East Japan Railway Stock

I'm Ito, Executive Vice President. I will now provide an overview of our financial results for the third quarter of the fiscal year ending March 2026 fiscal year 2025. Here are the key points of our third quarter financial results. The overall trends remain consistent with what we observed through the second quarter. On a consolidated basis, we achieved increases in both revenue and net income. However, operating income and ordinary income decreased year-on-year. Operating revenue reached JPY 2.240 trillion, marking our fifth consecutive year of revenue growth. This was driven by an increase in railway ridership and the resulting strong performance of our Ekinaka in-station stores. Furthermore, the opening of Takanawa Gateway City also contributed to these results.

Operating income was JPY 349.6 billion, a decrease of JPY 2.9 billion year-on-year. This was due to rising personnel expenses as well as the impact of front-loading our railway maintenance costs. Furthermore, since real estate sales for this fiscal year are primarily scheduled for the fourth quarter, this timing difference acted as a factor in the year-on-year profit decrease for the third quarter. On the other hand, quarterly profit attributable to owners of parent reached JPY 219.4 billion, an increase of JPY 2.8 billion year-on-year. This was driven by factors such as an increase in gain on sale of investment securities.

By segment, the real estate and hotels business was the only one to report increased revenue and decreased income. All other segments achieved growth in both revenue and income. As our performance is trending in line with our full year plan, we have made no change to our full year financial forecast and dividend payments. We plan to issue a full year dividend of JPY 70 per share, representing a dividend payout ratio of 33.3%.

This slide shows the analysis of year-on-year changes in consolidated operating income. The growth in revenue was bolstered by an increase of approximately JPY 55 billion in JR East Transportation revenues. Within this, commuter passes contributed roughly JPY 6.5 billion, while non-commuter passes revenue accounted for approximately JPY 48.5 billion. Revenue growth in the Retail and Services and Real Estate & Hotels segments, excluding real estate sales as well as an increase in other revenue also contributed to these results.

On the expense side, personnel expenses increased by approximately JPY 32 billion for the entire group and JR maintenance expenses rose by approximately JPY 21 billion. In the Retail and Services and Real Estate & Hotels segment, the cost of sales also increased in line with the growth in revenue. The increase in other expenses includes higher depreciation and amortization as well as taxes and product charges resulting from our proactive capital expenditures centered on growth investments.

This is the consolidated statements of income. I will provide further details on each segment later in this presentation. Nonoperating expenses increased by JPY 6.4 billion year-on-year. This was primarily driven by an increase in interest expenses resulting from the recent rise in interest rates. The increase in extraordinary gains was attributable to an increase in gain on sale of investments in securities.

Operating revenue for the Transportation segment saw strong growth, increasing by JPY 70.4 billion year-on-year to 104.9% of the previous year's level. Railway business passenger revenues, et cetera, increased by JPY 58.7 billion. In addition, sales of rolling stock to non-JR railway companies by J-TREC, Japan Transport Engineering Company, also rose compared to the previous year. On the other hand, operating income saw only a marginal increase of JPY 0.3 billion year-on-year. This was due to factors such as rising personnel expenses and maintenance costs, which offset much of the revenue growth. Furthermore, due to the front-loading of maintenance costs and other factors, we expect fourth quarter profit to improve compared to the previous fiscal year. Consequently, we forecast full year segment operating income to reach JPY 192 billion, a year-on-year increase of JPY 15.9 billion.

The following are traffic volume and passenger revenues. Please refer to the total row at the bottom of the table. Commuter passes revenue reached 101.9% of the previous year's level, driven by factors such as the return to office trend. Non-commuter passes revenue also saw significant growth, reaching 104.8% year-on-year. This strong performance in noncommuter revenue was primarily driven by high demand for the Shinkansen and conventional lines Kanto area network. The introduction of Green Cars on the Chuo Line Rapid Service has generated a positive impact of JPY 6.1 billion, and we project a full year contribution of JPY 8 billion. While adoption was additionally somewhat slow, performance as of the end of the third quarter is currently trending slightly ahead of our plan.

Here are the relevant indicators for the Transportation segment. Passenger volume for the Tohoku, Joetsu and Hokuriku Shinkansen lines has remained strong compared to the previous year. In particular, volume for the Hokuriku Shinkansen has increased by more than 10% compared to pre-pandemic levels fiscal year 2018. During the third quarter, we saw significant usage from leisure travelers visiting the Toyama and Kanazawa areas.

Regarding the Joetsu Shinkansen, ridership in relatively short-distance sections such as between the Tokyo metropolitan area and Takasaki remains strong. We believe this is driven by a robust demand from business travelers. Even when broken down by weekdays and holidays, the year-on-year performance for weekdays has outperformed that of holidays, both of the 3-month period of the third quarter and on a cumulative fiscal year-to-date basis.

Operating revenues in the Retail & Services segment increased by JPY 16.4 billion year-on-year. A significant portion of this growth was driven by the strong performance of our Ekinaka stores run by JR East Cross Station Company Limited. Advertising revenue is also showing growth. As shown in the middle of the slide, operating revenue from transportation advertising reached approximately 110% year-on-year, progressing in line with our plan. While this remains at around 80% compared to the pre-pandemic levels, it is showing a steady and gradual recovery.

Operating revenue for the Real Estate & Hotels segment increased by JPY 20.8 billion year-on-year. JR East Building Company Limited saw a significant increase in revenue due to factors such as the opening of Takanawa Gateway City, while Nippon Hotel Company Limited also recorded revenue growth. Overall segment operating income decreased by JPY 10.2 billion, approximately JPY 5.5 billion, roughly half of this amount, was due to a decrease in profit from real estate sales, resulting from a difference in the specific properties sold compared to the previous year.

The remaining half was driven by factors such as preopening expenses and depreciation and amortization associated with Takanawa Gateway City. We expect Takanawa Gateway City to become profitable starting in fiscal 2026. Our shopping center, office and hotel businesses are progressing in line with our plans. We are seeing steady growth, particularly at existing facilities, and we believe the operational and sales efforts at each location are translating effectively into revenue.

Here are the relevant indicators for the Real Estate & Hotels segment. Please look at our hotel revenue. In the first quarter, performance was strong as we successfully captured demand during the Easter holiday period. While there was a temporary dip in the second quarter due to the impact of earthquake warnings and rumors, we successfully offset that impact in the third quarter with revenue reaching 107% year-on-year.

Regarding travel restrictions from China, we did not see a significant impact during the third quarter. We will continue to closely monitor trends heading into the fourth quarter while also striving to attract travelers from other international markets to diversify our customer base. The office vacancy rate stands at 1.8%, which is a significant improvement compared to the end of the previous fiscal year. We're seeing improved performance across our existing portfolio by leveraging our competitive advantages, particularly our prime locations near stations and our relatively new properties.

The Others segment saw increases in both revenues and income, with operating income growth of 135.2% year-on-year significantly outpacing operating revenue growth of 109.2% year-on-year. This was primarily due to a rebound from the previous fiscal year, during which we recorded costs associated with a partial withdrawal from wind power development. Regarding the number of monthly uses of electronic money, performance for the 3-month period of the third quarter was flat at 100% year-on-year and the fiscal year-to-date cumulative total reached 102%. Overall, growth has been somewhat lacking in momentum.

Inbound revenue from mobility services came to JPY 30.5 billion, a shortfall of approximately JPY 3 billion against the cumulative third quarter plan of JPY 33.5 billion. Having already seen signs of a shortfall as of the second quarter, we were aiming for a recovery in the second half. However, the gap versus the plan widened further in the third quarter. Of the approximately JPY 3 billion shortfall, our analysis shows that about half was due to the impact of earthquake warnings and rumors. We attribute the remaining half to the fact that our own initiatives did not yield the expected results.

In particular, while we have been aiming for a recovery in demand from Taiwanese travelers who have historically been a very significant customer segment for us, we have not yet been able to fully capture this demand. For the fourth quarter, we are focusing on strengthening our partnerships with OTAs, online travel agents, and enhancing our online advertising efforts. Inbound revenue for the Lifestyle Solutions segment reached JPY 37.8 billion, slightly exceeding our plan.

Please refer to this slide for our consolidated balance sheet.

This slide shows our consolidated interest-bearing debt, capital expenditures and key indicators. The net interest-bearing debt balance stood at 103.8% compared to the end of the previous fiscal year. As average interest rates have been rising gradually, the rate for total interest-bearing debt is currently 1.71%. We project consolidated capital expenditures of JPY 907 billion for the current fiscal year. These investments are progressing steadily centered on growth investments in Lifestyle Solutions, including projects such as Takanawa Gateway City and Oimachi Tracks. Please refer to the other key indicators for your information. Regarding our cross shareholdings, while the slide lists our divestment results for the first half totaling 5 issues and JPY 27.6 billion, we have also proceeded with further sales during the third quarter.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]

Thank you for taking time out of your busy schedule to attend our financial results briefing today. I am Kise, President and CEO. And I would like to explain the highlights of the second quarter results for the fiscal year ending March 2026.

First, in addition to strong use of railways, the absence of major natural disasters allowed both consolidated operating revenues and operating income to significantly exceed the initial plan in the first half of this fiscal year. Therefore, based on actual results and future outlook, we have decided to revise our full year earnings forecast upward. Regarding the dividend forecast, we had initially announced an annual dividend of JPY 62 per share, representing a payout ratio of 30.9%.

However, considering the shareholder return policy outlined in the next stage 2034, which aims to gradually raise the payout ratio to 40% by fiscal year 2027 as growth investments stabilize and the upward revision of our earnings forecast, we have decided to increase the dividend. The full year dividend will be raised to JPY 70 per share, including an interim dividend of JPY 35. Consequently, the dividend payout ratio for the current fiscal year is expected to be 33.3%. Details regarding the financial results and earnings forecast will be explained later by Vice President, Ms. Ito.

Next, I will explain the management strategy for realizing the group management vision to the next stage 2034. Under to the next stage 2034, we will continue to uphold the pursuit of ultimate safety as our top management priority. While enhancing the quality of our products and services, we aim to provide everyone with a sense of security or peace of mind that goes beyond near safety. As previously explained, it is designed to expand the trust that forms the foundation of all our group's businesses in pursuit of nonlinear growth.

Recently, there have been railway incidents that have caused inconvenience or concern to our customers. We are promptly organizing investigation into the causes and implementing necessary countermeasures. Regarding the two incidents involving the [indiscernible] Shinkansen with Tohoku Shinkansen, there was an incident where decoupling of two linked sections occurred while running. As an immediate countermeasure, we have installed mechanical fixing tools to prevent decoupling even if abnormal signals occur. We plan to implement permanent measures based on the findings of the Transport Safety Board's investigation.

Next, regarding the E8 series train failure on the Yamagata Shinkansen, we have identified the cause as a certain combination of parts causing electric current flow changes and the extreme heat brought about by abnormal weather conditions causing the protective element to malfunction. Based on these findings, we are implementing measures to prevent malfunctions even under high temperature conditions. Since Shinkansen operates at high speeds, we are thoroughly reviewing the risks associated with high-speed operation. We are fundamentally reassessing our safety philosophy, including measures like having a redundancy system in place to meet our customers' expectations for security and peace of mind.

Furthermore, as we announced recently, regarding the long-standing issue of platform draws at Tokyo Station, Shinkansen platforms, the installation will start from fiscal year 2028. We also intend to continue installing platform draws on conventional lines in Tokyo Metropolitan area as previously announced. Furthermore, in light of recent technological advancements, particularly in AI, we are actively working to raising the level of safety by introducing generative AI and advancing DX digital transformation while also aiming to improve operational efficiency and productivity.

Under the NEXTAGE 2034 initiative, we have committed to advancing a dual access management strategy with railway focus of mobility and lifestyle solutions. To achieve the dramatic growth of mobility, which plays a key role in this strategy, we announced our first medium- to long-term growth strategy for the mobility business, namely Pride and Integrity on September 9.

Envisioning the future state of mobility in 2045, 20 years from now, it applies how we intend to grow and restructure our entire mobility business with railway focus over the next 10 years. By advancing pride and integrity, we plan to not only strengthen our existing businesses, but also sustainably grow our business through creating new value and expanding our business domains. We are currently for making a plan to grow the operating revenue of our railway-focused mobility business by over JPY 200 billion compared to FY 2024 levels by FY 2031.

Regarding profitability improvement in mobility, we will enhance profitability by combining the creation of domestic and international travel demand, increasing transportation capacity and increase in unit prices. First, the general domestic and international mobility demand, we have already implemented the Takaramono project. This initiative involves collaborating with local residents to uncover lesser-known tourism resources in each region and promote them domestically and internationally to develop a tourism business.

Additionally, the Tohoku reconstruction tourism project launched the summer before last, involves working with local communities to develop travel destinations, generate domestic exchange population and promote measures like dual location living. This aims to create a connected population into permanent residents, thereby, expanding transportation demand. Regarding inbound tourism, we will promote a new tourism aligned with global trends, improved recognition and improve the acceptance system.

Furthermore, as announced recently, we plan to introduce new overnight express trains where [indiscernible] in itself becomes a destination. We aim to create a new demand through this new business access. The planning expansion of [indiscernible] Yamagata Shinkansen, Fukushima Station approach track is scheduled to begin operation by the end of fiscal year 2026. Once operational, this will not only enhance transport stability, but also enable increased train frequencies and flexible time table settings based on demand.

Beyond this, we aim to achieve transport capacity aligned with customer needs through measures like setting time tables based on usage patterns and producing new vehicles. We will have a transportation system. And for example, increasing transportation volume through utilizing Shinkansen platforms at both [indiscernible] and Omiya station is also a key initiative we are considering for the future.

Next, on the railway fares and charges systems. As previously announced, we applied for fare revision in December 2024 for the first time since foundation, which was approved on August 1 of this year as submitted. Consequently, we anticipate an annual revenue increase of JPY 82 billion. This fare revision will be implemented on March 14 of next year, and we are currently making the necessary preparations, which are showing smooth progress. We are also requesting the national authority to review the total cost method itself.

Furthermore, we tend to continue discussion with them to ensure a flexible fare setting in response to future changes in the business environment, including requesting a shift from the current approval system for non-reserved seat express charges or Shinkansen be changed to a prior notification system and introduction of a mechanism, enabling timely responses to inflation.

Additionally, we are considering new pricing strategies, including revising the extra charge system and implementing pricing strategies that can be executed through prior notification even for items currently subject to notification requirements. Next, improvement of productivity and the introduction of new technology, mobility. We now have a clear path to achieving the previously stated goal of reducing railway business operation costs by JPY 100 billion by FY 2027.

Furthermore, we plan to transform mobility operations and pursue additional operational cost reductions through the introduction of driverless operations, advance Suica Renaissance to transform stations, facilities and technological innovation and structural reforms. One example is driver-only operation previously announced in the Tokyo Metropolitan area by the early 2030s. This will enable the reassignment of conductive positions to other worlds that are highly productive. And this is a direction we are moving towards. And through technological innovation and structural reform, employees will transition to work that is more advanced and creative, uniquely suited to human capabilities and when each individual can feel a sense of growth and fulfillment in their work.

Concurrently, this will enhance productivity across the entire group. We aim to create such a work environment going forward. And furthermore, as newly outlined in the to the NEXTAGE 2034, we have already commenced technical initiatives, such as utilizing satellites to enable walk-throughs, ticket gates in regional areas and transforming the train control system through satellite communication. Regarding local lines, we disclosed the FY 2024 operational information for underutilized sections on October 27.

We recognize that securing means of local transportation is a critically important role for our company, and this remains unchanged. We believe it is our mission to firmly safeguard local transportation. However, regarding whether the current forms of railways is sustainable, we wish to engage in thorough discussions with local communities and residents. As previously announced, regarding the section between Kanita Station and Minmaya Station on the Tsugaru line, we reached a basic agreement with local government in June of this year to shift to automobile-based transportation.

Furthermore, under the dual access management strategy outlined in the -- NEXTAGE 2034, we will actively utilize our railway assets to develop businesses that create new values and services. As for Hakobun freight transportation service, we have been entrusted with transporting government stockpile rice during the period of shortages. This is not merely about transporting rice. As shown here, it is an example of creating business structure by positioning it as part of the logistics chain, combining it with the con locker business or with the JRE Mall REC business.

Furthermore, we recently began a new initiative to expand sales channels to Southeast Asia. This is a trial operation of transporting freshly harvested pairs from Sendai to Tokyo, then loading them on to JL Cargo to Singapore. As previously announced, with the market now in place, we plan to convert the E3 series trains previously used for Tsubasa into dedicated cargo-only cars for commercial operation next fiscal year as a new business development utilizing the Hakobun service.

Furthermore, the multifunction blocker, Multi-Ecube is positioned not merely as a storage solution, but as an integral part of the logistics chain. It also features dynamic pricing based on demand fluctuations. We're expanding this system beyond our group area to facilities across the metropolitan Tokyo area and the Kansai area, aiming to deploy 1,000 locker blocks by FY 2026.

As previously announced, we aim to implement through service utilizing the Musashino Line and Seibu Ikebukuro Line connecting line in FY 2028, creating new tourist routes. Additionally, we are working to generate business revenue by supporting the digital infrastructure in our East Japan area through leasing the optical fiber core wire laid along our railway tracks. We plan not only to utilize the spare capacity of existing optical fiber core wires, but also to increase capacity slightly when replacing those wires aim to position this as a source of revenue. Through these efforts, we intend to contribute to improving our group's ROA while also helping to solve various social issues.

Next, regarding the town development our group aims to achieve. The area from [ Hamura ] -- so Station to Oimachi Station, including Takanawa Gateway City, we define as a greater Shinagawa area, creating new appeal and value of Tokyo as an international city while simultaneously implementing collaborative town development strategy. Rather than viewing each station as a single point, we will treat them as a station town as a whole.

By assigning distinctive roles to each area, an integrated value will be created. Within this greater Shinagawa area, our group's total floor area will be approximately 1.5 million square meters, equivalent to 31 Tokyo Domes with annual operating revenue exceeding JPY 100 billion. Takanawa Gateway City opened on March 27, followed by the opening of NEWoMan Takanawa in September.

In October, the University of Tokyo's Takanawa campus opened and the JW Marriott Hotel also commenced operations. Tenants are currently moving in one by one. Construction on the remaining three buildings near Tamachi, primarily offices, the LINKPILLAR 2, NEWoMan Takanawa and the residence is progressing smoothly towards the grand opening scheduled for March 28, 2026.

Regarding the office leasing status of high interest, the LINKPILLAR 1 already opened is nearly fully occupied with tenants moving in sequentially. As for the LINKPILLAR 2, our current projection is for approximately 90% occupancy or essentially at full occupancy at the time of opening in March 2026. We are feeling very strong momentum in the office leasing for this town. With integrated development with the station, we are firmly achieving rental rates 1.4 to 1.5x higher than the standard rates of the surrounding areas.

On March 28, we will also open a community development project of Oimachi Trucks, the site of our former company housing. Office leasing here is progressing smoothly. ATR will be located here. And when Oimachi Trucks opens on March 28, -- both Atre's tenant occupancy and office leasing are expected to be nearly at full capacity. We anticipate reaching March 28 with this project also ready.

Next, under -- to the next stage 2034, we will advance our unique public transportation-oriented urban development model, leveraging synergies between rail standard mobility and lifestyle solutions. We have named this JTOD. This plan involves creating diverse networks and realizing network synergies through the provision of services unique to the JR East Group, such as Suica and through collaboration with local government agencies and businesses.

Let me introduce a few concrete examples. One is the East Yamate route scheduled for fiscal year 2031. This route connects directly to a station close to Haneda Airport passing through Tokyo. This Haneda Airport access line will enable direct access to Haneda Airport from lines like the Takasaki Line or Utsunomiya Line. We believe this will contribute to enhancing the value of the Tokyo Metropolitan area. Our goal extends beyond contributing to the mobility businesses revenue. We aim to increase overall group revenue, including various lifestyle solutions being developed along the lines.

Additionally, between JR Tokaido Lines Ofuna Station and Fujisawa Station, we will establish a new station tentatively named, Muraoka New Station. We will collaborate with municipalities like Kamakura City to develop the area around this station and the former Kamakura General Rolling Stock Center site already decommissioned and former company housing sites.

By promoting this development, we aim to create synergies, enhancing the value of our existing and decommissioned assets, increasing revenue through this value enhancement and promoting railway usage. Planning for this is also progressing largely as scheduled. This diagram shows the major development projects planned for the Greater Tokyo area.

Beyond the items listed here, we are currently advancing initiatives such as reviewing the railcar depots around Tokyo by consolidation and creating new pipelines by utilizing former company housing sites. We have already initiated efforts to ensure our robust pipeline continues beyond fiscal 2030 by leveraging our pipeline through initiatives like the strategic creation of development sites mentioned earlier and steadily executing our rotation business model as outlined in to the next stage 2034, we aim to generate cumulative operating income of approximately JPY 600 billion from real estate sales by fiscal 2031.

Additionally, we're targeting JPY 1 trillion in asset management scale for our real estate fund business. This plan is currently progressing steadily. Moving forward, as a new challenge in our real estate business, we plan to fully enter the residential sector. Symbolizing this is the Funabashi Ichiba-cho Company Housing site development project. spanning approximately 4.5 hectares. We are jointly advancing this large-scale project with Tokyu Fudosan Holdings targeting completion in December 2028. It will feature over 1,000 units. We anticipate this residence for sale component alone will generate approximately JPY 42 billion in group revenue.

Furthermore, as this site also includes rental properties, adding rental income will yield additional revenue beyond the JPY 42 billion. This project represents the revenue effect we expect to gain from developing this former company housing site. Suica Renaissance, evolving Suica from a device for mobility and small payments to a device for lifestyle. We are steadily advancing this renaissance, aiming to go beyond Suica's current norms. Within the next decade, alongside advancing the transition to a central service system for tickets and value, we will sequentially develop and conduct verification tests on various technologies and accelerate efforts to realize their social implementation.

While our plan targets the next decade, we also view approximately 5 years as a key milestone for accelerating this development pace. Regarding ongoing social experiments, starting this November on the Joetsu Shinkansen, making the first time on a Shinkansen line, verification tests will begin for walk-through ticket gates using facial recognition technology between Niigata and Nagaoka.

Regarding conventional lines, as previously announced, we plan to implement walk-through ticket gates in the Greater Shinagawa area by fiscal year 2028. The specific number of stations within this area to be included will be determined through future discussions. We intend to realize these walk-through ticket gates in this area first. And based on the results, we hope to reduce costs regarding ticket gates system development.

We also plan to address the inconvenience currently faced by Suica users regarding the JPY 20,000 charge limit. By shifting the current system to a central server system in autumn 2026, users will be able to make a purchase over JPY 20,000 with a new payment function. Furthermore, regarding charging, while customers currently need to precharge their cards, we aim to create the Suica ecosystem where this is unnecessary by linking cards to credit cards or bank accounts.

Finally, regarding new organization and work style for the group's further leap forward, we will fundamentally review our existing business operation structure and personnel and wage system, which have been inherited from the former Japanese National Railways, JNR by boldly reforming our work style to transcend the legacy of the national railways, we aim to improve productivity, expand earnings and reduce costs.

Regarding the new business operation structure, we will abolish the regional headquarters and branch offices, which previously managed frontline workplaces like stations, train crew, depots and maintenance sites by area effective June 30. By shifting the core of management to each area operation center, we aim to transform our organization into one that is agile, deeply rooted in the community and capable of fully meeting the expectations of our customers and local residents.

As mentioned earlier, this will enable us to realize customer-first management deeply rooted in the community, while enhancing engagement between employees and the company. To support these new challenges for our employees, we will fundamentally reform the personnel and wage systems. Implementation dates for the personnel and wage systems are set for April 1 and for the organizational changes, July 1. We are currently advancing discussions on these reforms. We sincerely request your understanding and support for these new initiatives. That concludes my remarks. Thank you very much.

Now turning to Page 23. This is currently displayed, I will briefly outline the key points for the subsequent sections. Regarding the second quarter financial results, the group as a whole achieved both increased revenues and profit.

Operating revenues increased for the fifth consecutive quarter, rising approximately 5% compared to the same period last year. Regarding operating income, however, it decreased by JPY 4.1 billion year-on-year. This decrease in income is largely due to the timing shift in real estate sales. For the full year, as shown in the upwardly revised figure, we project operating income of JPY 405 billion, an increase of JPY 18 billion. Profit attributable to owners of parent increased by JPY 7.4 billion to JPY 147.2 billion, driven by higher gains from the sale of investment securities.

By segment, only the Real Estate and Hotels business segment reported increased revenue but decreased income. The other three segments all showed both increased revenues and income. I will touch on the financial forecast later. The dividend is as explained earlier by the President.

Now on Page 24, we have a waterfall chart for operating income. Within the JPY 67.9 billion in revenues, the largest contributor to the revenue increase was an increase in JR transportation revenues amounting to approximately JPY 37 billion. Retail and services, real estate and hotels and other revenues, including new Card JE system development contracts and J-TREC sales to non-JR railway companies also saw revenue growth across other segments.

Regarding the light blue increases in expenses, personnel expenses rose by approximately JPY 19 billion. Within JR East, this amounted to JPY 10.9 billion. Other group companies also saw increases in personnel expenses due to higher labor unit costs and base pay increases. Regarding the increase in JR maintenance expenses, as briefly mentioned in the first quarter, we are consciously leveling out construction projects. This approach allows for safer construction progress and earlier project starts compared to last year, maintenance expenses were concentrated in the first half, resulting in a JPY 13.5 billion increase in repair costs. This is one factor contributing to the reduced profit.

Regarding increases in other expenses, we have increased capital expenditures primarily for growth investments. This includes approximately JPY 10 billion in depreciation, taxes and other capital-related expenses. Furthermore, the opening of the Takanawa Gateway City this year has also contributed to the increase in other expenses such as opening costs.

Moving on to the consolidated statements of income. I'll cover the upper segment later, so please look at the lower section. Regarding nonoperating expenses, there was an increase in interest expense on corporate bonds. Under extraordinary gains, there was an increase in gains on sales of investments and securities.

Moving on, starting on Page 26, we break down by segment. Transportation saw increased revenue and income, though the income increase was minimal. This was due to the previously mentioned increase in personnel expenses based -- and the front-loading of repair costs, resulting in only a slight income increase. Regarding the railway business passenger revenues result in plan at the lower part of the slide, while we are revising the full year forecast upward for the third and fourth quarters, commuter passes revenue incorporates the first half results, reflecting reduced commuting and includes a slightly stretched forecast for the second half.

For non-commuter passes, we have incorporated the first half increase and maintain the original year start plan for the second half. This approach forms the basis for the upward revision of the annual transportation revenue forecast.

Moving to Page 27. This shows passenger revenues. Comparing the first half periods, please look at the lower section. Commuter passes increased by 2% and non-commuter passes grew by 5% compared to last year. For the increase in railway transportation, commuter passes contributed JPY 4 billion and non-commuter passes contributed JPY 23 billion, resulting in a total increase of JPY 27 billion due to increased railway usage.

In addition, in the middle section, under conventional lines Kanto area network, we have been recovering revenues through a paid service for the introduction of green cars on the Chuo Line Rapid since March, resulting in an increase of JPY 3.8 billion. We expect an increase in revenue of JPY 8 billion for the full year. Although the introduction of green cards was slow to catch on in the first half, usage is now quite high, and we're on track for the second quarter. So we expect to easily achieve the full year target of JPY 8 billion.

Next, Page 28 shows transportation, relevant indicators. As you saw earlier, the increase in passenger revenues shows that the Shinkansen performed very strongly. At the bottom of the slide, we have Shinkansen passenger volume, weekdays holidays. The percentage increase on weekdays is one point higher than the increase on holidays. So we are seeing a significant recovery of business travel. Business Ekinet also saw approximately 20% growth in the first half compared to last year.

Page 29 covers retail and services. Due to high rail usage Ekinaka stores also saw strong patronage, resulting in a total top line increase of JPY 11 billion. Of this, JR East Cross Station Company Limited contributed approximately JPY 8 billion. Transportation advertising, as shown in the middle section, is currently progressing as planned.

Moving on to Page 30, Real Estate and Hotels. Here, operating revenues increased by JPY 8.4 billion, while operating income decreased by JPY 9.7 billion. However, excluding real estate sales, operating revenues would be grown by approximately JPY 16 billion at the top line. As Takanawa Gateway City opens, operating revenues is primarily driven by JR East Building, contributing approximately JPY 8.5 billion, along with increased revenues from Nippon Hotel, Atre and Lumine. Without timing differences, the top line would be performing quite well.

Regarding operating income, there's a profit decrease due to timing differences in real estate sales. Additionally, the opening expenses of Takanawa Gateway City. Therefore, even if real estate sales had not occurred, operating income would have decreased in the second quarter.

Moving to the next page, Real Estate and Hotels, relevant indicators. Please look at the bottom right, properties operated by JR East Buildings saw their vacancy rate drop from 3.7% at the end of the previous period to 1.9%. Focusing on properties near stations, there has been considerable demand, and this has significantly contributed to the improvement in the vacancy rate.

Next, Page 32 covers the other segment. Revenue and income both increased. While revenue rose by JPY 2 billion, income increased by JPY 1.8 billion, showing a relatively large percentage increase in income. This is largely a rebound effect from last year when we recognized costs in the second quarter, anticipating uncertainties in construction for wind power project.

Next, inbound revenue results. Lifestyle Solutions is on plan, while mobility fell short of projections, continuing the trend from the first quarter. July saw reputational damage, particularly affecting Hong Kong customers, leading to underperformance. However, for the second half, we have various content initiatives and starting October 1, we will also integrate -- welcome Suica Mobile with JRE's train reservations.

Additionally, reservations for conventional lines, limited express trains like NiX and Fuji Excursion, which are very strong for inbound tourism will become possible by enhancing our device offerings, we aim to grow inbound revenue.

Page 35 shows cash flow. As we are focusing on growth investments, free cash flow is negative. However, we expect it to stabilize from fiscal year 2026 and turn positive.

Page 36 shows key indicators. Please look at the bottom right, we have included cross shareholding data starting this time. We sold 5 stocks in the first half, resulting in sales of JPY 27.6 billion, while the total number of holdings decreased by 5 from the end of the previous fiscal year to 65 stocks. The book value on the balance sheet increased to JPY 276 billion due to market valuations driven largely by significant stock price increases in listed shares. The net assets ratio is 9.2%. However, we are committed to reducing this by 30% based on the market value ratio by 2031, and we intend to steadily progress toward this goal.

Finally, as reference material, Page 39 shows the forecast by segment. Compared to the April forecast, the top line is up JPY 35 billion, with transportation increasing by JPY 30 billion. For real estate and hotels, out of the JPY 5 billion, JPY 4 billion comes from real estate sales. Additionally, for the first half, we've incorporated an extra JPY 1 billion from strong rental income sources like Shibuya Scramble Square. On the profit side, this reflects the carryover of income savings from the first half.

Furthermore, for retail and services, plus JPY 1 billion is due to JR East Cross Station significantly reducing its cost ratio. These factors are reflected on the profit side, while real estate and hotels shows increased profits accompanying higher sales.

Moving to Page 45 and beyond this section, action to implement management that is conscious of cost of capital and stock price is based on a request from the Tokyo Stock Exchange. We provide updates every half year. So please review it again. Thank you very much.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]