Orix Corp Ads Q1 2026 Earnings Call Transcript

Quartr
Provided by Quartr
August 7, 2025

Key Takeaways

  • Positive Sentiment: ORIX delivered net income of ¥107.3 billion in Q1, up 24% year-on-year, with an annualized ROE of 10.4% and has already achieved 28.2% of its full-year target.
  • Positive Sentiment: Pre-tax profit rose 29% to ¥155.5 billion, supported by profit gains across finance, operations and investments and ¥45.1 billion of capital recycling gains.
  • Positive Sentiment: Shareholder returns remain a priority with ¥40.9 billion repurchased under a ¥100 billion buyback programme and an interim dividend policy set at a 39% payout ratio.
  • Positive Sentiment: ORIX agreed to acquire a 71.4% stake in Hilco Global, bolstering its asset-based lending and private asset management capabilities in the US.
  • Negative Sentiment: Given rising macro uncertainty and US tariff impacts, management is reviewing its full-year net income target and expects earnings to be skewed toward the second half.
AI Generated. May Contain Errors.
Earnings Conference Call
Orix Corp Ads Q1 2026
00:00 / 00:00

Transcript Sections

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Moderator

Since it is time, we now would like to get started. Thank you for joining this telephone conference of Rx Corporation for first quarter financial results for the three month period ended 06/30/2025. I am, Nakane, from IR. We have today as an attendee, Ikazuki Yamamoto, operating officer in charge of investor relations. Yamamoto san will explain, and this will be followed by Q and A.

Moderator

We plan to have a one hour session. So over to you, Yamamoto san. Thank you very much for taking the time to attend the ORIX Group's earnings call today. I'm operating officer in charge of corporate planning and I am Kazuki Yamamoto. Let me quickly explain the financial results for the first quarter of fiscal year ending March 2026.

Moderator

On page two you can see this page contains the key points I want to cover today. The first point is net income and ROE. Net income for the first quarter was 107,300,000,000.0 yen an increase of 20,600,000,000.0 yen year on year with an annualized ROE of 10.4. Against the annual forecast three eighty billion dollars progress rate was 28.2%. As was announced in July we plan to record gains from the sale of Greenco and Rx Asset Management and Loan Services Corporation in the second quarter and earnings are favorable.

Moderator

Meanwhile considering the increasing macroeconomic uncertainty it is necessary to carefully review our planned H2 exits and second half performance in line with the market. While we expect earnings to be more heavily skewed to H2, we are currently undertaking a thorough review of full year net income target. Second is pre tax profit and capital recycling. Pre tax profit was 155,500,000,000.0 yen an increase of 35,300,000,000.0 yen from last year. Finance operation and investments in all three categories saw profit increases year on year.

Moderator

Investments including the Hotel Universal Port Vita and other valuation gains from listed stocks recorded total capital gain of 45,100,000,000.0 yen from multiple gains on exits. Number three, shareholder returns. As of the July we have completed the acquisition of 40,900,000,000.0 yen out of total 100,000,000,000 yen share buyback program announced in May we will continue to repurchase shares based on the existing program and aim to flexibly implement our shareholder return policy based on both our full year outlook and progress with new investments. As in the previous fiscal year, our current policy is to set the interim DPS at a payout ratio of 39% in first half net income. Please go to the next page.

Moderator

As outlined earlier, for Q1, ORIX reported net income of $107,300,000,000 up 24%. ROE was 10.4% annualized. In light of the investment gains we expect to book in Q2, the outlook for first half is very strong. Please go to page four. I'll explain pretax profits for each of the categories.

Moderator

Three categories finance, operation and investments. You can see first quarter results of the previous and current fiscal year. First at the top, the dark blue bar is finance. Profit increased by 5% year on year to 49,000,000,000 yen with a progress rate of 27% against full year forecast. Corporate Financial Services and Banking were generally solid.

Moderator

ORIX Life increased its investment income, and finance revenues grew in Australia and Singapore. Next. Second from the top. Light blue shows operation. Profit increased by 5% year on year to 55,800,000,000.0 yen with a progress rate of 24% against the full year forecast.

Moderator

In the Environment and Energy segment, we closed the sale of Zeke Light, which operates waste disposal plants and recorded a gain. Elawan increased its electricity sales revenue and the Kinokawa Energy Storage Plant, one of the largest in Japan began commercial operations last December, which also was a contribution. Furthermore, Rentec saw higher equipment rental income on Windows PC placement demand and airport concessions continued to see growth in international passenger numbers. Finally, red bar in the third row from the top shows investment. Profit increased significantly by 61% year on year to 60,100,000,000.0 yen In addition to the gain from the sale of Hotel Universal Port Vita, valuation gains on our remaining stake in NICE listed renewable energy company Ormat contributed to this result.

Moderator

Performance at domestic PE investees was solid resulting in growth in profit contributions. As a result, segment profit for Q1 increased by 20% year on year to a total of 164,900,000,000.0 Pretax profit increased by 29% year on year to $155,500,000,000 The difference of $9,400,000,000 between total segment profit and pretax profit is administrative expenses.

Moderator

Please go to page five. On this page, I will explain ROE and shareholders' equity for each of the three categories. Towards the right, please look at the graph. In dark blue is finance ROE. This improved from 8.2% at the end of the previous fiscal year to 8.7% plus point 5%.

Moderator

We are disclosing the amount of allocated capital by category beginning this fiscal year. And for finance, it is 1,700,000,000,000.0. The light blue circle towards the left with the sale of Zeke Light. ROE for operation improved from 13.5% to 14% likewise up 0.5%. Allocated capital was 1,200,000,000,000.0.

Moderator

The red category investment rose from 7.4% to 10.3% significant increase due to sale of hotels. The allocated capital is 1,700,000,000,000 The total allocated capital if you add all them up is 4,500,000,000,000.0 which is slightly different from shareholder equity amount of 4,100,000,000,000.0 on this consolidated DS. This is because allocated capital is based on management accounting. So that is why it's higher. Next on page six regarding the ROA and asset size of the three categories.

Moderator

You can see that finance and operation remained stable and investment improved its ROA in the first quarter. Page seven. This is the matrix chart of three categories and 10 segments. As a change, we have added in business verticals the transportation equipment for row from the bottom. In the operation column, we have added ship brokerage company Selmec.

Moderator

Page eight shows progress in capital recycling. In first quarter, we recorded capital gain of $45,100,000,000 as you can see in the center with cash flows from sales amounting to $130,000,000,000 below that and cash outflows from new investment executions amounting to 150,000,000,000 Major new investments in the first quarter include PE investment in the capsule toy specialty store operator Lulu Arc as well as Aircraft and MICIRR. We also have announced the sale of our partial stake in GreenCo, a new investment in AM Green and the sale of RX Asset Management and Loan Services Corporation. You can see towards the right. We aim to close the Hilco global transaction by the September '25.

Moderator

So regarding Greenco AM Green transaction transaction and Hilco, I will provide some additional information in the following slides. Please go to page nine. This is about the Grenco share transfer agreement and our new investment in AM Green. We held 20% of the shares in GreenCo, a major Indian renewable energy company, and sold 17.5% to AM Green Power, a company owned by the founders of GreenCo. Oh, you can see the structure in the chart.

Moderator

The sale proceeds were 1,282,000,000,000 USD. Sorry. 1,282,000,000.000, USD with a gain on sale of 93,400,000,000.0 yen. This amount are unchanged, from previous announcement and will be finalized at the time of q two financial closing. We plan to continue to hold our remaining 2.5 stake in GreenCo for the time being. Meanwhile, AMG, the parent company of AM Green Power, plans to produce 5,000,000 tons of green ammonia annually as a group and is advancing green hydrogen and green ammonia production projects. AMG has also agreed on basic terms with Germany's energy company Uniper SE and Belgium's ammonia trading and sales company Yalla Green Ammonia to supply green ammonia to Europe. We have invested in convertible notes issued by A. M.

Moderator

Green Luxembourg, the 100% owned parent company of AMG. The amount is $331,000,000 The transfer of Grinko shares and the investment in convertible notes of AMG parent company are part of our portfolio optimization strategy achieved through capital recycling in the globally evolving renewable energy industry. Next, moving on to page 10. Our investment in Hilco Global. ORIX has agreed with stakeholders to acquire 71.4% stake in Hilco Global, a world leading company in asset valuation, we signed in July.

Moderator

We are moving forward in accordance with the transfer agreement and aim to complete the acquisition by the September. Since its establishment in 1987 as you can see towards the right Hilco Global has gradually expanded its businesses to include asset valuation services, asset based lending, and inventory sales and asset liquidation within the group. The first, asset valuation service, provides to banks and others appraisal services for collateral assets. The second, asset based lending, refers to the provision of loans collateralized by various assets. And third, inventory sales and asset liquidation involves the purchase and resell of inventory assets among other things.

Moderator

Hillco's with Hillco join Global joining the ORIX Group, ORIX USA will acquire a platform for ABL. Hillco's origination capability and value increase model can be utilized through ORIX USA. By utilizing third party investor funds, we hope to further expand the ABL business and promote the asset management business centered on private assets and real assets.

Moderator

Next please turn to the next page. The investment pipeline outlined on this page is ample at 2,000,000,000,000 yen and heavily focused on operation and investments. We are aiming for sustainable growth by investing both in projects and contribute to revenue immediately after investment and those requiring longer development periods. Please turn to Page 12. Now this is about inbound and tourism.

Moderator

The concession business centered around Kansai International Airport is experiencing growth in international passenger numbers due to inbound tourist demand, and performance is steady. The performance of Kansai Airports is reflected in ORIX consolidated results with a three month lag. So Q1 results reflect Kansai Airports performance from January to March. However, with the start of Expo twenty twenty five Osaka Kansai in April and the launch of international charter flights at Kobe Airport in April, we expect earnings growth to continue. In facility operation, RevPAR at hotels has been improving, primarily in the Kansai area.

Moderator

In this January, Sugi Noi Hotel opened a new building, Hoshikang. And in April, Hilton's top luxury brand, World of Astoria Osaka, also opened at the Umekita area. We anticipate steady demand for facility operations such as hotels and inns in the future. But due to the impact of inflation and rising construction cost, we will carefully select new investments while aiming for sustainable growth. For the Aircraft and Ship segment, including aircraft leasing, is performing well and increasing in increase in passenger traffic, mainly in the we expect these three tourism related business, including those impacted by inbound tourism, to continue to drive performance this fiscal year.

Moderator

Page thirteen and fourteen are the summary of segment information. For details, please refer to the slides from Page 18 and onwards. But first, let me give you the report about the Corporate Financial Services and Maintenance Leasing. Segment profit increased by 3,800,000,000 or 19% year on year to 23,600,000,000.0 yen The Corporate Financial Services unit saw growth in fee revenues, resulting in higher profits. The auto unit continued to benefit from a strong used car market, achieving record profits for the first quarter.

Moderator

RenTech expanded its inventory based rental of ICT equipment, thanks to Windows PC replacement demand and increased its profits. Segment assets amounted to 1,870,000,000,000.00 yen a decrease of 14,660,000,000.00 yen from the end of the previous fiscal year, reflecting the sale of OREX Asset Management and Owned Services Corporation. Next, the segment profit for the real estate was up by 21,900,000,000.0 yen an increase of 157% year over year to 35,900,000,000.0 yen So this is due to the sales of the hotel Universal Port Vita and a sharp increase in facility facility operation earnings in hotels and inns has contributed. Assets in the real estate segment was flat versus the end of last fiscal year. For the PE Investment and Concessions segment, it recorded a decrease of JPY 8,000,000,000 year over year or minus 25% in segment profits, reaching JPY 24,000,000,000, out of which the PE Investment Unit reported lower profits owing to the absence of a gain on the sale of Sasaya Holdings recorded in the previous year.

Moderator

On the other hand, the performance of existing investees such as DHC and Toshiba was strong, resulting in profit growth when the impact from the aforementioned excluded. And the concession unit, as mentioned earlier, enjoyed impressive performance at Kansai International Airport. The slight decrease in profit compared to the previous year is due to seasonal factors. The segment assets with key investment concession increased by JPY 31,600,000,000.0 from last fiscal year to JPY 1,545,000,000.000. The main reason for the increase was a new investment in Lulu Arc and increased in equity method investment incomes

Moderator

Segment profit for the Environment and Energy segment increased by JPY 18,400,000,000.0 year over year to JPY 17,900,000,000.0. In addition to the gain on sales of shares of Zeagleit, both sales volume and unit sales price in the electricity retailing business increased. As I have mentioned, the start of operation at the Kinokawa Energy Storage Plant had a positive impact. Additionally, recovery in electricity sales revenue from Ella Wan and valuation gain in Ormat shares also contributed to the increase. Segment assets were slightly lower, owing to capital recycling and the ForEx impact.

Moderator

Segment profits in the Insurance segment was up 2,100,000,000.0 yen or 10% year over year to 24,000,000,000 yen Profits were higher on the growth in investment income, and performance improved sharply quarter on quarter. So because we have booked the losses on the sales of bonds associated portfolio reallocation, You can see the performance improved based on this reason. On the business side, in this June, we have started the sales of revised insurance, income protection insurance keep up. This has been strong. Segment assets were up JPY 38,800,000,000.0 to JPY $300,000,000,000,477,000,000,047,700,000,000.0, excuse me.

Moderator

For the segment profits and banking and credit were up JPY 3,500,000,000.0 or 51% year over year to JPY 9,900,000,000.0. So in terms of the environment, while the interest rates were rising and the funding costs for deposits are becoming higher, the yield on total investments is improving. For the first quarter, due to one off factors, the profit has grown. Segment assets were up 71,900,000,000.0 yen to JPY 3,216,500,000,000.0000. In July, OXXPENT paid the parent company a JPY 30,000,000,000 dividend with the aim to improve the segment ROE.

Moderator

In the Aircraft and Shared Ship segment, segment profit decreased by JPY 1,900,000,000.0, a 16% decline to reach JPY 9,900,000,000.0. Although there was a slight decrease in profits for aircraft, business outlook remains positive as the number of owned aircraft increased amid high lease rate levels. Avalon saw an increase in profits compared to the previous fiscal year, partly due to profit contribution from Castlelake, which was acquired in January. In terms of the credit rating, in May, Moody's and Fitch upgraded the rating. Standard and Poor's has revised its outlook to positive.

Moderator

In terms of the fiscal situation, they had enhanced this their health. The Ship segment experienced a decrease in profits due to the reduced financial income from Ship financing and the market factors, but the impact from tariffs is limited. Segment profit for the REX USA segment decreased by 11,200,000,000.0 yen year over year, amounting to 600,000,000 yen The budget for ORIX USA forecast earnings to be more heavily concentrated to the first half, and earnings are generally in line with the forecast. The private credit business experienced a decrease in profit due to the absence of reversals of credit costs booked in March 2025. Real estate profits were down on the absence of gain on the sales of a fund equity stake that was booked the previous year.

Moderator

The main reason for the decline in profits in the private equity business was the impairment of our investment in an equity method affiliate owing to the tariff impacts coming between United States and China. Segment assets decreased by 5,700,000,000.0 yen to 1,582,000,000,000.000. ForEx had a negative 51,700,000,000.0 impact, but assets increased slightly in U. S. Dollar terms as we made a bolt on investment aiming to enhance the value of an existing investee in this business.

Moderator

The segment profit of ORIX Europe was JPY 1,200,000,000.0 lower year over year. This is a 11% decrease to reach JPY 9,900,000,000.0. The decrease in profit is due to the absence of performance fees recorded in the same period of the previous year. On the other hand, ORIX Europe continues to see net inflows, expanding AUM to record high of JPY 401,900,000,000.0, mainly coming from Robeco, and management fees are on the rise. Lastly, in the AsiaAustralia segment, profit increased by 100,000,000 yen year on year, reaching 9,000,000,000 yen Although income from investees in the Greater China region was lower, Financial revenues from leasing in Australia and Singapore increased, resulting in profit growth.

Moderator

Segment assets decreased by 13,000,000,000 yen from the end of the previous fiscal year to 1,712,600,000,000 The decline is mainly due to the maintaining a conservative investment and financing stance in the Greater China region. This concludes the explanation of each segment. Please turn to Page 15. This slide is about the shareholder returns. Regarding the acquisition of treasury stock, as the July, we have acquired 40,900,000,000.0 yen of the total 100,000,000,000 yen buyback program we announced in May.

Moderator

Regarding the interim dividend, as mentioned at the beginning, the current dividend policy is set at a payout ratio of 39% versus the first half net profit. As I have explained, in the second quarter, we anticipate gains from the sales of GreenCo and new investments. And for our full year earnings forecast, it's currently under review. We will inform you any updates if there is a progress in this area. Please turn to Page 16.

Moderator

This slide is about the ROE and EPS growth enhancing corporate value. Since announcing the three year medium term plan and long term vision in May, our CEO, Inoue and COO, Takahashi have been actively engaging in direct dialogue with institutional investors, both domestically and internationally. In this context, we will strive to enhance the corporate value by increasing opportunities for direct dialogue with the market and focusing on improving ROE, which is our most important management goal as well as EPS growth and capital costs, which we also consider as critical. So this is the end of my remarks for the first quarter results. Thank you for your attention.

Moderator

So now we would like to open the floor for questions. If you have any questions, please use the raise hand button at the bottom of the Zoom screen. When your name is called, please unmute yourself and state your question. And please from JPMorgan Security, Sato san, please. This is Sato from JPMorgan.

Moderator

I have one question. Mainly in The US related business what are your views as to the risk arising from those businesses? The tariff was agreed with US, and there was abolition of incentives for renewable energy. So your existing assets or any of your renewable energy businesses will it impact your strategy and apart from that regarding exposure in The U. S.

Moderator

What is your views and how do you see it? Thank you for your question. First of all, ORIX US. Let me talk about the business outlook. If you could refer to page 33, I I would like to make additional remarks.

Moderator

For ORIX US said, focusing on middle market middle market, it provides finance solution and mortgage business for the real estate and also PE investments. And right now, with inflation and Trump's tariff, the interest is now high. So especially when it comes to real estate mortgage finance and investment in operations businesses, the environment is against wind. Segment profit is 14,000,000 for operation. So we have been rather conservative.

Moderator

So we're in red. And as was mentioned, in a minority investment due to tariff, we have been recognizing impairment for some of them. So we will be conservative and try to reduce the level of our asset. And for the real estate and the property, the high interest rate is continuing more so than we had expected. So we have been struggling in origination for investing in properties.

Moderator

So we are focusing on asset management. So for the segment profit, we are now more or less a breakeven. So given this environment whether it will improve or not it continues to be opaque. The fundamentals in The U. S.

Moderator

We don't consider this to be bad but for RXUS business to a certain extent we need to take into consideration the possible capital recycling. Meanwhile the credit business it has been quite solid leverage loan structured finance and infrastructure finance in these areas. In these debt services we have achieved a solid result. Having said that using balance sheet for some of the businesses, we will have to minimize the risk as much as possible. Also we would like to drive asset management.

Moderator

So we will pursue hybrid model between our own equity and third party fund. And for Hilco Global, this is rather countercyclical. It's very strong against the economic cycle in overall The US. So we will continue to invest in Hilco Global and shift to a better profitable assets. We need to recycle.

Moderator

And as to your question about the tariff by Trump about renewable energy, the direct exposure in The US is quite limited. However, for renewable energy as an infrastructure one is price competitiveness and second is the power business itself. Whether it has a strong connectivity with it will be critical. Also of course there may be tax system changes but globally the winning path in renewable energy, how to be in a better position, we need to be very flexible in working on our assets. So that is why we decided to sell Grinko and reinvest in AM Green.

Moderator

And also for LR1, we we have been driving forward. So for the policy of renewable energy business overall, we will not change because of the Trump's tariff. That was all. Thank you very much.

Moderator

Thank you very much, Sato san. Next, SNP C Nikko Securities. Muraki san, please. Hello. I am Muraki from SNP HSBC.

Moderator

Nico, thank you very much for taking my question. This is Page eight, capital recycling and capital profit and loss outlook. I would like to ask a question about that. At first quarter, 45,000,000,000 in profit and Gwinko will be reflected. So you've been putting on that, so $140,000,000,000 seems to be the number.

Moderator

Again, it seems that you'll be able to reach the full year plan. It says that you will make consider observations. In terms of the capital loss, what is your outlook? So in the fourth quarter, so for instance, a long term impairment or the goodwill impairment or the credit loss, CCL losses will be accumulated. And ORIX Life, in terms of the annualized loss, is over JPY 600,000,000,000 for the bond portfolio.

Moderator

So utilizing this one non profit and to be able to improve the profit for next fiscal year, how are your discussions going forward in terms of the portfolio realignment? So as it was mentioned on the right hand side on Page eight against the full year forecast, so basically, this is the same as we have announced our budget. So currently, it's under review. That's the reason we are saying this is under review. As we have pointed out, this JPY 41,500,000,000.0 in the first quarter, the green coal gains are about JPY 93,000,000,000.

Moderator

If you'd add that, the full year capital gain budget, including the excess strategy by project by project, we are reviewing the outcome. In terms of the if we are going to change the financial outlook, it is not only what we have conducted in the past, but in terms of our planning. Is it truly for this fiscal year correct, for this fiscal year? Or we consider next fiscal year as an opportunity in terms of the capital gain, the optimal timing? We are taking stock and trying reviewing about the timing.

Moderator

In terms of the capital loss in the last fiscal year in the fourth quarter, so in terms of the Soma Hibiki plant, there has been some partial impairment. And in The U. S, individual impairment and the credit loss impairment has occurred. As you have made a question for CCL, until the previous year, there has been some reversals, but that has stopped. But from this fiscal year and onwards, currently, we are trying to review what would be the right level of reserves.

Moderator

But basically, we think that the outlook is more or less conservative. So this will be some of the things that we want to reflect for the full year outlook. In terms of the Wickes' lives bond portfolio impaired under unrealized loss, Wickes has improved compared to last fiscal year, but this is linked to the liabilities. In terms of the actual performance against the real business, as long as there's no large surrenders and cancellations, that is the standard, like portfolio management conducted by life insurances. But ORIX Life, the long term lump sum payment type of insurance, the surrender risk, having that type of risk is limited because, basically, we offer medical protection type of insurance.

Moderator

So in terms of that nature of the the insurance, I think we they can absorb the risk. However, that said, in terms of the asset value and going forward valuation, if there is something that will have the negative impact for the next fiscal year and onwards, they will address that. But currently, in terms of the capital loss, there is no major considerations they are considering and conducted right now. Has this answered your question? So if that is the case, in terms of the direction on a net basis, the Grinko, yen 93,400,000,000.0 of the Grinko's shares will come in.

Moderator

So for the delaying some of the sales or the even if there's some capital loss, well, they come up. But in terms of direction, you are looking in a kind of upward trajectory. Yes. As you have mentioned, in terms of each of the exit deals or projects, more than we have assumed more high quality investors at the interest rate environment. We have to individually review with the top management of each of the segments are considering these type of factors.

Moderator

And we are waiting for the review, and then we want to communicate that as quickly as possible.

Moderator

Moving on from Daiwa Securities, Watanabe san. Please unmute yourself. This is Watanabe from Daiwa Securities. Regarding capital recycling, I would like to ask you regarding Ascentyc TOB period did not extend and Panasonic projector business was gained in a short period of time. So what's the investment discipline?

Moderator

Were there any changes in your approach? And also a $30,000,000,000 dividend you will be carrying out. So why at this timing are you going to carry out the dividend payout? Well, thank you very much for your question. Regarding Panasonic Connect projector business, I would like to explain why agreement was released.

Moderator

So we were supposed to sign an agreement with Panasonic Group, and we had prepared accordingly. As was announced, both parties had worked together, and that's a fact. Meanwhile, due to tariff impact and economic situation, the outlook of these business was revisited. And given the strategy on our end and between ourselves, there were gap between the two companies regarding the expectation on the future business, and we quickly consulted with each other. So based on agreement, we decided to release the agreement.

Moderator

We decided to terminate the discussion. So it's not that we were not able to reach an agreement. Rather, based on a rationale discussion, we discussed and agreed that we will not be making investment. So within a certain risk tolerance, the initial business plan did we are were we were they feasible or not? In light of that, we made a decision.

Moderator

And for Ascentyc TOB, it did not achieve the number that we had expected. And thereafter, the price compared to RTOB price, it has been faring higher. It seems like meanwhile, Ascentyx management team, we had a discussion many times. And so we discussed about whether there's a business synergy or is there a room for collaboration to improve corporate values. We have a relationship to continue to hold these discussions going forward as well.

Moderator

So this has been extend the period has been in not been extended, and the price were not revisited. And as you said, based on investment discipline, in light of the business value that we estimated of course we will not change our investment discipline just because we want to purchase. So because of the decision by the business side, we did not we decided not to extend and not revisit the price. In terms of timing, Centiq, there was an announcement this morning and also the market situation. These are impacting factors every time there's TOB.

Moderator

So I'm sure certain accommodation will be necessary going forward, But every time we take time to make a final investment decision. So every time we will consider within the defined ratio of investment. And also the dividend payout, this was announced. We have been stacking up the profit and also the revenue has been growing but in three categories, the finance segment. In terms of profitability, ORIX Bank compared to the peers, of course, they are not behind.

Moderator

It has maintained its decent profitability and asset has grown to a certain level, and it is being distributed. So in order to grow profitability higher, we decided to return the capital to a certain extent. So in a stand alone basis, at this point in time, the financial soundness of Rx Bank has no issue whatsoever. And upon that we decided to carry out the dividend. And going forward for each group companies and the business segments in order to contribute to a higher ROE of a group we need to go into one by one and be mindful of ROE.

Moderator

So the dividend of Rx Bank was based on the business strategy going forward. I hope this answered your question. Yes. I've understood very well. Thank you very much for the detailed answers.

Moderator

Thank you very much. Mizuho Securities, please. This is Sakamaki from Mizuho Securities. So I have one question. In terms of the shareholder return, so in terms of the flexibility of share buybacks in the three year plan, you have been talking about that you have been good in your profit process.

Moderator

In terms of the sales of Grinko, in terms of the capital, you have more room. So what type of interim discussions have been conducted in terms of this shareholder return policy? Thank you very much for your question. So in this Board of Directors as conducted today, in the Q1 financial results based on that results. In terms of the discussions that has been conducted, I think basically, the discussions were focused on the forecast going forward or the outlook going forward.

Moderator

I think in terms of the market environment, that is solid in Japan. How much will the impact of the Trump tariff? And I think each of the corporations are trying to discern about that. The second point is that in The United States and China, ORIX as a group, what type of business outlook should we establish in terms of the shareholder policies to be able to make a decision. For these materials, we will have to look more deeply and then decide about our policy.

Moderator

So that is the reason why we are saying that it is under review. But this fiscal year in May, we have said that we have a framework of 100,000,000,000 yen and a program. This will be quite flexible. In terms of the investment pipeline for the Panasonic Connect company, we have terminated that agreement. And with the GreenCo sales, we have invested in a green.

Moderator

And in terms of Hillco M and A, we have reached an agreement. So for the major projects, I think, basically, we have some voice visibility. So in terms of the looking at the investment and the payback, if we consider that we have the capacity and as a market condition shows that if there is capital market shows that it's a good timing to conduct share buybacks, if we make that type of decision, we will make a decision under con after conducting discussions. So maybe not a answer that may satisfy you. But thank you very much.

Moderator

Thank you very much. Next, B of AA Securities, Tsujino san. Please. About the return to shareholders, I have a question. First of all, in the first half dividend, how are you going to decide?

Moderator

39% is the annual, but the profit seems to be skewing towards first half. So what are you thinking about? And also the additional buyback, and you talked about two major deals as well. But Abalone's 70%, Houhai have completed the sale or it was agreed to. So or maybe you will think about what to do with Avalon.

Moderator

Maybe you are thinking about it from about two years ago, and this discussion may progress. Or maybe you will look for a good third party and whether you will be able to demonstrate your leadership. But the investment size will be quite significant. So taking all this into consideration and also thinking about the future, perhaps you will have to think So about the the next round of big investment. There may be several options, so I was wondering if this will turn out to be one of them.

Moderator

So about the interim dividend to start with, as Tsujino san, you know very well last year against the first half result, dividend payout ratio was 39% and that was our return. And as I mentioned earlier for this fiscal year, Greencore importer looking at this, we will be skewed towards first half. But nevertheless, will it be 39%? So when we announce interim financial closings, BOD will decide eventually. But our idea towards this dividend is what is fair?

Moderator

It would be a commitment towards 30 commitment of 39% against the result. And as long as we don't have any negative factors in the second half, it will be across the board of 39% annually. So that is how we've updated. And for additional buyback, as you mentioned Avalon's 70% the whole high shareholder of 70% and CECO. BOHAI's was 70% and CECO.

Moderator

Among overall capital policy, of course, these are important factors. And also apart from the current pipeline, we have some other potentials. So we are looking into this very deep. And on the market, of course, being mindful of capital cost, this is quite important as we manage our business. So with Inoue san and Takahashi san, we have been holding discussions with the investors in EU and US.

Moderator

Instead of stacking up the capital based on uncertainties, rather, we should be solid. And looking at the financial state of ORIX, the capacity is sufficiently maintained. So if the return becomes a bottleneck in investment, we will definitely avoid that to happen. So that is how we decided the size of buyback. And as of May, it was 100,000,000,000 yen.

Moderator

And come interim financial results, there may be a certain appropriate amount. So there are moving parts and taking into consideration the Avalons. We will decide if there is an opportunity. We you want to make an investment go ahead. Although this was rather vague, I hope this answered your question. Thank you very much. Stop.

Moderator

Next one, Nubanken Securities, Sasaki san, please. So this is Sasaki from Nubanken Securities. So I want to ask about the base profit. So I think it's the latter half of the presentation material. The first quarter base profit increased.

Moderator

Where was it coming? As much as possible, can you talk about that? If possible, so from the second quarter onwards, so more than TWD120 billion, is this sustainable? Or is it going to further increase? Can you please talk about that?

Moderator

Thank you. So that will be Page 42. I think you're looking at Page 42. As I said at the beginning of the presentation, in terms of talking about the segment profits, in terms of the level of base profits, this is a very solid level for the first quarter. But partially, in this, the so called the side of the recurring base profit, so from technical reasons, some has been booked in the first quarter.

Moderator

There is some of that type asset has been booked. So if you compare it year over year, so on the before tax, more than JPY 100,000,000,000 level, I think basically, we have been able to reach that level. But it's the first quarter, I will not be able to tell you the exact number. For the bank business, there has been some one off profits that has been included. Or in terms of the environment and energy, the capital besides some capital gains, there are some technical numbers that has been included.

Moderator

However, that said, up to now, in terms of the momentum, from two years ago, from the third from second quarter onwards, more than 100,000,000,000 yen of base profit has been achieved. In terms of maintaining this momentum, yes, we will continue to maintain this momentum. So in terms of other impacts, in terms of the performance of the PE investees, so it's quite dispersed and distributed. I do not think that one specific investee will have a negative impact. But each of our investees are conducting very unique businesses.

Moderator

So we would like to manage these companies very steadily. But they may lead to some fluctuations in the future. UNIDENTIFIED you. Imoto san, may I ask? So maybe I did not understand what you have explained, so let me ask again.

Moderator

For this fiscal year's guidance, you said that it's under review. What is the meaning of under review? So simply thinking, so last year, you were not able to sell Grinko. You're not being able to achieve your targets. And then this year, it has been decided, so it maybe go up.

Moderator

So that's a kind of a simple thinking that I have. So the you have used the word under review. Is it that implication that the outlook has become negative? Or it's just technically, literally, you're just thinking, so it's under review. So can you please help me understand your thoughts?

Moderator

So I think what you said, latterly, is what I I was you're think thinking. So when we disclose our budget in terms of the gains coming from the sales of Grinko, So in terms of the buyer was relying on the market conditions, saying it was a bit difficult to receive, but we have to compile a budget. So for each of the segments, we have been expecting that each of the segments will be able to do the business already. And we disclosed the budget and outlook of JPY $380,000,000,000. But from my point of view, the review of our forecast, including the green coat sales, so it's not just adding or subtracting what has changed.

Moderator

Against what is our forecasted performance for this fiscal year. We do want to answer that correctly and solidly. So as far as time allows compared to initial budgeting, how are things are going to transpire from July and onwards from the top management for each of the heads of the business segments that we have closely communicated about that. So I do hope that you will allow us more time to think about this. So it's not that its cost links got better or worse.

Moderator

We are thinking that we are really looking into the budget so that we can say that this is the revised forecast backed by solid reasons. So we do want to spend some time to be able to reach that conclusion. Understood. Thank you very much for clarifying my thoughts. Thank you very much.

Moderator

Thank you. So we're closing in, but this will be a final question. SBI Securities Otsuka san, please. This is Otsuka from SBI. Can you hear me?

Moderator

Yes. Towards the back of the presentation, on Page 46, asset management disclosure is given 81,000,000,000,000 at the June. And it doesn't say here, but in the previous document, March 2025 towards the left, AM was 74,000,000,000,000. I believe it was the number. So simply within three months plus 7,000,000,000,000.

Moderator

That's disclosure. So I would like to know the background of this increase. So third party asset management, I think you've talked about enhancing those areas, so I am now interested. Takahashi san mentioned this as well. So in mid to long term strategy, we would like to grow AUM through asset management.

Moderator

That is the direction within mid to long term strategy. And on page 45, one page before, that's included on this page. And also, as you recall, at the March, AUM outstanding amount, It's now $81,000,000,000,000 so it has grown. And the major reason behind this increase, there are two. One is Noveco and other companies.

Moderator

The inflow of cash relatively speaking towards this quarter, well, although this was within our expectation, we were able to take them in. And prior to that, over the past one year, Oueco's AUM was rather flat. But from previous quarter, the momentum of recovery started to be very clear. Perhaps this is mainly due to product lineup and the investors understood that, and this led to the inflow. And also The US stocks equities, the market was good, so there was inflow and AUM outstanding.

Moderator

There has been a higher valuation. And for first and second quarter, it has been on the rise. So that was Robeco related. And apart from that in The U. S, CLO and securitization product arrangement business is underway.

Moderator

So this is a private credit related product which has been quite successful. So in the past as a hybrid model, balance sheet was being used, but once sold to investors, it will shift to AUM. So for CLOs, the outstanding amount is quite significant. So this was another contribution especially in case of U. S.

Moderator

Because of The U. S. Dollar. In terms of value term compared to yen based, the impact appears to be much bigger. So there are other fluctuating factors, but there were valuation loss, but we've able to absorb and tariff impact.

Moderator

So both in US and Europe, I hope that I was able to explain the factors behind these numbers. So mark to market So there's a 21,400,000,000.0 yen euro inflow, but I think market value is not that high. Stock base as you say there's an impact on the market of the market. So with Takahashi san, just showing the numbers on the balance, it's difficult to understand. So in individual IR meetings, he has received a lot of questions about the product profitability, and this is a home for myself as well.

Moderator

I hope that we will be able to sort this out and better explain to you in our disclosures going forward. Well, thank you very much. I am looking forward to the detailed explanation going forward. Yes, thank you.

Moderator

So the time has come to end this meeting. We would like to end the Q and A session. So Yamamoto will say some last words. So thank you very much. In the first quarter, I think basically, we have seen some confirm in terms of Grinko.

Moderator

From last fiscal year, I think people were concerned about the situation. But we have been able to close the deals, and I think that was quite a favorable situation. On the other hand, as Tsujino san and other investors has asked for the second half, we cannot be too optimistic. And for this fiscal year, the capital gain is concentrated in the first half. But for the full year business in itself, I would like to carry out a business steadily.

Moderator

In terms of the review and looking into the business environment, we will focus on these activities. And through communicating with you, I would like to clarify any issues. So I hope that you will be able to support the ORIX Group going forward. So this, I'd like to end the first quarter presentation results. So thank you very much.

Moderator

So for the March results briefing, we'd like to end this meeting. Thank you very much for participating until the end.

Analysts
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