Annual Report 2019 for the Year Ended March 31, 2019 Our Value Creation Thus Far Providing Services Focused on Railways Shin-Hakodate-Hokuto
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Annual Report 2019 For the year ended March 31, 2019 Our Value Creation Thus Far Providing services focused on railways Shin-Hakodate-Hokuto For more than 30 years, the JR East Group has Shin-Aomori advanced a railway-focused business. The Group has Average Number of Passengers per Day Hachinohe grown through the use of railway-related infrastructure, Approx. technology, and expertise to increase the convenience of its railway network and railway stations, thereby encouraging more customers to use them. Akita Morioka 17.9 million Total Population of Japan Shinjo 2019 Transportation million Yamagata Sendai 126.4 Top 5 Stations services Source: Population Estimates, Niigata with Large Daily Passenger Use* Statistics Bureau, Ministry of - Railway Business, Bus Services, Internal Affairs and Communications Fukushima Cleaning Services, Railcar Manufacturing 1 Shinjuku 1,578,732 Koriyama Operations, etc. Joetsu-Myoko 2 Ikebukuro 1,133,988 Echigo-Yuzawa Toyama Nagano 3 Tokyo 934,330 Utsunomiya 1987 Kanazawa Takasaki Mito Karuizawa 4 Yokohama 847,302 Shinkansen (JR East) Conventional Lines (Kanto Area Network) Omiya Conventional Lines (Other Network) BRT (Bus Rapid Transit) Lines Tok yo Narita Airport 5 Shinagawa 766,884 Hachioji Shinkansen (Other JR Companies) Chiba Shinkansen (Under Construction) Yokohama * The number of station users represents twice the number of (As of June 2019) passengers embarking. 2019 Life-style JR East’s shopping centers services - Retail Sales, Restaurant Operations, Advertising & Publicity, etc. - Shopping Center Operations, Leasing of Office Buildings, 169 Hotel Operations, etc. Office buildings– Leased floor space 2002 2 Launch of the Station 380,000 m Renaissance program with the opening of atré Ueno Hotels–Total guest rooms 7,420 IT & Suica 2019 Suica cards issued services - Credit Card Business, Information Processing Business, etc. 75.9 million 2004 Start of Suica electronic 2001 money service Launch of Suica East Japan Railway Company1 Annual Report 2019 Open innovation Business design by utilizing knowledge and ideas from external sources IT & Suica services Transportation services Creating new values Technological Innovation Creating new services by introducing technologies and knowledge from outside the Company, by utilizing a Data Integration multilayered “real” network and stations as hubs for interaction for transportation, shopping, and payment Life-style services Our Value Creation Going Forward Creating values and services focused more on peop e With people (“everyone”) as our base point, and with “Safety,” “People's daily lives,” and “Happiness of our employees and their families” as keywords, we will continue to create values of “Trust” and “Affluence” in cities, regional areas, and around the world. East Japan Railway Company2 Annual Report 2019 “Move Up” 2027 In line with “Move Up” 2027, the Group will shift its “stories to create values” from the provision of services with railway infrastructure as the basis to the introduc- tion of new values to society, focusing on the affluence of everyone in their daily lives. Along with improving, evolving, and developing the quality of its railway and other transportation services, the Group will concentrate its management 6:4 resources on life-style services and IT & Suica services, which will become its growth drivers going forward. Through these efforts, the Group will aim to increase its consolidated operating Approx. revenues while raising the amount of total ¥2.95 trillion revenues accounted for by life-style 7:3 services and IT & Suica services to 40% by March 31, 2028. Approx. ¥2.0 trillion 9:1 Consolidated operating revenues Transportation Services Non-Transportation Services Life-Style Services and IT & Suica Services establishment Company’s The 2018 Fiscal 2027Around East Japan Railway Company3 Annual Report 2019 Our Value Creation in 2019 Taking on Challenges to Move Up In July 2018, the JR East Group established its new management vision, the JR East Group Management Vision “Move Up” 2027, and revised the JR East Group Philosophy in order for the Group as a whole to boldly pursue its new growth strategies and realize sustained growth. In light of this, the Group expeditiously executed various initiatives centered on transportation services, life-style services, and IT & Suica services. Opened Began jointly offering LUMINE JAKARTA, Mizuho Suica subsidiary Lumine’s service with Mizuho Bank second overseas store Prepared to begin test runs of ALFA-X test railcar East Japan Railway Company4 Annual Report 2019 Conducted verification tests for the shared office business STATION WORK inside Tokyo Station railway and at other locations Implemented the second phase of Increased level of verification tests of an technological support provided to railway operators in unmanned store with AI-enabled payment systems Indonesia on a platform at Akabane Station Commenced commercial Opened the integrated operations of a sports entertainment facility woody biomass power plant SPORU SHINAGAWA OIMACHI with Sumitomo Forestry and others ©GEKKO East Japan Railway Company5 Annual Report 2019 Contents About This Report Annual Report 2019 condenses information so that shareholders and other investors can quickly become acquainted with the Company’s businesses, growth strategies, and environmental, social, and governance (ESG) initiatives. For those wishing further information, please see the next page, which includes the URLs of the Company’s website and of specific documents and reports. STRATEGY GOVERNANCE YEAR IN REVIEW To Our Stakeholders ................................. 8 Board of Directors and Selected Financial Data .......................... 36 Corporate Auditors ................................. 28 Interview with the President .................... 10 Review of Operations ............................. 38 Corporate Governance ........................... 30 JR East Group Management Vision JR East: International and “Move Up” 2027 ..................................... 20 Activities in Fiscal 2019 ........................... 32 Domestic Perspectives ........................... 40 Toward Achievement of the SDGs .......... 26 Message from an Outside Director ......... 33 Management’s Discussion and Analysis of Financial Condition and Compliance ............................................ 34 Results of Operations ............................. 45 Operational and Other Risk Information ............................ 52 Consolidated Financial Statements ...... 56 Notes to Consolidated Financial Statements .............................. 63 Independent Auditor’s Report ................ 83 Corporate Data ....................................... 84 Stock Information ................................... 85 East Japan Railway Company6 Annual Report 2019 Contents Further Information Website Home Page http://www.jreast.co.jp/e/ for for for STRATEGY GOVERNANCE YEAR IN REVIEW - JR East Group Management Vision - Corporate Governance Guidelines - Historical Data “Move Up” 2027 http://www.jreast.co.jp/e/data/pdf/ http://www.jreast.co.jp/e/investor/ PDF guidelines.pdf CSV historicaldata/index.html - Fact Sheets http://www.jreast.co.jp/e/investor/ http://www.jreast.co.jp/e/ WEB moveup/index.html PDF investor/factsheet/index.html - Sustainability Report JR East Group Sustainability Report 2018 FTSE International Ltd. allows the use of the FTSE4Good mark for JR East Group Sustainability Report 2018 companies that satisfy certain standards. JR East Group Sustainability Report 2018 Published in September 2018 (Last published in September 2018 / Next publication planned for September 2019) East Japan Railway Company http://www.jreast.co.jp/e/ Committee on Ecology 2-2 Yoyogi 2-chome, Shibuya-ku, Tokyo 151-8578, Japan E-mail: [email protected] http://www.jreast.co.jp/e/environment/ PDF environment/index.html East Japan Railway Company7 Annual Report 2019 STRATEGY To Our Stakeholders STRATEGY To Our Stakeholders Interview with the President JR East Group Management Vision “Move Up” 2027 Toward Achievement of the SDGs GOVERNANCE YEAR IN REVIEW Group Philosophy We will earn the trust of our customers as a whole group by aiming for ultimate safety levels as our top priority. We will strengthen our network capabilities focusing on technologies and information, and we are committed to helping our customers and people in communities to realize affluent lives. TETSURO TOMITA YUJI FUKASAWA Chairman President and CEO East Japan Railway Company8 Annual Report 2019 STRATEGY To Our Stakeholders We would like to thank our shareholders STRATEGY To Our Stakeholders Interview with the President and other investors sincerely for their support. JR East Group Management Vision “Move Up” 2027 Toward Achievement of the SDGs In the Reiwa* era, safety will remain our top priority. scenario in which we provide services focused enhance profitability and productivity to sustain GOVERNANCE In accordance with the JR East Group Management on railway infrastructure to one that entails creating growth and exceed the expectations of its share- YEAR IN REVIEW Vision “Move Up” 2027, we will pursue ultimate new value and services focused on people. In holders and other investors. safety levels while taking such measures as addition, we will heighten the capabilities of our With respect to returns to shareholders, over the preventing disruptions to transportation services networks with a focus on technology and infor- medium-to-long term we aim to realize a total return to increase the safety and reliability of transporta-