Financial Results and Investor Meeting
CONSOLIDATED AND NON-CONSOLIDATED FINANCIAL HIGHLIGHTS FOR THE YEAR ENDED MARCH 31, 2002
Management Policies and Results of Operations
Management Policies
(1) Basic Policy
The East Japan Railway Company (JR East) Group provides high-quality and advanced services based on sound management, with railway operations as its core, to fulfill its obligations to shareholders. For this purpose, every individual employee of the Group will endeavor to support safe and punctual transportation and supply convenient and high-quality products. Every employee will take on the challenge of improving the standard of services and raising the level of technology in order to further gain the confidence and trust of customers. As a "Trusted Life-Style Service Creating Group," we will go forward with our customers to contribute to the achievement of better living standards, the cultural development of local communities and the protection of the global environment.
(2) Improving the Structure of Management Administration
To facilitate adequate and fast decision-making by the board of directors based on sufficient discussions, JR East is working on upgrading its corporate governance functions. This includes incorporating the opinions of directors from outside JR East and corporate auditors. Furthermore, JR East is strengthening ties between the parent company corporate auditors and the auditors at each Group company. The objective is to ensure the soundness of the management of each Group company, with recognition that a company is evaluated based on the performance of its entire group.
Regarding the disclosure of information, JR East is strengthening its public information activities to ensure the public is better informed about JR East Group. JR East is also actively implementing investor relations (IR) activities, including information meetings for analysts and investors.
(3) Strategies and Management Issues
Medium-Term Business Plan
JR East has formulated the Group's medium-term business plan, "New Frontier 21" for the period from 2001 to 2005, which was announced on November 29, 2000. In this plan, JR East Group aims to be a corporate group that strives to create life-style services trusted by its customers via corporate activities open to the world, i.e. a "Trusted Life-Style Service Creating Group."
In more detail, management will be carried out with five visions: "creating customer value and pursuing customer satisfaction," "innovation of business through the creation of technologies," "harmony with society and coexistence with the environment," "creating motivation and vitality," and "raising shareholder values. "
We have set five numerical goals. In November 2001, the following adjustments were made with regard to consolidated free cash flows and the reduction of non-consolidated long-term debt.
Numerical Goals
| Reference | Fiscal 2006 Target | ||
|---|---|---|---|
| Fiscal 2002 Actual | Initial Plan | Adjusted in November 2001 | |
| Consolidated free cash flows | 189.1billion yen | 180 billion yen | 200 billion yen |
| Consolidated ROE (return on average equity) |
7.8% | 10.0% | 10.0% |
| Consolidated ROA (ratio of operating income to average assets) |
4.4% | 5.5% | 5.5% |
| Total Long-term debt (non-consolidated) |
Balance at the end of fiscal 2001 4,537.5 billion yen |
500 billion yen reduction over 5 years | 750 billion yen reduction over 5 years (500 billion yen reduction achieved in 3 years) |
| Number of employees(parent company) | 75,380 at the start of fiscal 2002 | Reduction of 10,000 employees over 5 years | Reduction of 10,000 employees over 5 years |
Realization of Group Vision
JR East Group intends to earn even greater trust by increasing customer satisfaction through the security of safe and stable transportation and provision of higher- quality services under "scrupulous customer-oriented management." JR East also intends to continue to reduce total long-term debt to improve its financial position not only by all striving as one to secure revenues but also reducing expenses further and stepping up the slimming of assets. On the other hand, JR East will actualize" management style balancing assertiveness and defensiveness" and raise the profit level by placing massive management resources into the areas that are located in a superior position in competition and creating a basis for future growth. Furthermore, JR East will maximize the group value by carrying out substantiation and strengthening of the group management system such as implementation of a wide range of measures of close cooperation with each Group company. By these measures, JR East will increase the profit level and the quality of management.
Attainment of Full Privatization
Since its inception, the entire JR East has continued to make efforts to implement the principle of the Japanese National Railways (JNR) restructuring to establish its independent management assuming freestanding responsibility for its own actions. "Law of part amendment to the law concerning Passenger Railway Companies and the Japan Freight Railway Company" (Law No.61 in 2001) took effect on December 1, 2001, by which the regulations that had restricted JR East were abolished. Full privatization, which has been the purpose of the JNR restructuring and the greatest management issue of JR East, will finally be achieved through disposal of the 500,000 shares of JR East owned by Japan Railway Construction Public Corporation.
Full privatization will allow greater management flexibility and maneuverability. At the same time, it will also raise the expectations of shareholders, customers and communities. In addition, we estimate that the management environment surrounding JR East will show greater severity due to uncertainties of future economic conditions, as well as a further shift to a lower birthrate and rapidly aging population, and intensification of competition with other means of transportation. JR East will carry out the Group's medium-term business plan, "New Frontier 21," speedily and surely in order to become a corporate group which is appreciated by all the people surrounding JR East in a true sense by dealing with these environmental changes appropriately.
Establishment of a Sound Management Base
JR East intends to enhance the transparency of its management by strengthening its disclosure activities and, through the measures discussed above, fulfill its obligations to shareholders by establishing a sound management base capable of maintaining stable dividends.
(4) The way of thinking and policy relating to lowering the investment unit
JR East knows that lowering the investment unit to enable buying and selling of the shares by a wide range of investors' groups is one of the useful measures to establish an active equity market.
The share price of JR East exceeded "the investment unit of 500,000 yen," which was regarded as the appropriate unit price by the Tokyo Stock Exchange, as of the end of fiscal 2002. However, JR East thinks that the shares are held by many shareholders and active trading has been made on the stock market. Accordingly, JR East decided not to lower the investment unit this time. In future, JR East will review this decision, where necessary, in consideration of the trend of the share price and the number of shareholders.
