Orix Corp Ads Q1 2027 Earnings Call Transcript

Quartr
Provided by Quartr
August 6, 2026

Key Takeaways

  • Positive Sentiment: Record first-quarter net income reached JPY 280.8 billion, up JPY 173.5 billion year over year and representing 53% of the unchanged JPY 530 billion full-year forecast.
  • Positive Sentiment: Core earnings improved across asset management, transportation and insurance, while capital recycling generated approximately JPY 300 billion of cash inflows. ORIX also completed the ORIX Bank transfer and agreed to acquire aircraft-parts company AerFin to expand its aviation value chain.
  • Negative Sentiment: Results remain highly exposed to Kioxia’s share price; JPY 540 billion of the JPY 840 billion first-half forecast is non-cash Kioxia-related gains. Management noted that the share-price decline since June could result in Kioxia-related valuation losses in the third quarter.
  • Positive Sentiment: ORIX changed its dividend policy to base shareholder distributions on adjusted profit excluding Kioxia-related gains and losses, while maintaining the higher-of-39%-payout-ratio or prior-year dividend framework. The interim dividend is forecast at JPY 107.27 per share, and JPY 78.4 billion of the planned JPY 250 billion buyback had been completed by the end of July.
AI Generated. May Contain Errors.
Earnings Conference Call
Orix Corp Ads Q1 2027
00:00 / 00:00

There are 8 speakers on the call.

Operator

It's time to start the meeting. Thank you for joining this conference of ORIX Corporation for first quarter consolidated financial results for the three-month period ended June 30th, 2026. I'll be the master of the ceremony. My name's Tomioka with IR. Thank you. The attendees at this conference are Masataka Yamada, Senior Managing Executive Officer, Chief Financial Officer, and Chief Strategy Officer, and Kazuki Yamamoto, Operating Officer responsible for investor relations. Both Yamada and Yamamoto will provide you with explanation, which will be followed by Q&A. The whole meeting should last approximately one hour. Now we would like to hand over to Yamada-san.

Speaker 1

Thank you very much for taking time out of your busy schedule to attend the ORIX Group financial results briefing today. I am Masa Yamada, ORIX Group CFO and CSO. Without further ado, I'd like to explain the financial results for the first quarter of FY 2027. First, please turn to page two of the presentation deck. The points we would like to convey at today's briefings are the following three points. Net income is the first. Stronger core earnings power and robust capital recycling, and the third, first half earnings forecast and dividend policy. I will explain the first and the third points, and then Operating Officer Yamamoto, who oversees IR, will explain the second point. The first point is net income. Net income for the first quarter was JPY 280.8 billion, an increase of JPY 173.5 billion year-over-year, marking the highest quarterly profit on record.

Speaker 1

Progress against the full-year net income forecast of JPY 530 billion was 53%. Gains related to the sales and valuation gains on Kioxia shares held by Toshiba, one of our investees, contributed significantly. The second point is ORIX stronger core earnings power and robust capital recycling. Regarding our core earnings power in first quarter of this fiscal year, ORIX Europe expanded its AUM to record high levels, primarily through Robeco. Market appreciation was the main driver of the increase, and ORIX Europe also steadily acquired new money. As a result, asset management fees increased significantly. Additionally, the transportation equipment business benefited from favorable market conditions, and all three business lines, aircraft, Avolon, and ships, achieved year-by-year profit increases. Next, regarding capital recycling, we proceeded with the exit as planned for domestic PE investee, SUGIKO, as well as multiple PE investments at ORIX USA, including Peak Utility Services Group and Nectra Connex.

Speaker 1

Regarding ORIX Bank, the transfer of all shares to Daiwa Securities Group was completed on August 3rd. Additionally, as announced on the same day, we have signed a share transfer agreement for the 100% acquisition over AerFin, a major aircraft parts out company. We are steady advancing capital recycling while maintaining a balance between investments and divestments. The third point is our first-half earnings forecast and dividend policy. We have calculated our first-half net income forecast at JPY 840 billion. Of this, JPY 300 billion is categorized as adjusted profit and JPY 540 billion, which is non-cash profit, is categorized as Kioxia sale and valuation gains. We have changed our policy to use adjusted profits as the source of dividends. The full year net income forecast of JPY 530 billion remains unchanged. Details will be explained on the following pages. Please turn to page three.

Speaker 1

I will explain our first-half net income forecast for FY 2027. Our net income is significantly affected by fluctuation in the price of Kioxia shares held by Toshiba. This page shows the results of a calculation of the first-half net income forecast based on Kioxia share price at the end of June. The blue bar graph on the furthest left represents the full-year net income forecast of JPY 530 billion we announced on May 11th, calculated based on the assumption that Toshiba would continue to account for Kioxia related gains and losses as equity method earnings. The box immediately to the right briefly explains our announcement of May 21st, which was the result of calculating the impact on our first quarter results following our revised assumptions, namely Toshiba's change to market valuation of Kioxia shares in its full year results for FY 2026.

Speaker 1

The gray and red bar graph, second from the right, shows the first quarter net income of JPY 280.8 billion mentioned on the previous page, broken down into JPY 121.7 billion of Kioxia sale and valuation gains in gray and JPY 159.1 billion of adjusted profits in red. This Kioxia sale and valuation gains of JPY 121.7 billion is based on the valuation gains recorded by Toshiba using Kioxia's share price at the end of March, which was JPY 19,080, as shown at the bottom of this page. The bar graph on the far right shows our first-half net income forecast, which was also calculated based on Kioxia's share price at the end of June, which was JPY 89,680. Sorry to repeat myself, the first-half net income forecast is JPY 840 billion, which includes, 1, Kioxia sale and valuation gains, gray, of JPY 540 billion, and adjusted profits in red of JPY 300 billion.

Speaker 1

Please turn to page four. The reason we kept the full year net income forecast unchanged at JPY 530 billion is that it is difficult to predict the impact of Kioxia sales and valuation gains on our full year net income. For every JPY 10,000 change in Kioxia share price, our after-tax Kioxia sale and valuation gains fluctuates by JPY 57 billion. This is calculated based on Toshiba's holdings of Kioxia shares. As of the end of June, Kioxia's share price was JPY 89,680 at the end of June, and the closing price yesterday, August 5th, was JPY 54,300. Depending on Kioxia's share price at the end of September, we may record Kioxia sale and valuation losses in the third quarter. With the improvement in core earnings power as a backstop, we plan to steadily grow adjusted profits in the second half as well. Please turn to page five.

Speaker 1

This page explains the change in dividend policy for 2017 fiscal period. In the center of the page, we have, again, given a definition of Kioxia sale and valuation gains. This refers specifically to the portion of Toshiba-related investment gains and losses related to the sales and valuation gains on Kioxia shares after tax. Under our revised dividend policy, we will define adjusted profits as the portion of accounting net income excluding Kioxia sale and valuation gains and use this as a source of dividends. There is no change to our approach of policy of paying either net 39% of payout ratio or the previous year's dividend of JPY 156.10, whichever is higher. Based on the first half adjusted profits forecast of JPY 300 billion and calculated under the revised dividend policy, the interim DPS for this fiscal year will be JPY 107.27. This concludes my presentation.

Speaker 1

Operating Officer Kazuki Yamamoto will provide some additional commentary.

Speaker 2

I'm Kazuki Yamamoto with Sync Corporate Planning, IR, and Sustainability. I will use page six and seven to talk about Japan and APAC, infrastructure, U.S. and Europe, and insurance. For those new segments, I would like to talk about the pre-tax profits and assets year-over-year, also comparison against the end of a prior fiscal year. Infrastructure performed well with higher profit, excluding large gains on sales recorded in Q1 of the previous fiscal year. Profits increased year-on-year in three segments excluding infrastructure. Assets increased versus end of a prior fiscal year at ORIX USA in U.S.A. and Europe segment and expanded leading executions due to expanded lending executions, there's no significant changes in the other three segments. I would like to use some supplementary material to explain. Please turn to page 13.

Speaker 2

Profit for Japan and APAC was JPY 289.8 billion, an increase of JPY 237.6 billion year-over-year, in addition to gains of approximately JPY 62.3 billion from sales of SUGIKO, a domestic PE investee. The auto business expanded new lease origination, that contributed. Excluding the JPY 179.8 billion from Kioxia sale and valuation gains, segment profit was JPY 110 billion, an increase of JPY 52.2 billion. Increase of JPY 57.8 billion year-over-year compared to the JPY 52.2 billion. Asset increased slightly because of a new execution and the equity investment increase, Toshiba and Asia Pacific FX. Balance was slightly declining in Greater China. Please refer to page 15 for the list of PE investees exits and the new items, also for breakdown of APAC and Greater China, please refer to page 16. APAC and Japan accounts for 33% of the total segment asset.

Speaker 2

Please turn to page 17. Infrastructure segment. Segment profit was JPY 43.3 billion, a decrease of JPY 25.1 billion year-over-year. If we exclude the absence of the sales on gain from the prior year, it's actually an increase. Avolon and ships business benefited from favorable market conditions and achieved growth in both gains and the sale of aircraft lease revenues. We will try to close the deal by FY 2026. For energy, there's been problem with the outward regulation or restriction in renewable energy, the profit was down, concession, including Kansai International Airport, actually declined in profit year-over-year. The details are shown on page 18 for your reference later. Segment assets. While strong performance at Avolon and continued investment in ships boosted assets, this was offset by aircraft sales and exit from logistics center and real estate, it was down slightly year-over-year.

Speaker 2

Moving on to page 22, U.S.A. and Europe. Segment profit was JPY 63 billion, an increase of JPY 52.4 billion year-over-year. ORIX USA recorded fair value gains from PE investments and Robeco and others overseen by ORIX Europe significantly expanded AUM and grew fee income. As for segment assets, NXT Capital loan asset-based lending continued and this pushed up the numbers. As for ORIX USA, please refer to page 23 for LOB profit and asset breakdown for your reference. Moving on to page 25, insurance segment. This was mostly ORIX Life, but segment profit was up JPY 3.9 billion at JPY 28 billion. Led by strong earnings from yen-denominated whole life insurance product newly launched in the previous year, we acquired high-value contracts for corporate high-net-worth clients, resulting in increased insurance profit. Investment profit was also strong.

Speaker 2

Assets increased slightly as investment assets grew on the back of expanded premium income. Please return to page six. For the four segments, based on their performance in the first quarter, as you can see at the bottom segment profit basis, this was 133.73%, for pre-tax profit, 161%, and net income 162%. Compared to the prior year, the profit was up in each of these lines. The progress is at 53% against the full-year forecast. Moving on to page seven. At the end of the line, you can see the segment asset in total. JPY 14.4261 trillion, up JPY 190.9 billion year-over-year. The total assets was JPY 18.257 trillion, including JPY 3.262 trillion for assets from discontinued operations. Please turn to page eight.

Speaker 2

This page shows the relationship between the business lines, comparing the four new segments and the three categories, finance, operations, and investments that we have been using. To clarify the understanding based on this, please turn to page nine. This is the full-year outlook and also the pre-tax profit and progress year-over-year for the three conventional categories. Q1 profit for finance was JPY 45.2 billion, an increase of JPY 6.6 billion year-over-year, with achievement of 27% against the full-year plan. The main driver of the profit was increase of insurance. Please note that both the full-year forecast and the Q1 results do not include profits from ORIX Bank because this is going to be classified as discontinued operation in Q2. Q1 profit for operation was JPY 55.4 billion, a decrease of JPY 8 billion year-over-year because of the absence of the gain on sales of the prior year.

Speaker 2

ORIX and Robeco fees are strong. Domestically, ORIX Auto has been continuing its strength, therefore the progress was 23%. Last but not least, Q1 profit for investment was JPY 323.5 billion. This includes Kioxia. The overall progress was 112% exceeding the original plan. If we exclude Kioxia sales and valuation gains, the profit was JPY 143.7 billion. In this case, an increase would be JPY 90.4 billion year-over-year and a 50% progress. The dotted line in the middle is representing what I've just explained. Moving on to page 10. Capital recycling for this year. Capital gain recorded was JPY 115.7 billion. Cash inflows from capital recruitment was approximately JPY 300 billion. The EU unit and ORIX USA exited PE investees and made a steady progress. Additionally, we sold logistics facilities and multiple aircrafts. Cash outflows was approximately JPY 80 billion.

Speaker 2

In addition to the PE investment in Nihon Information Industry Corp as first deal for the joint venture established with the Qatar Investment Authority, we have been investing in developer-owned businesses in logistics, aircraft, and ships. Cash in was much higher than cash out, but based on the current state of the pipeline, we will continue the capital recycling and optimize the portfolio. The full-year outlook remains unchanged from the forecast announced in May, as you can see to the right. AerFin acquisition has been already announced and JPY 80 billion new investment actually includes this. Share transfer of ORIX Bank and equity transfer of Nectra Connex, a PE investee from ORIX USA, have already been completed in Q2 and already reflected.

Speaker 2

As for other new investments, main areas continue to be domestic real estate, PE investments, aircraft and MGM Osaka IR AerFin, a major aircraft parts company through ORIX Aviation. With AerFin joining the group, we aim to expand our business foundation across the entire aircraft value chain, from aircraft leasing to post-retirement parts utilization and enhanced asset management services. Capital gains amount mentioned earlier does not include profits and losses recognized from equity method investees such as Toshiba. Please turn to page 11, shareholder returns. As Yamada has explained, interim dividend based on the adjusted profit is set at JPY 107.27 per share. For the full year forecast, as Yamada explained, net income forecast is maintained at JPY 130 billion, and therefore the full year dividend forecast is steady at JPY 187.36 based on changed dividend policy and also based on the pipeline profit and investment recouping.

Speaker 2

We will continue to earn the excess capital, and this stance has not really changed. As for share buyback, against the total amount, which was announced at JPY 250 billion in May, at the end of July, we have purchased JPY 78.4 billion, progress of 31%. For this fiscal year, full year payout ratio, including the dividends and share buyback, is maintained at 85.9% as disclosed in May. That's all from me. Thank you.

Speaker 1

Thank you very much. We are now ready for the Q&A session. If you wish to ask a question, please press the raise hand button at the bottom of the Zoom screen. In terms of the question, please refrain from asking more than one question. We have Jay from JPMorgan. Sato-san, over to you. Thank you very much for your presentation. This is Sato from JPMorgan. Just one question. This is to do with Kioxia sales and valuation gain on page three. I know that there is an explanation on this page, but in accordance with this page, to begin with. To the original plan, any additional profit is to be JPY 70 billion, I suppose. From the adjusted profit, JPY 171 billion is to be adjusted.

Speaker 3

What was incorporated in the original plan was JPY 50 billion of an adjusted profit. This is the target for the adjustment, I suppose. Based on this presumption, all those that are going to be excluded for the full year, would you be able to get that back by the time of the end of the year? Would you be able to beat the JPY 530 billion, your original expectation for the full year? Also ROE, I'm sure, is proved to be important as well. With regard to ROE of 11%, I suppose the adjustment is required for this ROE as well. Especially for the denominator part.

Speaker 3

Just like the policy that you have announced this time, the Kioxia sales valuation gain or loss, can I take it that you're going to be making a similar adjustment to the ROE as well?

Speaker 2

Thank you very much for asking the question. Thank you for pointing out all that you have shared. JPY 520 billion, to be precise, on page four. You can refer to the chart, and it is pretty complex. JPY 530 billion, you can see it is slightly short of this amount. As for this, on a continued basis in the second half, there is a certain pipeline that where we have a great expectation for. I'm sure we'll be able to make up for the shortcomings through those pipeline in the second half, but we have not reached to the extent whereby we'll be able to incorporate these expectations yet at this point in time.

Speaker 2

As for ROE as well, as you have pointed out, whether it is going to be an adjustment for the denominator or are we going to be adjusting both the numerator as well as the denominator, or would it be based on a new idea for ROE or ROE itself, the target may have to be changed, is currently being discussed actively internally. Once we know the clear direction, for sure we would update on the latest understanding and thinking to the investment community as soon as possible.

Speaker 1

Thank you very much. Understood. Thank you. Thank you. Next, Atsuro-san, Morgan Stanley. Please ask your question.

Speaker 4

Thank you. This is Atsuro, Morgan Stanley, MFJ. I have a question about Q2 progress and also outlook. Excluding the impact of Kioxia in Q1, you landed at JPY 159.1, for the first half, you are aiming for JPY 300 billion. In the second quarter, you are planning for JPY 140 billion of profit, I presume. ORIX Bank gain on sales is more than JPY 120 billion pre-tax. If we take that out, then a profit for the second quarter is only just over JPY 50 billion. Are there any downside risks that you're assuming for Q2, or are you just being conservative and you're planning to exceed the plan? How do you see the progress of the first half of the fiscal year? Please share your thoughts.

Speaker 1

As you have pointed out, for Q2, ORIX Bank, the post-tax profit is included, your calculation is correct. With regard to the remainder or the balance, there are two things. As you said, one, we're being a little bit more conservative, the other is there could be some one-off factors. Based on multiple factors, we have decided on this number, we cannot really break it down for you. Please understand that there are two aspects, both aspects.

Speaker 4

Understand. Thank you. If that is the case, 25% or less progress in terms of operations, you are assessing that the progress is solid.

Speaker 1

Right. Recurring revenue has been moving quite steadily. Yes, that's our assessment.

Speaker 4

Understand. Thank you.

Speaker 1

Thank you for the question. The next person is from SMBC Nikko. Masao-san, over to you. This is Masao from SMBC Nikko. If I could ask question about page three in addition to what has been asked already. First of all, it suggested the profit, the upside as well as the downside. I know that there has been some discussion about this topic. Within this item, I know that there's non-cash portion. What you will be receiving from Toshiba, about JPY 51 billion or so, in the second quarter, this red part, is it going to be included in JPY 300 billion? May I take it? If there was to be a downside risk in Greater China, I know that you have posted some losses from the Greater China region. Are there any other impairment that you may have included?

Speaker 1

Well, you see, we have applied the equity method accounting. Even if there was to be any distribution, it doesn't hit our P&L. It will be an adjustment on the balance sheet rather. Therefore, with regard to this amount, it is not from the P&L perspective, but rather the investment in the future as well as its return, and also the capital structure and also at the same time, the ROE in mind towards the end of this fiscal period. How to treat this is what we need to decide for ourselves. With regard to this valuation loss in Greater China, there are numbers of public equity that we hold, more than a certain amount during a certain period, and if it has gone below our threshold, we would be accounted to be the impairment or valuation losses.

Speaker 5

There has been some of this that was applicable. I see. Which means that for the quarter from Toshiba, the cash portion that you have received, so Kioxia sale valuation, it is included in this portion. For the full year, it may be the case that you're not going to be including in that sales or valuation of Kioxia, but rather it will be incorporated in the adjusted profit rather than a P&L from the perspective of the fund itself. In other words, we will take on a comprehensive approach and how to treat this. To not to incorporate this into the formula, we may perhaps think about the shareholders' return from a different angle or different way of thinking. That's what it is. Thank you.

Speaker 1

Thank you very much. Daiwa Securities, Watanabe-san, please ask your question. Yes, this is Watanabe, Daiwa Securities. I have a question about AerFin and the impact on your capital and also contribution to profit and what kind of synergy you would expect from this deal.

Speaker 1

Impact on capital or equity. Goodwill and also intangible asset depreciation and non-depreciation. We have to separate those, but.

Speaker 2

The purchase price versus the book price. We cannot disclose this information. There's going to be a number that will explain the difference between the two. In terms of profit contribution, there is a public disclosure on the U.K. side. Contribution is expected in line with the number that's been disclosed in U.K. Depreciation of intangible asset will have to take place as well. That will have a slight negative impact. As for synergy, temporarily, we will be expanding value chain and completing the value chain. That is the context of this acquisition. There are also additional synergies that we would expect complimentary relationship in terms of customer base. In our aircraft lease business, we have customer base.

Speaker 2

AerFin has their own customer base, and some of them are not overlapped, which means that we would be able to make referrals of customers to each other. That's another part of synergy that we expect. Thank you. In terms of profit contribution, is it going to be about JPY 10 billion segment profit contribution at ORIX? Would that be in line with your expectation? Well, additional contribution will be in line with the profit disclosed by the other company, the target company. But as Yamada has mentioned, from lease acquisition parts out, we will be able to compound these benefits, which means that we can push up the revenue for the whole life cycle. Watanabe-san, as you have rightly mentioned, over the long term, it would have a bigger contribution to the profit growth. That is our expectation. That's very clear. Thank you.

Speaker 1

Thank you very much. It's Fujino-san from Bank of America Securities. Thank you very much for this opportunity. The P&L from the Europe and America, USA and Europe especially, JPY 59.6 billion worth of securities sales and valuation.

Speaker 6

This is a PE investment in the second quarter. Acquisition was completed in the second quarter than the first quarter, I think. This is JPY 59.6 billion, but U.S. only has JPY 42 billion, which means that without this, USA is still in deficit. It's making losses. What is the current status? Can you please explain? Yes, I would like to check the numbers first. This is Yamamoto speaking. The slide that you can see is pre-tax profit breakdown and ORIX USA Q1 2027 JPY 12.9 billion and ORIX Europe at JPY 20 billion or so. And out of these, ORIX USA private equity valuation contributed, which was a positive contribution this time. But for some of the businesses, profit and loss being balanced, and we could make some improvements as well. I think that would be the explanation of the status.

Speaker 2

In Q1 for Hilco, the number is still negative, as you can see. From PMI, we have seen some neutral market status, and we are trying to grow stably. Please give us some more time to show you the benefit of the acquisition. At the global IR conference, COO Suzuki has provided explanation. Last year or one of factors, we had some negative factors, but in order to recover from that, we know exactly what to do. We have clear strategy, we will be implementing those strategies in ORIX USA. Please give us some more time before that is reflecting the actual performance. I would like to add, as for Hilco, in the prior quarter, it was immediately after closing and therefore there were some expenses related to the acquisition. But that expense does not exist in the current quarter any longer.

Speaker 2

As Yamamoto has explained, Hilco Global business portfolio, if you look at the whole portfolio, we have business line with stable sales and profit, and also a part of the portfolio, which is a little bit countercyclical. In the U.S., as you may know, there is a Goldilocks situation. It's not going up or down. It's in the lull. That's the situation in the last couple of quarters for Hilco Global. Considering the nature of this business, rather than looking at the performance of each quarter, we should give it a longer term perspective, six months, perhaps 12 months. We believe that we need to give that kind of long term perspective. Looking at this PE JPY 268 million. Then again from sales of our securities, JPY 59.6 billion. This includes things that are not related to PE, is my understanding.

Speaker 2

I don't think these actually belong to ORIX Europe. I'm guessing that this relates to other U.S. businesses. Because of the expenditure expenses, in the end, you end up with the numbers in the navy and the gray on this page. Is that the correct understanding? On growth basis by segment, we have disclosure JPY 59.6 billion. Majority of this is attributable to the U.S. This is just one side of the revenue. Sales of marketable securities and also dividends and interest paid and received, those elements are also included as well. Funding side payment cost, for example, will have to be looked at in balance of this. U.S. credit business alone, NXT Capital, for example, or Signal Peak, and also structured credit trading.

Speaker 2

With regards to these, the environment is relatively positive, and some of the stronger numbers that you can see include bond and also trading environment. The environment is not necessarily bad. I understand. Thank you. Thank you very much. Moving on to the next question, Sakamaki-san, Mizuho Securities. Yes, this is Sakamaki, Mizuho. I have a question about ORIX Europe. AUM is growing, I can see. More than that, compared to the Q4, I think there's a huge growth on Q&Q. Are there any temporary factors, such as performance fee, or do you think this level of a profit is more or less standard? Yes, this is Yamamoto. I would like to explain. As you said, for Robeco, market appreciation has contributed. If appreciation does not continue, we expect some deceleration. Somebody else mentioned that our Q2 forecast is conservative.

Speaker 2

This is because we don't expect the market to appreciate further. We believe that this quarter was a little bit better than usual. This is not necessarily entirely one-off, not necessarily a success fee, including net new money inflow. Robeco gets mandates from the investors, and they have been strengthening their marketing activities, which are producing results. Yes, Q1 was quite strong. Q2 and beyond, we don't expect a huge decline because of the first quarter growth. Compared to other asset managers, looking at Robeco on a quarter-to-quarter basis, we see constant new money coming in. We do not expect a huge duration because some portion of this can be sustained or supported by new money coming in. I think that's going to make a big contribution going forward. That was very informative. Thank you very much. Thank you for the question.

Speaker 2

The next person is from Nomura Securities. Sasaki-san, please.

Speaker 7

I am Futoshi from Nomura Securities. Thank you for the opportunity. With regard to this adjustment profit, especially the outlook, I know that you have been providing various different explanation. If you were to perhaps view this from the management perspective, would you make a judgment that it is going for the better or the worse?

Speaker 2

Well, I know that it's difficult to understand. We think that we'll be able to grow this adjusted profit in the second half as well.

Speaker 7

Okay. As much as possible, if you could explain. This Kioxia related matters, especially in light of dividend, I know that you have excluded from the shareholders return. Inclusive of Kioxia, Toshiba's valuation enhancement. The payout to shareholders, how could that happen? The profit that you'll be generating, do you think that this would be kind of contributed to the shareholders?

Speaker 2

As of now, as you have understood, the valuation profit or loss, or even if it was to be a gain on sales, it will be remaining at Toshiba. Therefore, there will be no kind of payment being made to us on a cash basis. From Toshiba, as a result of the sales, if there was to be a return, and if we are in receipt of the cash, some part of it will be made use of as a source of payout to our shareholders, and especially if it is a capital gain. We would use part of what we will be receiving for the shareholders' return. This is something which is not under our full control. This is why I'm terribly sorry, but our explanation remains to be pretty ambiguous.

Speaker 7

Okay, understood. If this is the case, if you were to sell Toshiba's shares, if you were to sell Toshiba's sales, would it be included in this payout?

Speaker 2

Anything that is non-cash. Because there is such a fluctuation. Even today, it's adjusted. This is the policy.

Speaker 1

Thank you very much. That's very clear. Thank you. UBS Securities, Niwa-san, please ask your question.

Speaker 2

Yes, this is Niwa, UBS Securities. I have a question about new investments. I am looking at page 10. Probability of achievement for the annual plan, including FM, JPY 200 billion quarter. Maybe this is in line, but it also looks like it is a slow start. The market is quite strong. Perhaps you are struggling with the generation or you are waiting for the market to change. Can you please give some color to this? We have a pretty rich pipeline. As you have said, valuation range is quite high in some of the sectors. Therefore, we will be, of course, continuously active. We also need to implement financial discipline at the same time. Rather than hurrying to make the investments and focusing on the amount that we are investing on a quarter-by-quarter basis, we really want to focus on doing something that is effective.

Speaker 2

We are being selective when we make investment decisions right now. I do not think it is right to consider that the pipeline is weak. I see. Thank you. I would like to add some comments. JPY 300 billion coming in. For this particular quarter, we are recuperating less than investment, but this is according to our plan. If we do more exits toward the end of the fiscal year, that would be problematic for the stability of the performance. SUGIKO was sold and also ORIX Bank Corporation closing is second quarter. We will be reinvesting the profit coming, proceeds coming from that, which means that within one single year, it looks like the new investments are being delayed. It just looks like that. For the flow that we have the visibility, like MGM Osaka, time lag is not a problem.

Speaker 2

Real estate and aircraft investment and MGM Osaka related investments. As Yamada-san mentioned, we also have a PE investment market situation. Because of those, there is a trend or tendency that more of them will happen toward the end of the fiscal year, but this is within our expectation. JPY 800 billion. Well, if we tell everyone that we can spend as much as they want quickly, they would spend everything at once. The investment committee is being very selective. Under the leadership of Takahashi, we have started discussing all the potential investments pretty deeply from the beginning. We have very strong pipeline, rich pipeline. We need to be clever in buying them at advantageous prices. We are looking forward to showing you the outcome of these efforts. Can you give us some color, please? JPY 800 billion for this year.

Speaker 2

Domestic versus overseas, how do you think it will finish? Well, mostly IR. Well, because of IR, there is more focus on Japan. Do you have any items that are within scope for the domestic market, and can they give an impact in this fiscal year? Well, IR day in London, we provided more of a long-term perspective at that meeting in regard to private asset context. For this fiscal year, it is not so much about private asset, but real estate and also PE investments within the existing business. As a result, investment amount in Japan will have a higher percentage. Well, in IR day, I think we were talking about a different asset class, that is expectation over the mid to long term. I understand it better now. Thank you. The floor is open for questions.

Speaker 2

If you have a question, please click the Raise the Hand button, which can be found at the bottom of the screen. If there are no further questions, we would like to close the Q&A session. We would like to receive closing remarks from Yamada-san. Thank you very much for joining us today, and we received various questions, including Kioxia's volatility. I understand that this fiscal visibility is somewhat weaker, but we will look at the changes, and we will do our best to update you on a timely basis and stay in communication with all of you. Thank you very much for your support, for your continued support. That concludes the Q1 earnings call. Thank you very much for staying until the end of this call.

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