Interview with the President

Progress of the Medium-Term Management Plan
Making steady progress to reach our management goals ahead of schedule
The concept behind the Medium-TermManagement Plan

Why has the Group set the goal of improving
the interest-bearing debt/EBITDA ratio toaround seven times?

On the occasion of the management integration of Hankyu
and Hanshin, the Group formulated and announced the sixyear Hankyu Hanshin Holdings Group 2007 Medium-Term
Management Plan (fiscal 2008–fiscal 2013), for which we established yearly adjusted estimates and implemented initiatives toachieve the plan’s targets. This plan was intended to clarify theGroup’s vision for improving its enterprise value across the board
in fiscal 2013, during which the Group completed such major
projects as the rebuilding of the Umeda Hankyu Building.
Following the plan’s implementation, however, the operating environment deteriorated in the wake of Lehman Brothers’
collapse. This delayed improvements in the Group’s financial
standing and has unfortunately made it impossible to reach theinitial goal of bringing down the interest-bearing debt/EBITDA
ratio to around seven times during the period of the plan.
Nevertheless, in order to increase value along Group railway
lines and shore up its financial standing—which is indispensable
for maintaining sustainable growth—we decided in May 2012
to extend the Medium-Term Management Plan to fiscal 2016.
This decision was made with the idea that despite initial targets
being behind schedule, we must remain firm to the direction
initially established by the plan. Based on this, we announced ourrenewed commitment to achieving the initial goal of improving
the interest-bearing debt/EBITDA ratio to around seven times
and, in turn, are diligently working to carry forward this plan.

To answer this question, I will once again explain the management indicators that the Group is aiming for.
The Group’s mainstay railway and real estate leasing
businesses generate stable cash flows. Yet, these businesses
are characterized by the need to own large amounts of fixed
assets, which saddles the Group with a commensurate amountof interest-bearing debt. It is extremely difficult to pinpoint in a
general way the ideal interest-bearing debt/ EBITDA ratio within
the private railway sector in Japan.
However, in light of the current outstanding balance of interest-bearing debt exceeding ¥1 trillion, our business must havefirm financial foundations that make it resistant to interest-ratefluctuation and other risks. One very basic benchmark in setting
this ratio is to improve the interest-bearing debt/EBITDA ratio toa minimum level among other major private railway operatingcompanies. As you can see from the figures below, this is how wearrived at a target of around seven times.

13.7

126

4.5

7.7

7.8

8.1

8.1

8.5

8.7

8.9

9.9

11.1

5.7

0
Nishi-NipponRailroad

KeioCorporation

Tobu
Railway

Tokyu
Hankyu Hanshin
CorporationHoldings

NagoyaRailroad

Keihan Electric Odakyu Electric Keisei Electric
Railway
Railway
Railway* Interest-bearing debt/EBITDA for each company has been calculated by Hankyu Hanshin Holdings Group.

Sotetsu
Holdings

KeikyuCorporation

Nankai Electric
Railway

Kintetsu
Corporation

Over six years have passed since the management integrationof Hankyu Holdings, Inc. and Hanshin Electric Railway Co., Ltd. in
2006. In light of changes in the environment in which each corebusiness operates, certain core businesses have been restructured from fiscal 2014 onward.

(¥ billion)

2008
Results*1

2009
Results

2010
Results

2011
Results

2012
Results

2013
Results*4

2014
Estimate

2016
Plan*4

90.7

77.8

70.1

64.7

73.8

87.9
[78.0]

84.0

85.0[83.0]

145.2<143.2>*2

135.3

133.2

127.1

133.5

145.1
[137.0]

142.0

143.0
[142.0]Effects ofintegration*3

2.2

4.6

7.1

7.9

8.8

9.7
[9.7]

—

—

Interest-bearing
debt/EBITDA

8.8 times

9.4 times

9.6 times

9.8 times

8.9 times

7.8 times[8.5 times]

7.7 times

6.8 times[7.0 times]

Interest-bearing
debt

1,271.11,275.6

1,282.6

1,251.7

1,183.6

1,126.6[1,160.0]

1,100.0

980.0[1,000.0]

Debt/equity ratio

2.7 times

2.8 times

2.7 times

2.6 times

2.3 times

2.0 times[2.2 times]

1.9 times

1.5 times[1.6 times]

0.1%

4.4%

2.3%

3.8%

7.9%

7.4%
[6.0%]

7.5%

7.2%[6.5%]

(FY)

ROE

3

fiscal 2016 is expected to exceed the previous plan’s target of
7.0 times to 6.8 times. We are steadily taking steps to reach thesemanagement goals as early as possible.

Consolidated Performance and Key Performance Indicators during the Medium-Term Management Plan Period

EBITDA(Times)
157.6

Current estimates indicate that we will achieve our goals slightly
ahead of schedule and forecasts have been adjusted accordingly.
Operating income for the fiscal 2016 target year is forecast tosurpass the previous plan (¥83.0 billion) by ¥2.0 billion to ¥85.0billion, reflecting currently robust railway operation revenue andhigher rental income mainly from the Umeda Hankyu Building. Inaddition, interest-bearing debt is projected to shrink ¥20.0 billioncompared with the previous plan (¥1 trillion) to ¥980.0 billion
primarily thanks to a detailed review of investment amounts
and periods intended to further upgrade our financial standing,extend operating cash flows and improve the financial accountbalance. As a result, the interest-bearing debt/EBITDA ratio in

Operating income

Interest-Bearing Debt/EBITDA Ratios for Major Listed Private Railway Operators (Fiscal 2013)

9Estimates adjusted from the Medium-Term
Management Plan: fiscal 2016 forecast*1 The department store business (The Hanshin Department Store, Ltd. (currently Hankyu Hanshin Department Stores, Inc.) and its four subsidiaries (“Hanshin Department StoreGroup”)) was treated as a consolidated subsidiary up to the first half of fiscal 2008.
*2 Figures in < > exclude those of the department store business (the former Hanshin Department Store Group)*3 Calculations based on EBITDA. As some time has passed since the management integration between the former Hankyu Holdings Group and Hanshin Electric Railway Group,
the integration boost effect is factored in only up to fiscal 2013.
*4 Figures in [ ] are those announced in May 2012 for the previous plan.