AIRPORT FACILITIES Co.,LTD. Q2 FY2026 earnings call

• Opening and Corporate Update

  • Management apologized for a fire that occurred during demolition of a large hangar at Haneda Airport on September 29; confirmed the fire has no impact on current earnings and the company will implement recurrence prevention measures.

  • The company is advancing initiatives aligned with the revised medium-to-long term management plan announced in May, and is systematically executing capital policies including share buybacks to improve capital efficiency.

  • Core Strategic Initiatives Progress

  • Haneda Airport 1-chome Project: Phase 1 relocation of functions from 1-chome district to existing facilities in the New Maintenance Yard area is underway; value-added renovations are complete, additional parking space has been secured to address local shortages, and partial tenant relocation was completed in November. All remaining tenants are expected to complete relocation by FY2026, and plans for subsequent phases remain under discussion with stakeholders.

  • Non-asset Off-airport Real Estate Business: The company sold 『Sakura Front Ichibancho』 in the interim period, and acquired two new properties (Yamatoya Building in Shinjuku, Tokyo in September and GRANBIZ Tokyo Nihonbashi in Chuo, Tokyo in November); preparations are underway for a private real estate fund to support the rotation-based business model.

  • New Business and Sustainability Initiatives: Expanding solar power generation installations at Haneda cargo facilities and advancing preparations for energy storage battery introduction to support carbon reduction, power demand leveling and airport BCP; launched bundled shared IP network services at Haneda; completed construction of a business jet parking apron at Shizuoka Airport under a construction management (CM) contract, and is pursuing additional CM contracts to expand this service line.

  • Capital Policy Progress

  • Filed an application to change listing classification from the Tokyo Stock Exchange Prime Market to the Standard Market; the change aims to balance compliance with listing requirements and flexible capital policies such as share buybacks, and allow management to focus resources on core business strategy.

  • Initiated a share buyback program with an upper limit of 1 billion yen; all repurchased shares will be cancelled as part of broader shareholder return expansion and balance sheet optimization.

1. Airport Real Estate Business: Revenue of 8.73 billion yen, up 3.1% YoY; operating profit of 2.2 billion yen, up 10.0% YoY; accounts for 50.8% of total consolidated revenue. 2. Off-Airport Real Estate Business: Revenue of 4.05 billion yen, up 160.4% YoY; operating profit of 1.22 billion yen, up 112.2% YoY; accounts for 23.6% of total consolidated revenue. Growth was driven by sale of one develop-to-sell property in the non-asset business and rent optimization on newly acquired properties. 3. Airport Infrastructure Business: Revenue of 4.01 billion yen, up 9.2% YoY; operating profit of 0.64 billion yen, up 17.9% YoY; accounts for 23.4% of total consolidated revenue. Growth came from basic rate revision for heat supply business and increased water usage in water supply and drainage operations. 4. Other Businesses: Revenue of 0.37 billion yen, down 6.4% YoY; operating profit of 0.14 billion yen, down 11.3% YoY; accounts for 2.2% of total consolidated revenue. Decline resulted from transfer of part of solar power generation facilities.

• For the full FY2026 March term, management revised up core earnings projections: total revenue is forecast at 36.58 billion yen, 0.6 billion yen higher than the initial projection; operating profit is forecast at 5.82 billion yen, 1.29 billion yen higher than the initial projection; ordinary profit is forecast at 6.19 billion yen, a 49.1% increase from the initial projection.
  • Net income attributable to the parent company is projected at 3.03 billion yen, nearly unchanged from the initial forecast, as the upward earnings momentum was offset by the booking of additional impairment losses on Haneda 1-chome district removal costs and accounting classification changes for subsidy income.
  • The full-year dividend projection is maintained at 37 yen per share, a new all-time high and significantly above the prior year's full-year dividend of 21 yen, aligned with the company's 60%+ payout ratio policy set after the medium-term plan revision.
  • The interim dividend is confirmed at 18 yen per share, up from 9 yen per share in the prior year interim period.

• A fire occurred during demolition work at a Haneda Airport large hangar; while there is no material impact on current earnings, safety risks from construction work require ongoing recurrence prevention measures.
  • Significant increases in construction costs have forced the company to revise cost estimates for asset removal obligations for the Haneda 1-chome district project, resulting in a large additional impairment loss (special loss) booked in the interim period that reduced interim net profit by 41.6% YoY.
  • Persistent inflation and rising operating costs create pressure on profit margins, requiring ongoing renegotiation of rent and contract terms with tenants.
  • High construction cost volatility complicates planning and investment return projections for new capital projects such as the Haneda Airport container storage facility.

Q: What is the status and timeline for the Haneda Airport container storage facility project? Will construction start in FY2026? / A: The company is exploring solutions to improve empty container storage and distribution efficiency at Haneda's domestic cargo area, including multi-level construction to maximize limited land. It is currently in discussions with airline users, and is evaluating all options (including alternatives to multi-level construction) in light of recent high construction costs. / A: The company targets starting construction in FY2026, with service launch around 2027, and is evaluating both east and west cargo areas for the facility, with final details dependent on ongoing discussions with users. (1000/2000 chars)

Q: Will the company maintain the 1 billion yen annual pace of share buybacks going forward to hit the ROE target? / A: The medium-term plan commits to 10 billion yen in total shareholder return over the plan period, combining dividends and flexible share buybacks, with the current tranche set at 1 billion yen. / A: Management cannot commit to a fixed annual pace at this stage. Future buyback size will be determined dynamically based on market conditions, growth investment needs, and the broader business environment, while keeping the 10 billion yen total return target in mind. (1398/2000 chars)

Q: How does the company plan to handle inflation, and will the benefit of rent renegotiation disappear next year? / A: The company is proactively renegotiating rents and lease terms not just to pass through higher costs, but to secure appropriate profit growth amid inflation, while preserving long-term relationships with airport tenants. / A: Most high-priority rent adjustments have been completed this period, with gains from current year changes will full-year next year. The company will continue to pursue additional adjustments as needed based on market conditions going forward. (1776/2000 chars)

Q: What is the profit size of the Shizuoka Airport CM project, and what other non-Haneda investment opportunities is the company pursuing? / A: The Shizuoka CM contract contributes tens of millions of yen in profit, a fee-based service different from the company's core own-and-lease model. It helps build brand recognition for the company's CM capabilities to drive future contracts. / A: The company is targeting investment and business opportunities across all Japanese airports, with a focus on regional airports, leveraging existing experience to capture demand from facility aging and decarbonization projects. Multiple early-stage opportunities are currently being evaluated. (1987/2000 chars)