FY2018/3 Annual Investors Meeting May 11, 2018 Kyushu Railway Company 11 Contents Ⅰ Financial results for FY2018/3 3 Ⅱ Forecasts for FY2019/3 11 Ⅲ Business Initiatives Under Medium-Term Business Plan 17 Ⅳ Progress of the Medium-Term Business Plan 30 Appendix 35 2 Ⅰ Financial results for FY2018/3 3 Consolidated Financial Highlights for FY2018/3 【Year on Year】 • Operating revenues up for the 8th consecutive year (set new record) • Net income attributable to owners of the parent up for the 2nd consecutive year (set new record) • EBITDA up for the 5th consecutive year (set new record) （Billions of yen） FY2017/3 FY2018/3 YoY Operating revenues 382.9 413.3 30.4 108.0% Operating income 58.7 63.9 5.2 108.9% Ordinary income 60.5 67.0 6.4 110.7% Net income attributable to owners of the parent 44.7 50.4 5.6 112.6% 0.0 0.0 0.0 EBITDA 73.2 81.8 8.5 111.7% Note: EBITDA = operating income + cost of depreciation (excluding depreciation of leased assets held for subleasing purposes) The same applies hereafter. ¥ Billions ＜Operating revenues by segment＞ ¥ Billions ＜EBITDA by segment＞ 4,300430 85085 413.3 ＋6.4 81.8 +2.7 +0.1 ＋0.6 4,100410 ＋1.9 +0.8 +8.6 800 +5.8 ＋0.2 +7.3 80 3,900390 382.9 75075 73.2 3,700370 3,500 700 Construction (FY2017/3) revenues Transportation Estate Real Restaurant and Retail Other (FY2018/3) revenues Operating Operating 0 (FY2017/3) Other EBITDA Transportation Construction Estate Real Restaurant and Retail (FY2018/3) 0 EBITDA 2017.3 2018.3 2018.3 （2017.3 運 建 駅 流 そ （ Ｅ （ 運 建 駅 流 そ Ｅ （ 輸 設 ビ 通 の 輸 設 ビ 通 の 営 営 Ｂ Ｂ サ ル 外 他 業 サ ル 外 他 業 Ｉ Ｉ 収 ー 不 食 収 Ｔ ー 不 食 Ｔ ビ 動 ビ 動 益 期 益 期 Ｄ 期 Ｄ 期 ス 産 ス 産 Ａ Ａ ） ） ） ） Note: Figures for changes in operating revenues and EBITDA by segment are prior to eliminating intersegment transactions and therefore do not coincide with consolidated figures. 4 Consolidated Income Statements （Billions of yen） YoY FY2017/3 FY2018/3 Increase/ Major factors % (decrease) Railway transportation revenues ＋4.6 382.9 413.3 30.4 108.0% Operating revenues Consolidation of Caterpillar Kyushu, Ltd +7.3 Depreciation cost (JR Kyushu) +2.6 324.1 349.4 25.2 107.8% Operating expenses Taxes +1.5 58.7 63.9 5.2 108.9% - Operating income Non-operating income 1.8 3.0 1.2 169.1% Gains on investment securities + 0.8 and expenses 60.5 67.0 6.4 110.7% - Ordinary income Decrease in disaster expenses due to the 2016 Kumamoto earthquakes +9.0 (4.9) (2.2) 2.7 - Increase in disaster expenses due to heavy rain in Extraordinary gains northern Kyushu and typhoon No. 18 (3.8) and losses Decrease in gain on sales of trusts (3.0) Net income attributable 44.7 50.4 5.6 112.6% - to owners of the parent 73.2 81.8 8.5 111.7% Railway transportation revenues +4.6 EBITDA 5 Segment Information (Summary) (Billons of yen) YoY FY2017/3 FY2018/3 Increase / % (decrease) Operating revenues 382.9 413.3 30.4 108.0% Transportation 176.4 183.7 7.3 104.2% Construction 79.3 88.0 8.6 110.9% Real Estate 67.4 69.4 1.9 102.9% (Real Estate Lease) 46.3 49.0 2.6 105.8% Retail and Restaurant 100.4 103.1 2.7 102.7% Other 60.9 67.4 6.4 110.6% Operating income 58.7 63.9 5.2 108.9% Transportation 25.7 29.2 3.4 113.6% Construction 5.9 6.2 0.3 105.4% Real Estate 22.6 23.2 0.5 102.4% (Real Estate Lease) 19.7 20.6 0.9 104.6% Retail and Restaurant 3.4 3.6 0.1 105.0% Other 2.5 2.4 (0.1) 94.8% EBITDA 73.2 81.8 8.5 111.7% Transportation 28.5 34.3 5.8 120.5% Construction 6.7 7.0 0.2 104.4% Real Estate 31.1 32.0 0.8 102.9% (Real Estate Lease) 28.2 29.4 1.2 104.4% Retail and Restaurant 5.1 5.3 0.1 102.8% Other 3.3 3.9 0.6 118.3% Note: Figures by segment are prior to eliminating intersegment transactions. The same applies hereafter. 6 Financial Position and Status of Cash Flows (consolidated) （Billions of yen） As of March As of March Increase/ Consolidated balance sheets 31,2017 31,2018 (decrease) Assets 676.6 749.5 72.9 Current assets 198.6 206.7 8.1 Non-current assets 478.0 542.8 64.7 Liabilities 328.2 366.3 38.1 Current liabilities 134.9 164.7 29.7 Non-current liabilities 193.2 201.6 8.3 Net assets 348.4 383.2 34.7 Equity ratio 50.7% 50.3% (0.4%) Net assets per share （\） 2,144.00 2,357.27 213.28 （Billions of yen） Increase/ Consolidated statements of cash flows FY2017/3 FY2018/3 (decrease) Net cash provided by operating activities 28.5 87.6 59.1 Net cash provided by (used in) investing activities (18.3) (68.3) (50.0) Free cash flows 10.2 19.3 9.0 Net cash used in financing activities (0.6) (9.1) (8.5) Change in cash and cash equivalents 9.5 10.1 0.5 Cash and cash equivalents, end of year 54.2 64.3 10.1 the period 7 Nonconsolidated Income Statements （Billions of yen） YoY FY2017/3 FY2018/3 Increase/ Major factors % (decrease) Operating revenues 212.2 219.7 7.5 103.5% Revenues from real estate leases +1.6 Rebound from impacts of the 2016 Kumamoto (Railway transportation revenues) 146.4 151.1 4.6 103.2% earthquakes, etc. +4.6 Operating expenses 168.7 172.9 4.2 102.5% - Personnel costs 53.1 51.3 (1.7) 96.7% Decrease in employee numbers, etc. Non-personnel costs 102.5 104.3 1.7 101.8% - Energy costs 8.0 8.8 0.8 110.1% - Maintenance costs 37.8 36.3 (1.4) 96.2% - Other 56.6 59.0 2.4 104.3% - Taxes 6.0 7.5 1.5 125.9% Increased taxes on non-current assets, etc Depreciation costs 7.0 9.6 2.6 137.3% - Operating income 43.4 46.7 3.2 107.5% - Non-operating income and - expenses 4.0 5.5 1.4 136.7% Ordinary income 47.5 52.2 4.7 110.0% - Decrease in disaster expenses due to the 2016 Kumamoto earthquakes ＋9.2 - Increase in disaster expenses due to heavy rain in Extraordinary gains and northern Kyushu and typhoon No. 18 (4.0) losses (4.2) (2.3) 1.9 Decrease in gain on sales of trusts (3.0) Net income 37.6 41.6 4.0 110.7% - 8 Nonconsolidated Income Statements【Reprint】 （Billions of yen） YoY FY2017/3 FY2018/3 Increase/ % (decrease) Operating revenues 164.9 171.3 6.3 103.8% Operating expenses 139.8 143.0 3.1 102.3% Railway business Operating income 25.0 28.2 3.1 112.5% Operating revenues 47.2 48.4 1.1 102.5% Operating expenses 28.8 29.9 1.0 103.7% Related businesses Operating income 18.4 18.5 0.1 100.6% 9 Railway Transportation Revenues and Performance of Transportation Volume （Billions of yen） YoY Railway transportation FY2017/3 FY2018/3 Increase/ Major factors revenues % (decrease) Total 146.4 151.1 4.6 103.2% Shinkansen 50.1 54.1 4.0 108.0% Rebound from impacts of the 2016 Kumamoto Commuter pass 2.6 2.6 (0.0) 99.7% earthquakes +2.3 Noncommuter pass 47.4 51.4 4.0 108.5% Conventional Lines 96.3 97.0 0.6 100.7% Rebound from impacts of the 2016 Kumamoto Commuter pass 29.4 29.6 0.1 100.6% earthquakes +1.1 Noncommuter pass 66.8 67.3 0.4 100.7% （Millions of passenger-kilometers） YoY Passenger-Kilometers FY2017/3 FY2018/3 Increase/ % (decrease) Total 9,191 9,336 145 101.6% Shinkansen 1,852 2,004 152 108.2% Commuter pass 196 195 (1) 99.4% Noncommuter pass 1,655 1,809 153 109.3% Conventional Lines 7,339 7,331 (7) 99.9% Commuter pass 4,018 4,011 (6) 99.8% Noncommuter pass 3,320 3,319 △0 99.9% 10 Ⅱ Forecasts for FY2019/3 11 Consolidated Financial Highlights for FY2019/3 【Year on Year】 • Operating revenues forecast to increase • Net income attributable to owners of the parent forecast to decrease • EBITDA forecast to increase （Billions of yen） Results Forecasts YoY FY2018/3 FY2019/3 Operating revenues 413.3 439.7 26.3 106.4% Operating income 63.9 60.7 (3.2) 94.9% Ordinary income 67.0 62.6 (4.4) 93.4% Net income attributable to owners of the parent 50.4 47.5 (2.9) 94.2% #REF! 0.0 0.0 EBITDA 81.8 82.0 0.1 100.2% ¥ Billions ＜Operating revenues by segment＞ ¥ Billions ＜EBITDA by segment＞ 900 +19.7 439.7 90 4,400440 +2.2 81.8 +0.0 +1.1 82.0 +3.1 +0.5 +1.1 4,200420 413.3 +0.0 (0.0) 800 80 (1.1) 4,000400 3,800 700 (FY2018/3) EBITDA Other (FY2018/3) revenues Operating Transportation Construction Estate Real Restaurant and Retail (FY2019/3) revenues Operating Construction Estate Real Restaurant and Retail Other (FY2019/3) EBITDA 0 0 Transportation 2018.3 2019.3 2019.3 （ 運 建 駅 流 そ （ Ｅ （2018.3 運 建 駅 流 そ Ｅ （ 営 輸 設 ビ 通 の 営 Ｂ 輸 設 ビ 通 の Ｂ 業 サ ル 外 他 業 Ｉ サ ル 外 他 Ｉ 収 ー 不 食 収 ー 不 食 Ｔ Ｔ ビ 動 ビ 動 益 期 益 期 Ｄ 期 Ｄ 期 ス 産 ス 産 Ａ Ａ ） ） ） ） Note: Figures for changes in operating revenues and EBITDA by segment are prior to eliminating intersegment transactions and therefore do not coincide with consolidated figures.