Kyushu Railway : Q&A Session of Financial Results Web Conference（75 KB）

About this update from Kyushu Railway Company

(Translation) May 18, 2026 Kyushu Railway Company Main Questions and Answers from the Financial Results Web Conference, FY2026/3 Q The Medium-Term Business Plan 2025-2027 Update targets operating income of ¥81.0 billion, with a particularly large upward revision in the Real Estate and Hotels Segment. What factors are behind this? A While we will continue to implement appropriate rent increases in the real estate leasing business, the primary factor behind the upward revision to the numerical targets is increased property sales. We have long focused on our capital recycling model, but we initially incorporated it modestly into the figures when the Medium-Term Management Plan was announced last year. This time, we reassessed the pipeline and recalculated projected profits for the update. We have incorporated inflation assumptions into our projections. We will continue to evaluate which assets to sell from the potential assets going forward. Q Does the pipeline for capital recycling-type property sales have sufficient depth to support sustainable growth beyond the current Medium-Term Business Plan period? A We have been pursuing the capital recycling model for some time, and we expect to enhance it in the next Medium-Term Business Plan period. We are currently advancing the acquisition and development of logistics facilities, rental apartments, offices, and other properties, and we believe we have a sufficiently robust pipeline. We will generate development profits while taking inflation into account, and use the resulting cash flow to further expand the capital recycling model. Q Since the cancellation of the project utilizing the space above the tracks at Hakata Station, are multiple large-scale projects, such as the Asahi Breweries Hakata Plant Site project, now emerging in the pipeline? A The cancelled project utilizing the space above the tracks at Hakata Station was originally scheduled for completion after the current Medium-Term Business Plan period. The project related to the Asahi Breweries Hakata Plant Site is also expected to begin after the site is handed over in 2029, so it is more likely to emerge during the Medium-Term Business Plan period after next. At present, we do not have any major development projects scheduled through 2027. The Phase 1 opening of the former Kyushu University Hakozaki Campus redevelopment project is currently planned for 2028. Q There has been no change to the shareholder return policy, but could you elaborate on your thinking regarding share repurchases? What factors do you consider, such as business performance or the share price? A Naturally, we take the share price into account, but we also consider a variety of other factors, including cash flow conditions. This time, given uncertainties including the situation in the Middle East, we decided not to proceed with share repurchases. Q You mentioned that the impact of the Middle East situation is not incorporated into the earnings forecast. What impact do you anticipate? A We believe the Middle East situation will have the greatest impact on energy costs, such as electricity and fuel expenses. Electricity prices generally affect us with a lag of around three to four months, so we expect that we may soon begin to see the extent to which unit prices will rise. We also anticipate higher material costs. In addition, shortages of naphtha and other materials could affect supplies of paint used for rolling stock, including thinners, so we intend to take early action from a procurement perspective. If the situation continues for an extended period, we believe the impact could become more significant, and we will continue to monitor developments closely. Q Regarding costs, the increase planned for this fiscal year appears relatively limited. How are you approaching cost reductions in areas such as personnel expenses and maintenance costs? A Regarding maintenance costs, we are implementing cost reductions through initiatives such as the Future Railway Project. As for personnel expenses, while we expect base salary increases and other measures to secure talent going forward, we also aim to contain costs through efficiency initiatives. Q Nintendo FUKUOKA has now been open for six months. What has your impression been so far, and what are your expectations for this fiscal year? A The station building continues to attract large numbers of customers, and collaborations such as those with Mario have generated a certain level of positive impact. While the railway collaboration will end upon the expiration of the contract, we expect Nintendo FUKUOKA itself to continue performing strongly going forward. Q Why did you decide to open an Amu Plaza location in Tenjin, and what is your strategy going forward? Could you potentially expand into urban areas away from station fronts, such as central Kitakyushu? A Tenjin is one of Fukuoka's most concentrated commercial areas. We operate Amu Plaza in Hakata and have engaged in city-building initiatives encompassing the entire station area. As we explored opportunities to leverage these capabilities beyond station-front developments, we came across an attractive property. Our leasing capabilities have also strengthened, and Amu Plaza has successfully attracted stores making their first appearance in Kyushu. Going forward, if opportunities arise where we can leverage our strengths, we intend to pursue them. Q I believe the target for the private REIT was ¥50.0 billion by around 2027. How is progress currently tracking? A Progress is currently at around 80% of the target, and things are proceeding steadily. Q Regarding the wireless train control system, to what extent can investment costs be reduced? Also, since it is a train-centered system, would it be difficult to introduce on lines with high train frequency? Is the primary target local lines? A This is a classic example of "lightening infrastructure." Managing cables required significant labor and replacement work, but that can now be omitted. In addition, by using public telecommunications networks instead of proprietary wireless systems, we can further reduce infrastructure requirements. We expect cost reductions of approximately ¥160 million in FY2029/3, when the rollout is completed. Looking ahead, if the system can be expanded and implemented together with autonomous train operation, we expect benefits across a wide range of areas. While the focus will primarily be on local lines, we also believe implementation on certain main lines is feasible. Q You indicated that the membership tier service will contribute ¥500 million in profit this fiscal year. Could this eventually become a new earnings pillar? What are your future plans regarding measures to increase web membership and expand services? A We have a large membership base, but many members are inactive. To reactivate those customers, we implemented various point-based initiatives. For example, exchanges for Shinkansen tickets between Hakata and Kumamoto, among others, have seen strong usage over the past four months, and around 30% of users had no reservation history over the previous year, indicating that the initiative is encouraging railway usage. In addition, accumulating points also motivates customers to use other Group services, such as credit cards. While we presented a ¥500 million contribution for this fiscal year, we intend to continue considering various initiatives with an eye toward further profit growth in the future. Q You explicitly stated an ROE target of around 10% in the Medium-Term Business Plan 2025-2027 Update. Within the "Outlook" section, which areas are particularly important? Could you explain the priorities and expected impact? A When we announced the previous Medium-Term Business Plan, we stated that we intended to "maintain the current level," but we also received feedback that it was difficult to understand without a specific numerical target, so we decided to clarify it. In addition to improving earning power, it is important to pay attention to equity capital and other factors from the perspective of capital efficiency. We also believe it is important to reduce the cost of capital and expand the equity spread. Regarding the initiatives outlined in the "Outlook" section, we have already been implementing measures to balance profitability and sustainability. We are also enhancing the value of existing assets and carrying out disciplined growth investments. In addition, we have been transforming our business portfolio to enhance resilience and agility. We believe it is important for stakeholders to understand our initiatives and actual business conditions through dialogue. Including the CEO and CFO, we will engage in dialogue and thereby further expand the equity spread. Q The upward revision appears to demonstrate progress in areas such as enhancement of existing assets and the capital recycling model. However, progress is less visible in balancing and accelerating sustainability and profitability in the railway business, as well as in fostering a "third pillar" business. We believe this may be a missing element in improving the PER from a growth expectations perspective. Recently, another JR company announced a partnership with a financial services company and articulated a strategy to expand transaction volume and grow financial services within the group. Does JR Kyushu have a similar perspective? A For several years now, we too have been studying what kinds of advantages can be created specifically in Kyushu, which differs from the Kanto and Kansai regions. If we determine that meaningful benefits can be generated, such initiatives could certainly become one of our strategic options. * 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.

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