FY2017/3 Annual Investors Meeting May 12, 2017 Kyushu Railway Company 11 Contents Ⅰ Financial results for FY2017/3 3 Ⅱ Forecasts for FY2018/3 14 Ⅲ Progress of the Medium-Term Business Plan 20 Ⅳ Individual business initiatives 25 Appendix 36 2 Ⅰ Financial results for FY2017/3 3 Consolidated Financial highlights for FY2017/3 【Year on Year】 • Despite a decrease in revenues from railway passenger traffic resulting from the impact of the 2016 Kumamoto earthquakes, operating revenues increased due to higher revenues from condominium sales and from drugs stores and convenience stores. • Net income attributable to owners of the parent increased due to the absence of impairment losses on fixed assets held in the railway business recorded at the end of the previous fiscal year. • EBITDA was up as a result of favorable performance in the real estate lease business. （Billions of yen） FY2016/3 FY2017/3 YoY Operating revenues 377.9 382.9 4.9 101.3% Operating income 20.8 58.7 37.8 281.2% Ordinary income 32.0 60.5 28.5 189.1% Net income attributable to owners of the parent (433.0) 44.7 477.8 － 0.0 0.0 0.0 EBITDA 69.1 73.2 4.0 105.9% Note: FY2016/3 EBITDA = operating income + cost of depreciation + earnings from use of the Management Stabilization Fund FY2017/3 EBITDA = operating income + cost of depreciation The same applies hereafter. ¥ Billions ＜Operating revenues by segment＞ ¥ Billions ＜EBITDA by segment＞ 3,900390 75075 +2.7 +0.2 73.2 382.9 (0.0) 3,800380 377.9 +2.8 +1.5 +4.2 70070 69.1 +5.4 (0.1) 3,700370 (4.5) (9.0) 3,600360 650 Retail and and Retail (FY2016/3) revenues Transportation Construction Estate Real Restaurant Other (FY2017/3) revenues Operating Operating 65 (FY2016/3) EBITDA Transportation Construction Estate Real Restaurant and Retail Other (FY2017/3) EBITDA 2017.3 2016.3 2017.3 （ 運 建 駅 流 そ （ Ｅ （2016.3 運 建 駅 流 そ Ｅ （ 営 輸 設 ビ 通 の 営 輸 設 ビ 通 の Ｂ Ｂ 業 サ ル 外 他 業 Ｉ サ ル 外 他 Ｉ 収 ー 不 食 収 Ｔ ー 不 食 Ｔ ビ 動 益 益 ビ 動 期 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 4 transactions and therefore do not coincide with consolidated figures. Consolidated Income Statements （Billions of yen） YoY FY2016/3 FY2017/3 Increase/ % Major factors (decrease) A B B-A B/A Increase in revenues in Retail and Restaurant ＋4.2 Operating revenues 377.9 382.9 4.9 101.3% Higher condominium sales +2.3 Depreciation cost (JR Kyushu) (22.3) Operating expenses 357.0 324.1 (32.9) 90.8% Shinkansen track usage fees (10.3) Operating income 20.8 58.7 37.8 281.2% Nonoperating income and Decrease in earnings from use of the Management expenses 11.1 1.8 (9.3) 16.4% Stabilization Fund (11.1) Ordinary income 32.0 60.5 28.5 189.1% Rebound from previous impairment losses on fixed assets held in the railway business (FY2016/3) +520.3 Extraordinary gains and Decrease in gain on sales of the Management Stabilization losses (476.4) (4.9) 471.5 － Fund assets (42.0) Net income attributable to owners of the parent (433.0) 44.7 477.8 － Increase in revenues from real estate leases +2.3 EBITDA 69.1 73.2 4.0 105.9% 5 Segment Information (Summary) (Billons of yen) YoY FY2016/3 FY2017/3 Increase / % (decrease) A B B-A B/A Operating revenues 377.9 382.9 4.9 101.3% Transportation 180.9 176.4 (4.5) 97.5% Construction 88.4 79.3 (9.0) 89.7% Real Estate 62.0 67.4 5.4 108.8% (Real Estate Lease) 43.2 46.3 3.1 107.2% Retail and Restaurant 96.2 100.4 4.2 104.4% Other 58.1 60.9 2.8 104.9% EBITDA 69.1 73.2 4.0 105.9% Transportation 27.0 28.5 1.5 105.7% Construction 6.8 6.7 (0.1) 98.3% Real Estate 28.4 31.1 2.7 109.6% (Real Estate Lease) 25.9 28.2 2.3 108.9% Retail and Restaurant 4.9 5.1 0.2 105.5% Other 3.3 3.3 (0.0) 98.7% Note: Figures by segment are prior to eliminating intersegment transactions. The same applies hereafter. 6 Segment Information ① ◆ Transportation Segment (Billions of yen） YoY FY2016/3 FY2017/3 Increase/ % (decrease) A B B-A B/A Operating revenues 180.9 176.4 (4.5) 97.5% Operating income (10.5) 25.7 36.2 － EBITDA 27.0 28.5 1.5 105.7% ◆ Construction Segment (Billions of yen） YoY FY2016/3 FY2017/3 Increase/ % (decrease) A B B-A B/A Operating revenues 88.4 79.3 (9.0) 89.7% Operating income 6.1 5.9 (0.1) 97.5% EBITDA 6.8 6.7 (0.1) 98.3% 7 Segment Information ② ◆ Real Estate Segment (Billions of yen） YoY FY2016/3 FY2017/3 Increase/ % (decrease) A B B-A B/A Operating revenues 62.0 67.4 5.4 108.8% Operating income 20.4 22.6 2.2 110.9% EBITDA 28.4 31.1 2.7 109.6% (Reprint) Real Estate Lease (Billions of yen） YoY FY2016/3 FY2017/3 Increase/ % (decrease) A B B-A B/A Operating revenues 43.2 46.3 3.1 107.2% Operating income 17.9 19.7 1.8 110.0% EBITDA 25.9 28.2 2.3 108.9% 8 Segment Information ③ ◆ Retail and Restaurant Segment (Billions of yen） YoY FY2016/3 FY2017/3 Increase/ % (decrease) A B B-A B/A Operating revenues 96.2 100.4 4.2 104.4% Operating income 3.4 3.4 0.0 102.2% EBITDA 4.9 5.1 0.2 105.5% ◆ Other Segments (Billions of yen） YoY FY2016/3 FY2017/3 Increase/ % (decrease) A B B-A B/A Operating revenues 58.1 60.9 2.8 104.9% Operating income 2.4 2.5 0.0 101.7% EBITDA 3.3 3.3 (0.0) 98.7% 9 Financial Position and Status of Cash Flows (consolidated) （Billions of yen） As of March As of March Increase/ Financial Position 31,2016 31,2017 (decrease) A B B-A Assets 646.6 676.6 29.9 Current assets 165.8 198.6 32.7 Non-current assets 480.8 478.0 (2.7) Liabilities 340.9 328.2 (12.7) Current assets 146.3 134.9 (11.4) Non-current assets 194.5 193.2 (1.2) Net assets 305.7 348.4 42.7 Equity ratio 46.4% 50.7% 4.3% Net assets per share （\） 1,876.72 2,144.00 267.28 （Billions of yen） Increase/ FY2016/3 FY2017/3 Status of Cash Flows (decrease) A B B-A Net cash provided by operating activities 63.4 28.5 (34.8) Net cash provided by (used in) investing activities 9.0 (18.3) (27.3) Free cash flows 72.4 10.2 (62.2) Net cash used in financing activities (40.0) (0.6) 39.3 Change in cash and cash equivalents 32.4 9.5 (22.8) Cash and cash equivalents, end of year 44.6 54.2 9.5 the period 10 Nonconsolidated Income Statements （Billions of yen） YoY FY2016/3 FY2017/3 Increase/ % Major factors (decrease) A B B-A B/A Operating revenues 211.1 212.2 1.1 100.5% Higher condominium sales +2.3 (Revenue from Impact of the 2016 Kumamoto earthquakes, etc. (3.6) railwaypassenger travel) 150.1 146.4 (3.6) 97.6% Operating expenses 205.6 168.7 (36.9) 82.0% Personnel costs 54.2 53.1 (1.0) 98.0% Decrease in employee numbers, etc. Nonpersonnel costs 116.2 102.5 (13.7) 88.2% Energy costs 8.8 8.0 (0.7) 91.3% Lower usage volumes Maintenance costs 38.9 37.8 (1.1) 97.1% Other 68.4 56.6 (11.8) 82.7% Shinkansen track usage fees (10.3) Taxes 5.8 6.0 0.1 103.1% Rebound from previous impairment losses on fixed assets held in the railway business (FY2016/3) (22.2) Depreciation costs 29.3 7.0 (22.3) 24.0% Operating income 5.4 43.4 38.0 804.0% Nonoperating income and Decrease in earnings from use of the Management expenses 12.8 4.0 (8.8) 31.4% Stabilization Fund (11.1) Ordinary income 18.2 47.5 29.2 259.9% Rebound from previous impairment losses on fixed assets held in the railway business (FY2016/3) ＋525.6 Extraordinary gains and Decrease in earnings from use ofthe Management losses (481.9) (4.2) 477.6 － StabilizationFund (42.0) Net income (444.4) 37.6 482.0 － 11 Nonconsolidated Income Statements【Reprint】 （Billions of yen） YoY FY2016/3 FY2017/3 Increase/ % (decrease) A B B-A B/A Operating revenues 169.1 164.9 (4.2) 97.5% Operating expenses 180.7 139.8 (40.8) 77.4% Railway business Operating income (11.5) 25.0 36.6 － Operating revenues 41.9 47.2 5.3 112.7% Operating expenses 24.9 28.8 3.8 115.5% Related businesses Operating income 16.9 18.4 1.4 108.6% 12 Income from Railway Passenger Traffic and Performance of Transportation Volume （Billions of yen） YoY Transportation Revenues FY2016/3 FY2017/3 Increase/ Major factors % (decrease A B B-A B/A Total 150.1 146.4 (3.6) 97.6% Decrease due to impact of the 2016 Kumamoto Shinkansen 51.6 50.1 (1.5) 97.0% earthquakes (2.4) Commuter pass 2.6 2.6 0.0 101.7% Increase in usage due to reconstruction efforts ＋0.3 Rebound from brisk travel during Silver Week in 2015 Noncommuter pass 49.0 47.4 (1.5) 96.7% (0.1) Conventional Lines 98.4 96.3 (2.0) 97.9% Impact of the 2016 Kumamoto earthquakes (1.4) Commuter pass 29.5 29.4 (0.0) 99.7% Rebound from brisk travel during Silver Week in 2015 Noncommuter pass 68.8 66.8 (2.0) 97.1% (0.3) （Millions of passenger-kilometers） YoY Passenger-Kilometers FY2016/3 FY2017/3 Increase/ % (decrease) A B B-A B/A Total 9,378 9,191 (186) 98.0% Shinkansen 1,929 1,852 (77) 96.0% Commuter pass 194 196 2 101.2% Noncommuter pass 1,735 1,655 (79) 95.4% Conventional Lines 7,448 7,339 (109) 98.5% Commuter pass 4,026 4,018 (8) 99.8% Noncommuter pass 3,421 3,320 (100) 97.0% 13 Ⅱ Forecasts for FY2018/3 14 Consolidated Financial highlights for FY2018/3 【Year on Year】 • Operating revenues are forecast to increase due to a rise in revenues from railway passenger traffic as the impacts of the 2016 Kumamoto earthquakes dissipate.