ORIX Corporation

Good evening, ladies and gentlemen. Thank you for joining this telephone conference by Oryx Corporation for Consolidated Financial Results for the fiscal year ended March 31st, 2023. From RR Sustainability, my name is Nakane. I'm the master of ceremony today. Thank you for this opportunity. We have two attendees today. Makoto Inoue, member of the board of directors, president of executive officer and CEO, and Hitomaru Yano, executive officer responsible for accounting and IR. Before we begin, we have a request for the participants. In order to prevent feedback, if you have a telecommunication device such as a mobile phone, please turn it off or move it away from the telephone. Mr Yano will take the first half, and the second half will be taken by Mr Inoue, followed by Q&A. We expect the duration of the meeting to be approximately one hour. Mr Yano, please.

Good evening. This is Ito Maruyama, Executive Officer, Responsible for Accounting and Treasury and Investment Relations at OREX. Thank you so much for joining us today despite your busy schedule. Let me start by giving an overview of FY23 March end results. Please turn to page 2. Net income fell 12% year-over-year to 273.1 billion yen for FY23 March. It was disappointing to see earnings decline, but we substantially exceeded our forecast of 250 billion yen announced on November 7. ROE was at 8.3%. The right-hand chart shows quarterly trend in net income. fourth quarter net income was 61.7 billion yen. Investment gains and asset management fees from Oryx Europe fell as compared to the third quarter. As we booked some impairments in the fourth quarter, growth was less evident than in the first quarter and the second quarter, but progress in reopening has helped a solid trend for the quarter. Please turn to the next page. This is a breakdown of segment profits. Segment profits totaled 381.3 billion yen, down 28% year-over-year. Please look at the left-hand chart, which shows trends in segment profits. The light blue bar indicates investment gains, while the dark blue bar shows base profits. Base profits fell by 13% year-over-year to 297.8 billion yen, while performance among segments varied. But overall, we were able to secure stable base profits despite... an opaque operating climate. I will go into further details later. The light blue investment gains were down 55% year over year to 83.5 billion yen owing to the absence of last year's substantial gain on the sales of Yayoi. Oryx typically books investment gains of around 100 billion yen each year. Even in a tough environment, we were able to continue our effort of capital recycling and maintain a level of investment gains mostly on par with that of a normal year through the partial sales of our OMAD stake and logistics centers. Please turn to page four and five. These are segment earnings. Here we have broken down segment profits and assets by segment. This will give you a broad view of each segment, and the details can be found from page 18 onwards in the presentation deck. I'll focus on the overview for now. First is the corporate financial services and maintenance leasing segment. Segment profits reached 73.2 billion yen, excluding the sales of Yayoi booked last fiscal year profits were up. The auto business unit reported profits that surpassed FY23 to March, which was a record high, bolstered by continued strong markets for used cars and the recovery in rental car demand from pandemic lows. In the corporate financial services unit, fee income was strong and demand for rental equipment at Rentek is growing. For segment assets, while assets in the auto unit fell owing to a shortage of new vehicle supply, assets in corporate financial services increased as the unit selectively added new deals. Overall, assets were almost flat year over year. Next is real estate. Segment profit rose 19.5 billion yen year-over-year to 51.5 billion yen. The development and rental unit posted profit growth fueled by sales of logistics facilities primarily to overseas investors. And... with at the specific operation business hotels and ins both occupancy and average daily rates recovered sharply thanks to recovery in inbound tourism and national travel support campaigns the daikyo unit also posted higher profits year over year segment assets were up 24.9 billion despite property sales offsetting some new investments next is pe investment and concession segment profits improved by 14.3 billion yen year over year to 2.6 billion The private equity business in Japan was in the red last fiscal year owing to Kobayashi Kako-related losses, but an end to measures related to the business and strong performance of current investees helped the business return to the black, despite booking due diligence costs related to the recent DHCC acquisition in the fourth quarter. In the concession business, passenger numbers are growing on both domestic and international flights, helping losses to shrink. According to data recently released by Kansai Airports, passengers on international routes exceeded 1 million for the first time in three years. Since February 2020, on a single-month basis in March 2023, domestic routes also reached 2.35 million passengers, 99% of March 2019 level, showing the strongest recovery to date since the start of the pandemic. Inbound tourism should begin to recover in earnest as Japan significantly reduced travel restrictions for Chinese tourists last month. Earnings from the concession units are reflected in group results with a three-month lag, so we expect considerable growth in profit for this business in FY24 March. Segment assets were up 251.9 billion yen year-over-year as a result of the acquisition of DHC and Hexaworks that offset the sale of NetJapan.

In environment and energy business, segment profits were up 32.6 billion to 35.7 billion. In addition to the partial sale of a stake in geothermal energy company OMAT, higher prices in the electricity spot market At Ella One, which became a fully consolidated subsidiary in Q4, and other firms led to growth in revenue from power sales. Domestic energy, the solar power business also saw higher revenues. Segment assets grew substantially owing to changes in forex and additional stakes taken in Ella One, up by 70 billion yen versus end of the Alpha 22. In insurance, segment profits were down 15.3 billion to 38 billion yen. Rising infection rates for COVID earlier in the fiscal year resulted in an increase in COVID-related payouts, causing a major drag on earnings. However, changes implemented since last September means that only patients at high risk of serious complications are eligible for policy payouts. for isolating at home, and payout-related expenses have since peaked and declined as a result. Japanese government's classification of COVID as a Category 5 infectious disease from May 5 means that policyholders are no longer able to make claims from hospitalization insurance policies for in-home isolation regardless of the risk. For this reason, we expect the COVID-related payout to decline dramatically going forward. Although segment assets were down due to lower variation of market-to-market assets affected by higher interest rates of the US dollar and Japanese yen, liabilities' market-to-market value also declined, and therefore there's no problem. In banking and credit, segment profits were down 3.9 billion to 37.6 billion. In banking, profits were down owing to the absence of a year-earlier one-time profit. Earnings from investment real estate loans remain high and healthy. Credit business posted a decline in profits owing to aggressive advertising to support the launch of the new Oryx Money product. However, this is in line with projections and loan balances are steadily increasing in this business and guarantee business is healthy. In aircraft and ships, segment profits were up 20.9 billion year-on-year to 18.6 billion. Aircraft and ships reported strong profit growth year-on-year. Lease revenues rose in the aircraft leasing business, primarily in North America and Europe, but also supported by the delayed recovery in the Asian passenger market. Service revenues from arranging various securitization vehicles among string investor demand was also positive. Avon posted Q1 23 earnings announced at the end of April, up 36% quarter by quarter. While the firm posted losses at the segment profit level owing to funding costs charged to investment to Avalon, earnings are improving on a market recovery. Ships' unit profits were up sharply, aided by sales of owned vessels during periods of strong marine shipping prices and higher contributions from financial revenues from ship financing deals. Segment assets were flat year-on-year, excluding changes in forex as sales of vessels was offset by an increase in aircraft acquisitions, primarily narrow-body aircraft. And we continue to rotate portfolio, and we will take a close watch on market conditions. Profit fell sharply at Oryx USA, down 26.6 billion to 49 billion. compared to FY22, when the segment booked record profits owing to changes in the macroeconomic climate. There were fewer P-exits and origination fees of looming. A mortgage orientator was also down. We maintain disciplined risk management at Oryx USA and have taken conservative stance on new investments. Segment assets appear to have increased on yen basis, owing primarily to changes in forex. But we are controlling the size of the asset base and dollar denominated assets are down slightly. Next is RXU. Segment profits were down by 8.7 billion to 40.7 billion. Starting in the U.S., interest rates have risen globally, fueling fears of a recession, which led to a retreat in both equity and fixed income markets. This caused AUM to shrink and profits to decline. Net inflows turned positive, however, in the fourth quarter, and AUM has increased. Last is Asia and Australia. Segment profits were down 16.8 billion yuan a year to 34.3 billion yen. Profits were lower owing to the absence of investment gains booked last fiscal year and impairments of an affiliate booked in the fourth quarter. As reopening progresses in Asian countries, new business execution is rising steadily in Australia, South Korea, Southeast Asia, as well as in India. Segment assets grew sharply owing to changes in forex and new executions. And this is going to be my last slide. Please turn to page six. I briefly went over results in different segments, and this graph explains FY22 results versus this fiscal year. Our CEO, Mr Inouye, will explain more in detail that there were strong and weak performance among various segments during FY23. Some segments like Insurance, Oryx USA and Oryx Europe posted lower profits owing to COVID and rapid market changes. Meanwhile, some businesses benefited from COVID-related reopening and did well. Focus areas for Oryx such as Overseas Renewable Energy and MCPE also grew. Auto in the maintenance leasing segment and facility operations were also strong performers. We expect the insurance segment to rebound in FY24, and segments that grew and recovered during this fiscal year should achieve further growth. For these reasons, we hope to secure profit growth in FY24 and 25. That's all from me, and now I would like to hand over to Mr. Inoue, our CEO.