An Interview with the President

Question 3
What are the Group’s management strategies for growth?
  • We aim to post operating revenues of approximately ¥3,000.0 billion and operating income of ¥500.0 billion in fiscal 2019.
  • Our target for total consolidated cash flows from operating activities between fiscal 2017 and fiscal 2019 is approximately ¥2,000.0 billion. Of this, we will allocate ¥1,600.0 billion to capital investment. We intend to pay stable cash dividends and maintain a flexible policy on share buybacks. Also, aiming to strengthen our financial position, we will steadily move toward our goal of reducing consolidated interest-bearing debt to ¥3,000.0 billion during the 2020s.

As significant targets for the coming three fiscal years, we aim to achieve operating revenues of ¥2,967.0 billion and operating income of ¥498.0 billion by fiscal 2019. We will maintain ROA at the current level of 6% and ROE at the current level of 10%.

Over the coming three fiscal years, we will generate total consolidated cash flows from operating activities of approximately ¥2,000.0 billion, of which ¥1,600.0 billion is earmarked for capital investment. We want to realize a total return ratio target of 33% by continuing to pay stable cash dividends and using surplus funds to buyback and cancel shares. We also want to reduce consolidated interest-bearing debt from the present level of approximately ¥3,200.0 billion to ¥3,000.0 billion during the 2020s. Although interest rates are unprecedentedly low or even negative, we cannot predict interest rates. Therefore, we will adhere to our existing approach of steadily reducing debt.

Anticipating the use of cash flows five years, 10 years, and further ahead is paramount. Of the ¥1,600.0 billion we have earmarked for capital investment, we will invest roughly ¥1,000.0 billion in maintenance and renewal. Further, we want to invest ¥600.0 billion of this amount in measures aimed at ensuring safe and reliable transportation, including seismic reinforcement measures, safety measures for platforms and railway crossings, and disaster countermeasures. Also, during the next three fiscal years plans call for approximately ¥600.0 billion of growth investment, which will cover such initiatives as redeveloping railway stations and introducing new railcars. Given that we expect consolidated cash flows from operating activities to be comparatively plentiful for some time to come, we want to use them in effective, farsighted ways that will facilitate business management going forward.

We have set targets for revenues and earnings at conservative levels because the economic outlook for Japan remains uncertain in some respects. Further, we plan to control costs steadily. Each year roughly 3,000 employees will retire, which will reduce personnel expenses. On the other hand, we face the problems of how to increase efficiency and how to compensate for a shortage of manpower. We intend to respond to the problem of growing numbers of retirees by increasing productivity through technological innovation, outsourcing operations, and utilizing Group companies and partner companies. While personnel expenses are decreasing, outsourcing expenses are rising slightly. Despite this increase, we are confident that we can reduce total personnel expenses and outsourcing expenses steadily. Although we have set a conservative target for revenues, I think that we will be able to generate stable operating income by controlling costs steadily. In-house, I am urging employees to aim higher because the revenue target represents the lowest limit. In addition, I am calling on the life-style service business to increase its pace of development. This is a challenge because there are significant time restrictions on work conducted at busy railway stations in the Tokyo metropolitan area and other railway stations that large numbers of customers use. Nonetheless, I would like to bring forward development initiatives as much as we can.