Kyushu Railway Company

In the event of a railway accident, the Company may incur damages to third parties, substantial expenditures for facility repairs, and revenue losses due to service suspensions. Furthermore, due to the characteristics of the interconnected network centered on the Shinkansen, even a small-scale accident could cause widespread disruption to operations. There is also a risk of ripple effects on brand value and social trust extending to businesses outside the railway business. The Company addresses this through a PDCA cycle led by top management and the implementation of safety audits and safety inspections.

Kyushu, the Company's primary business area, has a higher rate of population decline than other regions in Japan, and its proportion of elderly residents is projected to remain high, raising concerns about declining commuter and non-commuter revenue as well as a decrease in users of commercial facilities and condominiums. This may affect the business performance and financial position of the Transportation Services, Real Estate & Hotels, and Retail & Restaurants groups. The Company aims to expand its resident and visitor population through station building and condominium development along its lines and by capturing inbound demand.

Natural disasters such as earthquakes, volcanic eruptions, typhoons, and heavy rain, as well as man-made disasters such as terrorism and armed conflict, could necessitate large-scale repairs of numerous fixed assets and disrupt business continuity. In the July 2020 torrential rains ('Reiwa 2 Nen 7 Gatsu Gouu'), the Kyudai Main Line and Hitoyoshi Line were damaged, and substitute transportation continues on a portion of the Hitoyoshi Line to this day. The Company addresses this risk through a combination of hardware measures, such as Shinkansen derailment countermeasures, seismic reinforcement, and slope collapse prevention, and software measures, such as evacuation guidance drills.

The outbreak or spread of a serious infectious disease could cause a significant decline in railway passengers, sluggish rental income due to closures or reduced operating hours at commercial facilities such as station buildings, and a decline in hotel occupancy rates, potentially having a major impact on the Group's overall financial position and business performance. These effects actually materialized during the COVID-19 pandemic. The Company has established a system for implementing business continuity measures, including setting up a response headquarters based on its 'Countermeasure Operations Plan for New Strains of Influenza and Other Diseases' and coordinating with the national and local governments.

Changes in domestic and international conditions, such as exchange rate fluctuations, increasing geopolitical risk, natural disasters, and infectious diseases, could cause fluctuations in the number of inbound visitors, primarily from neighboring Asian countries, changes in procurement prices for materials and energy, and disruptions to supply chains. The Company Group, which is highly dependent on the economic environment of Kyushu, is also significantly affected by economic trends in major urban areas such as Fukuoka City. These factors affect a wide range of business segments, including Transportation Services, Real Estate & Hotels, Retail & Restaurants, and Construction.

If an event with significant social impact occurs due to a lack of safety and compliance awareness or inadequate safety management systems at Group companies, this could damage the credibility of the entire Company Group and affect its business and financial position. In FY2024, a serious safety-related issue occurred at JR Kyushu Jetferry Co., Ltd., and in FY2025, new incidents occurred at a consolidated subsidiary involving the failure to conduct alcohol checks and improper implementation of roll-call duties. The Company continues to promote the formulation of recurrence prevention measures and the strengthening of governance over Group companies.

Cyberattacks, system failures, or human error affecting core systems such as railway operation management and reservation/ticketing systems could cause railway delays or malfunctions and disruptions to ticket issuance and reservation functions, potentially hindering business operations. There is also risk arising from external systems associated with business partners, such as Japan Railway Information Systems Co., Ltd. The Company implements security enhancement based on its DX strategy, establishes systems for early incident detection and recovery, and promotes Group-wide countermeasures through its Information Security Committee.

Financial risks exist, including the recognition of impairment losses when investment recovery on fixed assets becomes unlikely due to changes in the business environment or declining profitability, reductions in deferred tax assets due to changes in projected future taxable income, and declines in the market value of held investment securities and other assets. Since the Company continuously makes substantial capital investments in the railway business in particular, there is a risk that impairment of railway business fixed assets could materialize if performance falls short of expectations by a wider margin than anticipated. If these events occur in combination, they could have a material impact on business performance and financial position.

Revisions to policies and regulations aimed at decarbonization could increase tax burdens, raise energy and material procurement costs, and increase expenses associated with modifying facilities and rolling stock, while more frequent and severe natural disasters due to climate change pose a risk of expanding facility damage. In addition, there is high uncertainty in identifying, assessing, and managing natural capital risks in response to the TNFD recommendations, and if the Company's response to regulatory trends and social demands is judged inadequate, this could lead to a decline in evaluation by shareholders and investors. In February 2025, the Company formulated a roadmap toward achieving net-zero GHG emissions by 2050, promoting the introduction of energy-efficient rolling stock and renewable energy adoption, among other measures.

Since the fixed portion of the lease fee for the planned Shinkansen lines, which is calculated based on anticipated benefits, must be paid regardless of actual revenue, if performance falls short of projections, this could affect the results of the railway business. Regarding the section between Shin-Tosu and Takeo-Onsen on the Kyushu Shinkansen (Nishi-Kyushu Route), discussions are ongoing with the construction method still undecided, and the Company has requested early completion of the full line, stating that prolonging or fixing the relay transfer method would limit the effects of regional revitalization. The Company has stated that it cannot accept any increase in lease fees corresponding to increased construction costs, as this would deviate from the basic scheme for the planned Shinkansen lines.