overall development. Our plan is to fund our portion from

the earnings boost expected on the existing Kumamoto-Higo-Ozu segment. While we do not yet have concrete projections for the profit contribution, we expect it to be positive. Separately, we are developing an office building near Higo-Ozu Station, about 40 minutes from Kumamoto Station. While we have not disclosed projected returns, we anticipate demand due to the site's proximity to the Semicon Techno Park.

Q. What is the status of your request to make unreserved Shinkansen seat surcharges subject to notification rather than approval? Also, do you have any comment on the start of discussions on lease fees for the Shinkansen infrastructure?

A. All JR companies share the same view on changing unreserved Shinkansen seat surcharges to a notification-based system. We have no updates since last time, but will continue urging the national government in cooperation with the other companies. Regarding lease fees for the constructed Shinkansen lines, a panel of experts is convened. Taking into account the purpose of lease fee, we believe future rules will be formed on the premise that such fees remain within the scope of benefits, and we expect to have opportunities to express our opinions in those forums.

Q. With regard to the unfinished segment of the Nishi-Kyushu Shinkansen, we understand there is movement to reduce Saga Prefecture's financial burden. Can we assume there is no risk of increased burden for JR Kyushu?

A. As was mentioned in recent reports, we have met with the Administrative Vice-Minister of the Ministry of Land, Infrastructure, Transport and Tourism to request that Saga Prefecture's financial burden be eased. However, we consider that issue separate from the discussion on

lease fees, and do not expect Saga's reduced burden to increase our own.

* 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.