ORIX Q1 2025 Earnings Call Transcript

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Provided by Quartr
August 5, 2024

There are 1 speakers on the call.

Operator

I'm from the Investor Relations and Technical Department. My name is Nakane. I've been seeing this program. Today's attendee is Kazuki Yamamoto, Beijing Officer responsible for Investor Relations.

Operator

As we begin, we have a request to the participants. Given the prepared feedback, if you have a mobile phone or other telecommunication devices nearby, please make sure that it is turned off or away from the telephone. Yamamoto will provide an explanation and a brief hold by Q and A. The program will last approximately 1 hour. Ms.

Operator

Yamamoto, please begin. Thank you very much for the introduction, and thank you for joining ORIX Group's earnings speaking meeting and despite your busy schedule. My name is Emma Matloff, operating at the same charge of Corporate Planning and Investor Relations. Without further ado, we'd like to get started. Please turn to page 2 for the adjusted settlement summary.

Operator

So some of the other 4 highlights. So the first is on the net income. Q1 net income was up 38% year over year to JPY 86,700,000,000 bringing annualized ROE to 8.7 percent. This represents 22% of our full year net income target of JPY 390,000,000,000, which is given the seasonality of Rx earnings, we view this as solid start to the year. Finance category in the 3 categories that we newly introduced in Q4 of last fiscal year continues to generate steady earnings Graphics grew in the insurance segment during Q1.

Operator

In operation category, airports concessions continued to post earnings growth. Investments category achieved 20% of the full year's profit target, while profits grew significantly at 194% year over year, thanks to domestic PE exits. The second key point to look at is in inbound tourism. Profit of 3 inbound related businesses in total was up 78% to KRW6.9 billion year over year, thanks to aircraft leasing and in aircraft and ships and ongoing profit expansion in the airport concession business, including Kansai International Airport and Hotels and Inn in the Rio estate facilities operation. In aircraft leasing, both lease rates and aircraft prices remain at elevated levels, fueled by expansion in passenger markets and tight supply and demand for aircraft.

Operator

Oryx has exposure in both the aircraft leasing market and sales of pre owned aircraft on the secondary market, and therefore enjoying better earnings opportunities and foresee strong growth potential in this business. The third point is capital recycling in addition to a domestic key exit or export gains on the sales of investment condos, leading to a total of JPY 35,000,000,000 in capital gains for the quarter. We also made several key investment decisions that are likely to contribute to future growth, which I will go into some details later on. We expect full year capital gains to outpace those of the prior year and we will carefully proceed with each deal as we promote ongoing capital recycling. Now please turn to the next page.

Operator

As shared at the beginning of this session, Q1 net profit was up 38% year over year to JPY 86,700,000,000 and this represents RX's strongest first quarter since FY 2018 margin annualized ROE was 8.7%. The right hand graph shows quarterly net income and ROE trends for the last 3 years. As you can see, Oryx's net income for Q1 in the past 3 years were in the JPY 60,000,000,000 range. So this is the reason why we feel that we made a good start to the fiscal year. In the next few pages, you will notice that we have made some changes to how segment profit and segment assets are calculated.

Operator

In each case, we have yet to actively adjust the data from past few years to reflect the change. For details, please see our supplemental materials, which will also be released today. Please turn to Page 4. This slide explains progress towards our fiscal year forecast in the 3 categories. The left hand bar chart shows actual segment profits for FY 'twenty four March end and our target for this year.

Operator

The right hand bar chart shows this data for Q1. I will focus on the quarterly data for today's discussion. 1st, the debt free finance category was is what I want to make use of. Now at the very top, the dark blue finance category was down slightly by 1% year over year in segment profits to JPY 47,200,000,000. Please note that ORIX credit was previously in the finance category, but is now in the investment category from this year.

Operator

Considering the change, finance category enjoyed a robust quarter bolstered mostly by investment income in the life insurance business and other factors. The category progressed 24% of the full year forecast. Next, please look at the light blue bar, second from the top business, operation category, which was up 14% year over year in segment profit, which is JPY53,200,000,000. The earnings recovery in airport concessions, higher earnings in the European Asset Management business and growth in order all contributed to the expansion. The acquisition of Sanfoku Senpaku in Q4 last year also provided a profit base.

Operator

The operation category achieved 22% of its full year earnings target, which we feel is a solid result given the seasonality of some of the businesses. Finally, please refer to the pink formula from the top for the investment category, where segment profit was up about 36 point 8,000,000,000 yen. While this is just 20% of the full year target, profit rose significantly by 194% year over year. The exit from a domestic PE industry and sales of investment convenience both contributed, and Oryx was able to grow gains on sales through well timed exits driven by the weak yen and low interest rates. Now as a result, total segment profits were up 28% year over year to JPY137,300,000,000.

Operator

Please turn to Page 5. The page updates the 3 categories, IRA and segment asset size data trends provided in Q4 of last year within the 3 categories. We still aim to improve ROA through finance category positioned as an earning space and aided by the accelerated shift to an asset managed model in operation category and further promotion capital recycling centered on investment category. Please move on to Page 6. This page shows the matrix table of 3 categories and 10 segments.

Operator

We added definition for each of the categories as represented by investors. Please also note that the 3 businesses in that front indicate changes from the investment category to operations category as of Q1. We retroactively, Santoku Senpaku as well as Mysara that is. That will actively adjusted the segment profit figures on pages 4 to 5 to reflect these changes. Meanwhile, credit was categorized in finance last year, while it is now in the investment category from this quarter.

Operator

Pages 7 and 8 give a summary of information by segment. Copies were up sharply year on year. And if the gain on the sales of the partial stake in Oryx credit is excluded, then segment profits were also up Q on Q. Details for each of the ten segments can be found in page 13 and onwards of the presentation material, but I will use Pages 7 and 8 to go over the general trends. 1st is Corporate Financial Services and Maintenance Leasing segment.

Operator

Segment profits were up were down JPY 600,000,000 or 3% year over year to JPY 19,800,000,000. Profits were lower in corporate financial services on the absence of one time gains booked in FY 'twenty four March end. On the other hand, OTO surpassed last year's record high Q1 performance, backed by continued strong sales of used autos and growth in the rental car business, powered by stronger inbound tourism and Real Estate segment profits were up 36% year over year or JPY 3,700,000,000 to JPY 14,000,000,000. Earlier Estate Investment and Facilities Operations business posted a surge in profits, thanks to the sales of investment condos. Facilities operations, that is hotels and inns, also sustained favorable earnings.

Operator

Please note that MICE IR business is now part of the Real Estate segment, which has resulted in slightly higher costs year over year. The PE Investment and Transactions segment profit was up 4 55% year over year to JPY 32,000,000,000 a JPY 26,000,000,000 increase year over year. PE Investment Business earnings grew sharply with the sales of SASSA AR Holdings as well as higher profit contributions fueled by earnings growth at existing industries, including DHC. The contractions unit profit was also higher on growth in international passenger numbers at Kansai International Airport and an increase in non aero revenues fueled by new shopping facilities opened at the airport. On Page 8, you can see that PE investment and concession assets are about 9%, which is mainly due to the sales of Sasaeiya Holdings.

Operator

Please go back to the Environmental Energy segment. This segment reported losses of JPY 500,000,000 down yen 5.5000000000 year on year. In Japan, costs rose for rebuilding of existing facilities as with Q1 FY 'twenty four March, prior to measure revenue sales due to output caps at lower solar plants in some regions. Overseas Renewable Energy tends to be seasonally weak during Q1. In addition to this, profits were lower on to the costs associated with past flood damage as an equity method affiliate.

Operator

In Europe, natural gas inventories piled up following the record warm winter, which resulted in lower wholesale electricity prices. However, we expect Europe wide LNG inventory adjustments to run their course soon. Insurance segment profits were up 2,500,000,000 yen or 13% year on year to 21,900,000,000 yen Thanks to earnings gains from asset management portfolio diversification in life insurance. Insurance revenue profits surpassed last year's robust performance. Growth in life insurance premiums also contributed.

Operator

The Banking and the Credit segment recorded a 23% year on year or JPY 2,000,000,000 decline in profits to JPY 6,400,000,000. This was mostly due to lower cost contributions from ORIX Credit owing to a partial sale of our stake in the business. OXBANK saw higher long term prime rates applying to loans, resulting in an increase in financial income. Segment assets were lower owing to the sale of our credit business. However, the lending balance rose on growth in corporate loans in key assets key areas such as renewable energy and loan securitizations continue and trust assets are growing.

Operator

We continue to prioritize improvements in profitability while efficiently turning over assets. Please note that with the sale of Oryx credit, it is now an equity method affiliate instead of subsidiary, but it is still included in this segment. The Aircraft and Ship segment posted a JPY 4,100,000,000 increase or 54% jump in segment profits to JPY 11,800,000,000. At aircraft and Avolon, profits were up last year, thanks to stronger passenger demand globally And quarter by quarter profits was down sharply in aircraft in the absence of investment gains. But the profit trajectory remains positive.

Operator

In ships, profits were much higher with the addition of our Santoku Senpaku, which was acquired in the 4th quarter FY 24 March to ORIX Group. Segment assets were up by 135,200,000,000 yen even excluding changes in ForEx owing to an increase in aircraft purchases and Avolon process contributions. On this quarter, we will disclose aircraft and ship segment data broken down into 3 business units, namely aircraft, ships and Avalon. Olinx TSA segment posted 3% year on year decline in profits to JPY 11,800,000,000. In light of the U.

Operator

S. Business climate, we continue to carefully manage risks for both new deals and existing investments. Through these risk management efforts, we have been able to control the balance of non performing loans within expected levels. Also, as we booked larger impairments during the Q4 of last fiscal year, credit costs were minimum during the Q1. On the 3 business lines, private credit posted stable growth in financial income, but the new estate and PE business is in slot.

Operator

This is the reason for lower profits. Segment assets were down excluding the impact of exchange in FX. And the detail was shown by business line on Page 28, we reference. ORIX Europe segment profits were up JPY 4,000,000,000 or 56% year on year to 11,200,000,000 yen. Segment profits were up substantially on low time growth in fee income and the expansion in assets under management.

Operator

In the Asia and Australia segment, profits were down JPY 2,000,000,000 to JPY 8,900,000,000. However, this is mostly due to the absence of valuation gains at an affiliate booked at the previous fiscal year. In ASEAN countries, the business climate is healthy. In South Korea, India and Australia, new lease executions for auto are growing, while financial income and operating lease income is also expanding. Assets in this segment rose by JPY 93,700,000,000 but JPY 91,500,000,000 of this was due to FX change.

Operator

We remain cautious on Greater China and the segment assets for this region are lower excluding the FX impacts. That's all about explanation for each segment. Now please turn to Page 9, and I would like to explain the key topics. Starting with our inbound tourism. We grew the aircraftsman ships, real estate facilities operations and airport concession businesses into the inbound tourist related category as they took earnings hit following the pandemic but are seeing a strong recovery, thanks to inbound tourism demand and their growth in global travel demand.

Operator

Segment profit trends of these 3 businesses are shown on the left hand side. Aircraftsmanship's pink, Concession Business, gray, have brought this particularly strong recovery, as you can see. Q1 segment profits for these 3 businesses were up 78% year on year to BRL 57.7 In aircraft leasing, as I mentioned before, tight supply demand for jets has led to not only higher rates, as you can see on the upper right graph, but also rising prices for aircraft is contributing And we see steady growth potential here for ORIX as the secondary market is one of our areas of expertise. Please look at the lower right graph on the right. Visitor arrivals to Japan continue to outpace 2019 levels from all countries and regions except China.

Operator

And also the number of visitors from the China mainland is recovering. At Kansai International Airport, new shopping venues that were part of the Vashi exclovation during the pandemic have opened and the non air revenues are increasing. Expo 2025 is coming to Osaka next year and we anticipate even greater increases in inventories as a result. Capacity additions made to the airport as part of innovation should help boost earnings. Please note that the Kansai Airport's results are posted to ORIX Group earnings on a 3 month lag.

Operator

So the Q1 results reflect the January through March period. Let's move to the next topic, which is capital recycling. In Q1, CoreEx posted JPY 35,000,000,000 in capital gains. The cash inflow of 135,000,000,000 yen from these transactions have been used for investments in growth areas such as domestic real estate, overseas renewable energy projects and the aircraft purchases. Since our last earnings call in May, we are moving forward with many transactions as anticipated.

Operator

Investments are shown in the blue box on the bottom right hand side. And over the last 3 months, Oryx has made multiple investments that will continue to contribute to future growth. By accelerating capital recycling based on our value creation model, we expect capital gains of FY 2025 March to exceed those in the prior year. We continue to work on to achieve the best pricing and conditions for each individual deal. Please turn to the next page.

Operator

This is a breakdown of our segment profits. And this is base profit versus investment gains, separated as usual. Please turn to the quarterly trend on the right hand side. Base profit is bank blue, investment gains is in light blue. Base profits rose 6% year on year to JPY 1,300,000,000 while investment gains were up 261% year on year to JPY 33,500,000,000 Looking at past Q1 results.

Operator

We feel that this represents a strong start for FY 'twenty five March, both base profits and investment gains by capturing the market timing and you can see that active initiatives are being taken. U. K. Plans to respond flexibly to changes in the macro climate such as interest rates and FX. And our financial strategy remained unchanged from the details outlined by our CEO, Makoto Inoue, in our main earnings release.

Operator

We continue to work toward providing easy to understand disclosure explanations in an effort to deepen investors' understanding of ORIX despite quick changes in the market. Q1 results were largely in line with expectations. For Q2 and beyond, we will endeavor to increase company wide profitability utilizing the stable earnings base of the financial category and through growth opportunities and professional investments despite some uncertainties. First, we'll be focusing on achieving our JPY 390,000,000 net income target for FY 2025 March and continue with investments that will contribute to future growth in the following years. And that's all from me.

Operator

Thank you very much for your kind of attention. Contribution. Muraki, this is from SMBC Nikko. So the market fluctuation, how does it affect your earnings is what I want to ask you. On Page 45 to the right hand side, so there is a sensitivity to ForEx as compared to March end.

Operator

So it is yen has depreciated or appreciated further. So that is about the $16,000,000,000 of adversity, I think, that you're experiencing. So if United States is going to go into recession and that said an ECB is going to cut their interest rate, then what would be the impact to your earnings, whether it be to the positive or negative? Thank you. Thank you for the question.

Operator

As you have said, as we stand now, after the sensitivity to ForEx, so the current investment as well as loan extension, in fact, is a 3 basis. And the result indicated a plus and minus of JPY 2,000,000,000. And therefore, what Murak san said is true. So if there was to be any changes in the policy, especially for U. S.

Operator

Dollars as well as euro, interest rate cut should well plan to be positive for us. It will be a tailwind for our company. Whereas for euro, the interest rate in actuality, the decline of the interest rate so far, in fact, has been supportive to the recovery of our earnings. And with regard to aircraft related businesses, it will work out to be positive as well. With regard to USD, it is the same.

Operator

So same can be said to be true. And also private equity and also real estate, as of now, we have been deferring for making new investment. We have been continuing our activities so far, but I think we will be able to be provided with some building space. But of course, it is kind of difficult to indicate the impact in a quantified manner at this point in time. However, these monetary policy changes can be captured as a great opportunity for our earnings.

Operator

So we have to make sure that we'll be able to capture that as an opportunity both in European market as well as U. S. Market. I don't know whether I have been able to answer to your question in a straightforward manner because the market is still kind of going through changes. But that is all for myself.

Operator

Thank you. Well, thank you for your answer. So here in Japan, so investment to private equity and also exit in real estate. With regard to that, so it is not correlated to NSA225, but in what kind of condition would you find it difficult to generate in say gains on sales do you think? Well, just as you have said or asked, especially with regard to real estate businesses.

Operator

So there are certain, of course, some funds that we would have to continue to manage. So we would have to perhaps increase the amount of wait and see. So such as investment condos this year, we were able to enjoy a timely kind of sales, which was it had exceeded or outpaced our initial expectations. And that is the depreciation of yen and also lower interest rate was supportive of these initiatives on our part. However, up until the adjustment up until now, at about 14 times as compared to the timing when it was JPY 110, JPY 120 in terms of the further space of growth, I think we still have some more space that we can enjoy growth because the expectations of investors would continue to remain to be unchanged.

Operator

So therefore, so the pipeline deals that we can proceed with can be continued at a similar pace for now. But especially the investment in PE, especially F and Es and SMEs, we would have to be affected by the higher industry. However, because of the positive turnaround of the economy, we can expect them to generate more profit. And that is true with our investees as well. They are beginning to show some signs of recovery in their earnings.

Operator

So therefore, we'll be able to not just receive any negative impact from the higher interest rate. I don't think the magnitude of the impact could be that large. That is all. Okay. Thank you very much.

Operator

That was very helpful. Good. Thank you. Biosecurities, Watanabe san. Please ask your question.

Operator

Yes. This is Watanabe, Biosecurities. Panasonic Connect project business, you have obtained this and equity investment and profit contribution size. What kind of synergy do you expect? Can you please outline this, please?

Operator

Thank you for your question. As you have mentioned, from Panasonic Connect, 80% of the projected business is transferred to us. And with regard to this project, we have mentioned several times in the past, we are positioning this as a carve out investment from a large company. The PE expertise can be leveraged and some aspects will be new to us as well. As you can see in the report, the transfer price, enterprise value, JPY 118,500,000,000 is mentioned, but this actually includes loans.

Operator

So our actual investment is different from this number. And we are not disclosing this number yet because we will it will take some more time before the deal can be closed. I hope you understand the situation. As for profitability, because this is a carve out project, because of that nature, this means that compared to the conventional investment project, it may take time for this time to be profitable to increase in profitability because the size of the business and the number of employees and other aspects of this project are larger than traditional. So it may take time before this can contribute to profitability.

Operator

But expected ROI in the end will not differ materially from the traditional deals. We believe that there is a good future potential for the return and we will continue to focus on this. And together with the sellers, we will continue to proceed with the process up until the close of the field. Thank you. What about business synergy?

Operator

What do you expect? What about synergy with Atoshiba or synergy in terms of MICE IR? Do you have any comments? Thank you for your question. When we do PE Investments, synergy with the existing business is not necessarily included in a valuation.

Operator

And therefore, we believe that this is going to be potential upside. Specific events, specific planning, well, it will be impacted by the future trend. So we should not rely on just one factor that would lead us to the wrong decision. And therefore, together with the seller, we are basically assuming this is going to be the strength of our business. And rather than synergy, we can have areas of corporation.

Operator

So we have a PE know how from the past, which means that we have experience of hands on investments in the past. And Oryx has its own unique financial perspective, which can be reflected in this project and that should contribute for future growth. I know that this doesn't directly answer your question, but this is how we assess, evaluate our investments. That's very clear. Thank you very much.

Operator

Thank you for the question. The next person is from Mizuho Securities. Sakamaki san, over to you. This is Sakamaki from Mizuho Securities. Thank you for the opportunity.

Operator

So first, regarding your U. S. Businesses, the risk as far as opportunity, if the rate cut is going to start in the United States, you may be able to start enjoying the growth potential. But is there any kind of time line that you have in your mind? Because we don't know how much of the cuts will be conducted and also whether there will be a recession in U.

Operator

S. Or not. And also, in terms of the currency of the rate cuts, at what timing, If you have any idea to the timeline? And what kind of impacts can be thought about as a result of such timeline? Thank you.

Operator

So well then in that case, if you could just refer to Page 28, you can see the breakdown of the businesses. Please allow me to refer to this page. And as of now, this is just maybe limited to the impression, but let me answer to your question. So the credit market in the United States, for certain extent, we can start to see the signs of recovery. And therefore, our investment as well as our own extension, businesses can enjoy expansion of the spread.

Operator

And moreover, as being shown, NXT Capital as well as signal peak, in fact, we can make use of the funds that have been provided by our investors. And that would perhaps accelerate the willingness to invest on the part of those investors as well. And also, if there was to be an interest rate card in the United States and that may translate into the recovery of the market and that may contribute to the earnings recovery and maybe in the second half of next year or so. And as to the real estate businesses, in actual fact, we cannot, of course, foresee how much of a decline can be expected for the long term interest rate. So it is very much to do with the policy rate and how does it affect the development deals.

Operator

So that is what we cannot foresee as to the magnitude and for the same fact. And so we would have to foresee how the policy is going to trend, especially in light of the presidential election in the United States. So but as we look back at the past years, at movement as well as Boston Financial Investment, the mortgage investment levels that we used to enjoy in the past, maybe we would have to watch over the development in the next 1 to 2 years. On the other hand, STPE targeting equity, especially the middle market in the United States, in the general businesses or service businesses, their earnings recovery and also the M and A business recovery related to such recovery of the market, it may take a little while. So therefore, we would have to continue to be on the defensive side for now.

Operator

So the investees the impact to the earnings of the investees is one thing. But the other on the other hand, the private equity investment really interest on the part of the investors, we have to see the terms and conditions become little more clear and transparent because it remains to be uncertain still. So credit related businesses, we think that the pickup is going to be a little earlier, whereas mortgage as well as the PE may take a little while until we can see a short recovery in the market. That is all. Thank you very much for a detailed explanation.

Operator

Thank you. JPMorgan Securities. Sato san, please ask your question. Yes, just one question about the nonperforming asset or asset quality. What is the consideration and the future risks?

Operator

What is your view on the future risks? In the appendix, Page 27, I can see the non performing. And for the individual rooms, nonperforming is increasing. The ratio increases 2.8%. Compared to pre COVID, I believe that this ratio is probably the highest that you have had for a while.

Operator

So where do you see the non performing assets in each asset type? And how would you account for these losses? Is there a risk that this will hit your PL in the future? In terms of amount, total NPL is just over JPY 60,000,000,000 and then we have the traditional JPY 30,000,000,000 so this is actually higher than the traditional number JPY 30,000,000,000 to JPY 40,000,000,000. There are different factors behind this.

Operator

U. S. Real estate business. In terms of classification, we have to include some of the items here. And this is why the disclosed amount of NPL is higher than before.

Operator

So real estate related financing deals, This is what I'm talking about. And some of them will be recovered according to disclosure assumptions. So we have no good concerns for those items and also the amount that is recognized here by us. So the real estate, which is part of the mortgage. We will continue to pay close attention to this so that we can deal with a potential of losses in the future.

Operator

So we have not really accounted for this in a large way, in a big way at this point in time. But as I mentioned before, interest rate trends and also including mortgage, the business environment surrounding real estate may take time to recover, which means that at limit on balance or securitized assets, management status will have to be reinforced. And we have already started this effort by reviewing the insurance and also we are doing this in a more granular manner right now. So in terms of recognized asset by us, the quality of the assets, I would say, is now shared and managed at a higher level than what it used to be. In other words, in that sense, the transparency is improving.

Operator

I hope you understand this point, and that's my answer. Thank you. Thank you very much. Thank you for the question. The next is Safaki san from Nomura Securities.

Operator

This is Sasaki from Nomiya Securities. Thank you for the opportunity. Allow me to refer to Slide 10. So there's one question to ask about this slide. So referring to the bullet point, so the full year earnings, so capital gain is to be targeted, which is to surpass that of 2024 March end.

Operator

So I think you have changed the wording here. Can I take it that the light preferred has increased? This is something that I want you to confirm. And it is not just dependent on the gain on the sales, but also the new investment because of the market fluctuation, the volatility, how does it affect you in making or executing those decision because evaluation may perhaps decline that may allow you to make further investment. And also yen has started to appreciate.

Operator

So some of the hesitancy that you used to have may go away. So would you mind giving us some flavor to your idea because of the changes in the market? So while we were targeting that we can expect, as we have said, and that is at the time of the earnings result, we have made such expression that we target that with what we have said last time. But this time, we have said that we can expect or we expect and that is based on the Q1 result, but there is not much of a changes except for the fact that we have now concluded the Q1. So it is the market continues to be volatile.

Operator

But as to the deals that we foresee executing, of course, we will continue to watch all the development by carrying through the negotiation. As to the rights referred, it is only 1 quarter of the progress that we were able to meet in the Q1. But as to the new investment, as you have asked the question, the valuation may have gone down, but the yen appreciation, especially in the 1st 1 or 2 years, if you were to declare to our actual investment. So as a result of yen depreciation as well as low interest rate, we have been focusing very much on investment here in the domestic market. Well, with the current rate against the U.

Operator

S. Dollar yen of JPY 144, Would that be perceived as attractive enough? It's yet to be kind of determined. But as to the negotiation that we have been carrying out, it is true that we will be able to enjoy a little more tailwind, thanks to this appreciation of yen. But we may turn a little stronger in allowing the growth to take place, not just onshore, but also abroad as well.

Operator

Thank you very much. Thank you. Citigroup Securities, Nila san. Please ask your question. Yes, this is Niwa from Citi.

Operator

I would like to ask you about the shareholder return. I believe that the valuation is now lower, maybe partly due to the external environment. Investment into growth versus return to shareholders. How do you evaluate this? And also share buyback, do you think maybe there is room for you to be more agile, mobile about this?

Operator

So in terms of share price support, is there anything that you can announce to us today? Thank you. Rationality of share buyback. Well, we have compared that against the expectation for the investment into growth and it is something that is discussed by Board meeting as well. So today at BOD, we met early in the morning.

Operator

So we were actually not really talking about how the market was performed during the afternoon. But DoD, including guidance and external directors, the discussion included the reasonableness of the share price. This has always been discussed. Share buyback to support our share price, whether we can do this in an agile manner. Well, we have not really discussed this extensively.

Operator

I'm not really talking about the 6threshold, after which we would move very quickly, but we would like to receive this question and try to learn a little bit more about this going forward. I know that I'm not really answering your question, but we are only talking about the return to shareholder as a comparison against the investment for growth. And in terms of the share buyback, we may decide it quickly, but we will not be doing that just because the share price fluctuated. That's all. Thank you.

Operator

Thank you very much for your very dynamic explanation. That's very informative. Thank you for the question. We are still waiting for your questions. If you have any, please come forward.

Operator

There seems to be no further questions. So I would like to conclude the Q and A session for now. I would like to call upon Emamoto, who will be providing the closing remarks. So thank you all very much for joining us in this briefing, despite the very busy schedule. So that was the trend for the Q1.

Operator

And thank you very much for many questions. So we would ask Oryx. We'd like to, of course, capture whatever the changes that would take place in the market to be a great opportunity that would make a positive contribution to the earnings. So we will continue to watch about the development of the deals that are increasing as well as in the pipeline. And thank you very much for your time again.

Operator

So I would like to conclude our 2025 March end Q1 results earnings briefing. Thank you all very much for taking part in this session.

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Key Takeaways

  • Q1 net income rose 38% year-over-year to JPY 86.7 billion, delivering an annualized ROE of 8.7% and representing 22% of the full-year target of JPY 390 billion.
  • The investment category achieved a 194% YoY jump in profits—driven by domestic private equity exits—and reached 20% of its full-year earnings goal.
  • Inbound tourism-related businesses saw profits surge 78% to JPY 6.9 billion, fueled by elevated aircraft leasing rates, high pre-owned aircraft prices and a rebound in airport concession revenues.
  • Capital recycling generated JPY 35 billion in gains and JPY 135 billion in cash inflows in Q1, with management expecting full-year capital gains to outpace last year and redeploying proceeds into growth areas.
  • Total segment profits climbed 28% YoY to JPY 137.3 billion, with the operations category up 14% and the finance category remaining resilient despite portfolio reclassifications.
AI Generated. May Contain Errors.
Earnings Conference Call
ORIX Q1 2025
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