Four JR firms anticipate drop in pretax profits

Due to an increased burden of fixed-asset taxes and negative effects of the April 1 consumption tax hike, the pretax profits of four Japan Railway group carriers are likely to shrink in the next business year, compared with the figures in their business plans for the current fiscal year, the four firms said Mar. 14.

According to their 1997 plans, East Japan Railway Co., Central Japan Railway Co. (JR Tokai), West Japan Railway Co. and Japan Freight Railway Co. estimate that starting April 1, their pretax profits in the next business year will decline in comparison with their initial plans for the 1996 fiscal year.

Saddled with heavy debts, Japanese National Railways was dissolved into seven JR group firms in 1987. As part of the privatization program of the now-defunct JNR, JR East, JR Tokai and JR West have for the past 10 years been exempt from paying half of their fixed-asset taxes — worth about 60 billion yen per year. The special treatment expires at the end of fiscal 1996.

Officials of the group carriers also said their profits will drop because some customers will try to purchase train passes prior to the consumption tax hike on April 1, and part of such sales revenues will be counted in the current business year.

JR East officials said the carrier estimated its pretax profits for the next business year at 87 billion yen. Although its business will be expanded in the next fiscal year due to the opening of the new Hokuriku Shinkansen Line to Nagano, JR East’s increased fixed-asset tax burden starting in the same year will shrink their profits, they said.

JR West announced its pretax profits will drop to 48 billion yen, compared with 52 billion yen in its 1996 business plan. JR Tokai, which expects to list its shares on the stock market in the next business year, will manage to have 58 billion yen in pretax profits. In order to list its stocks, they must have a minimum of 44.8 billion yen in pretax profits.