ORIX Corporation American Depositary Shares

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.

I'm Inoue from Oryx. I would like to start from page 7 of the handout. So FY23 March net income was down 12.5% year over year to 273.1 billion yen. EPS came in at 232.35 yen. So for the fiscal year ending March 2023, we will pay a dividend of 85.6 yen per share, same as the prior year. So end of the year dividend, the second half dividend, in other words, will therefore be the same as the first half dividend at 42.8 yen. Taking into the account 50 billion yen worth of share buys back, OREC's total shareholder's return ratio will be 55.2%. Unfortunately, FI23 March ROE was 8.3%, below our 10% target. We will continue to, however, to work to fulfill this target. Now, last March, last May, when we made the announcement of FI25 March net income outlook of 440 billion yen, however, we will need to revise this figure downward in light of current market conditions. We now focus FI24 March net income of 330 billion yen and revise downward our FI25 March net income target to 400 billion yen. Now, as a result of this downward revision, ROE will be Q% in 24 March end and the 10.4% for 25 March end. So for 24 March end, the shareholders return, we would maintain 50 billion yen worth of shares buyback and the DPS of 55.6 Japanese yen per share or payout ratio of 33%, whichever higher. So I would like to further explain, referring to the three pages of 6, 7, and 8. And firstly, let me briefly discuss 23-month change results. So firstly, let me discuss the primary reason for FY23 March net income of 273.1 billion yen. As mentioned at the first half results announcement, COVID-related payouts expenses, particularly for patients isolating at home, had a substantial negative impact on the life insurance segment, a change in eligibility requirements in September 2022, led to a decline in COVID-related payouts expenses in the second half. But this factor brought 20 billion yen worth of increase in costs for the whole year. And secondly, profits at Oryx USA fell by $200 million for the full fiscal year against our initial target due to an increase in credit costs, a slowdown in agency-related transactions for affordable housing, and for other reasons. As I said, it was below by $200 million U.S. dollars. in addition management fees fell by 160 million euro owing to lower aum at robeco group which also had a direct impact despite the profit the contributions from the domestic real estate auto ships and environmental energy segments and the boost from the weaker yen overall profits were down unfortunately year over year On a brighter note, we foresee the Kansai Airport's concessions business and real estate operations boosting earnings in FY20 for March, thanks to a strong recovery in inbound tourism following COVID reopening. The aircraft segment is still on a recovery track. However, higher Eurozone and U.S. interest rates have led to an increase in hedging costs, meaning it will take some time longer before this business contributes significantly to profits. Meanwhile, the outlook for financial markets, including U.S. real estate, is becoming increasingly uncertain following turmoil in the financial system caused by failure of Silicon Valley Bank and the Credit Suisse. Whether the authority will move to prioritize inflation control or stabilization of financial assets system and uncertainty remains to be seen. Many regional banks have unrealized losses on their commercial real estate portfolios which could lead to credit downgrades, a rapid increase in interest rates and a collapse in the real estate market. So a vicious cycle may start, we think. So experience tells us that financial authorities will most likely search for soft landing. Nonetheless, given RXUSA's position in the U.S., we feel the necessity to prepare for a possible increase in credit provisions and funding costs. For FI24 March and beyond, we will continue to execute our business with a focus on conservatism and defensiveness until conditions settle down. In FY22 March, Oryx USA reported record high segment profits of $715 million, but this figure fell to $422 million in FY23 March. Inflation continues to rise despite a higher Fed rate, which unfortunately drew attention to the negative effects of tighter monetary policy. We have thus judged that it would not be in Oryx's best interest to anticipate strong growth in this business for some time. Against such a backdrop, we have moved to both strengthen management functions and securitize Oryx USA's assets. Our ultimate vision for this business is to build it into a specialist asset-like manager utilizing third-party assets, and thus it may take several years before it can achieve major profits. For the near term, although it depends on the deal, we don't plan to grow the U.S. business through M&A unless it is an investment that will contribute to the asset management business. It is for these reasons that we have decided to both lower our FI24 March net income to 330 billion and FI25 March net income forecast to 400 billion. It goes without saying that our internal targets, I think, would remain at 440 billion yen and that we would endeavor to exceed these goals. Please see a breakdown of FI23 March net FI24 March and FI25 March pre-tax profits by category. Now for FI23 March, overseas profits accounted for 43.2% of the total, but we expect this to go lower to 40.80% for FI24 March owing to inflation and interest rate hikes in the U.S. as well as rising energy costs in Europe. This said, with a renewable energy business expected to contribute more dramatically to overseas profits from 2025, and a likely recovery in the U.S. economy within several years, we will continue to carry out activities with a vision to expand our overseas businesses going forward.

Please turn to page 10. In FY March, OREC's continued program of capital recycling... We realized around 60 billion yen in gains on the sales of slightly more than 200 billion yen in assets. including part of a stake in OMAC Technologies, while acquiring 470 billion yen in new assets in the private equity, DHC real estate development and other businesses. While new asset purchases have also been dominant in FY23 March, we will continue to manage our program in a balanced fashion in FY24 and onwards. IRI, ROA, ROI and RE will be used to assess the new investments and exits. In addition, the impact on the balance sheet, PL and asset efficiency and risk adjusted to the capital ratio, also important metric for credit rating standpoint. We do calculate segment level WACC and ROIC, but this is only employed as a method of supporting internal managerial accounting. This said, we believe that ROIC is not an appropriate fit for accurately calculating the future potential of investment projects for all the diverse business segments. For this reason, we have decided not to disclose ROIC value for each segment at this time, but will continue to manage each business unit in a way that considers the capital cost of both debt and equity. Please turn to page 11. Our investment pipeline for domestic and overseas projects now totals at about 1.5 trillion yen. Our domestic pipeline includes the development of logistic centers and condominiums, as well as private equity deals such as carve-outs. Although we need to carefully monitor conditions such as changes in interest rates, we plan to move ahead with carefully selected projects. For a domestic logistics center and a condo development project, we expect to realize a developed NOI yield of 4% or higher range centered on urban locations such as Tokyo and Osaka. For domestic private equity, our basic plan is to pursue projects which can guarantee an IRR of 15% to 20% over a 5-7 year holding period. for investments in renewable energy overseas. With both interest rates and construction costs rising, we will only carry out projects where we can ensure sufficient arbitrage and will realize certain exit strategy. Please turn to the next page. On April 14, the Minister of Land, Transportation and Infrastructure approved the Osaka MICE-IR project bid, spearheaded by MGM and Oryx. We now have 90 days to sign an agreement with Osaka Prefecture and City And while there are uncertainties and issues remaining, such as detailed design of the facilities, as well as soil remediation and refueling measures, we are proceeding based on the assumption that these issues can be resolved. As we move towards an opening in 2029 or later, adjustments may have to be made for construction costs and the Osaka Expo, but we are aware of the importance of carefully monitoring construction costs and schedules. We have heard that several lawsuits to stop work on this have been filed, but we hope to contribute to sustainable growth in the economy and tourism of Osaka and Kansai region. Regarding Toshiba, a takeover bid contract has been signed between JIP and Toshiba. Antitrust filings will be made in each country and we expect the TOB procedures to begin in late July. While we cannot disclose certain details due to the fact that this is a TOB procedure, Oryx plans to supply 100 billion yen to mezzanine syndicate loans funded by banking group and also to invest 100 billion yen in equity as limited partner. we decided to participate in the GIP consortium based on a positive evaluation of Toshiba's corporate value and executability of the management improvement plan. Although this is positioned strictly as financial investment that will depend on GIPs, management ability, we will strive towards the promotion of a new management structure and achieving improvement in corporate value through communication with JIP and will consider exit strategy following achievement of these. Please turn to page 13 to 14. Regarding progress in ESG-related measures, after expanding our TCFD scenario analysis and moving forward with measurements and disclosure in key areas such as Scope 3 GHG emissions, water usage, and water waste volumes, we have seen improvements in both our ESG ratings and our standing in the annual NIC-SDG survey. In December 22, Oryx was newly added to the constituent to the FTSE Blossom Index, and now it is included in all of the ESG indices utilized by the GPIF for domestic stock allocation. We are preparing a survey and risk analysis regarding human rights protection, and we are also creating an integrated report that features more detailed sustainability information. Going forward, in addition to continuing activities that will further develop an understanding of our accessibility promotion direction among all employees, we will also be raising awareness of human rights across our supply chain, improving our sustainability policy, enhancing our non-financial disclosures. In addition, In order to promote achievement of our key ESG-related goals in FY24 March, the nominating committee is considering measures which will include ESG-linked performance metrics in bonuses for internal directors and some executive officers. We will announce these metrics externally as soon as the final decision is made. Finally, On page 15, on March 31st, 2023, the Tokyo Stock Exchange has recently directed listed companies to make action plans if their shares are trading below PB of 1.0 times and to promote discussion with shareholders. From past results, it's clear that ROE and price to book are clearly correlated. From this perspective, improving ROE will, more than anything else, lead to higher share price. Thus, outlined before, we will make maximum efforts to lift ROE to 11% or above. And we will also work to improve disclosure methods to investors. That's all from me. Thank you for your attention.

Thank you. We are now ready for the Q&A session. If you wish to ask a question, please press the star key, then press 1 on your telephone keypad. After your name is announced, please ask your question. If you wish to cancel the question, please press the star key, then press 2. If you wish to ask a question, you may ask up to one question. Thank you. So first of all, Mr. Watanabe from Diver Securities. I am Watanabe from Daiwa Securities. So I'm referring to page 7, and that is to do with your shareholders' return. So the 33% plus, I think, is the payout ratio that you're indicating. May I take it that this is your target? And also, at the same time, With regard to the capital policy, upon this guidance which was provided from the TSE, is there any kind of changes? So you have quickly identified, although we had kind of roughly indicated this number. As a result of the benefits that would be cancelled, that has been provided to the shareholders, we thought... that some of the shareholders may decide, the retail shareholders may decide to apart themselves from our shares. Although the amount that we were spending on this shareholder's benefit will be allocated, the cost will be allocated to the payout of the dividend. And if we can achieve 400 billion yen of net income, I think it would require us to increase the dividend in a way significant manner. So we hope that we'll be able to pay out more than what we had indicated as a target. So we hope that it will be above 33%. So you can perceive it to be 33% plus. Thank you. Thank you very much for that.

SMBC Nikko Securities, Muraki-san, please ask your question. Thank you. 330 billion this year and 400 billion next year. These profit forecasts give us some sense of ease. But inflation and the banking crisis, how does it impact the banking business for Oryx, both in Japan and Asia? the United States. On page 8, you're saying that PE will be mostly focused in the domestic market and some asset management acquisition may happen overseas. I think that is a policy that you're indicating. And on page 10, there are many keywords. Cost increase, procurement environment worsening, and also credit is tightening and off balance. There are so many different keywords here. And my question really is, in the existing business, What are the concerns about exposures for specific businesses? What kind of scenarios do you need to get ready for? And carve out as well as an investment into NPL or equity or credit could be maybe provided for risk opportunities. And how do you see those opportunities? As far as Japan is concerned? We now have a new governor of BOJ, but the policy will remain the same. That is my expectation. So zero interest rate for Japan may increase slightly, but we believe that it is going to be manageable. So as far as Japan is concerned, we will not be changing a policy very much. In other words, we'll be investing into new projects actively, and also overseas investors will are still planning to invest newly in Japan as well. So we want to actively promote capital recycling. So I have not a big concern for the Japanese market. Oryx USA would be the biggest concern. Last year, from October and November, the situation became more tight in terms of a new investment. In other words, we have been very careful in selecting new projects. so more than 700 million yen in FY22. And in the end, we could secure profit of over 400 million, so it was fine. But if we want to increase it to 700 or 800 million dollars, then it would be too risky, especially for USA. Private credit. In other words, lending is the mainstay. So as the interest rate goes up, there's a high risk in implementing loans. So we have basically slowed down the whole process. So for FY24, contribution to profit is only about $400 million maximum. And, of course, allowance for doubtful debts will have to be increased or has to be considered to be increased. And bank loans, if this is stopped or slowed down, well, non-banks like us can continue to lend money, but the target companies will face... financial challenges, in which case we cannot really lend to those targets. So we have to continue to be cautious. So contribution of a profit from the USA is going to be quite small. That's how we plan the numbers. But if the banks stop lending and the regional banks stop lending, and the banks start to sell assets and asset sales has increased, what would happen is, as we saw in the case of aircrafts and ships, banks started selling the portfolio in aircrafts and ships from about two years ago and we are purchasing at a discount basis and for aircrafts and ships we have increased exposure for example average coupon is libel plus 350 loan to value and of the asset is 50 for example so these um Purchase of loans are very safe, and we have many opportunities such as that. And we expect Oryx USA to go through a similar process. Heavy asset financing and against those markets are providing offers to us to sell. So depending on the content, we may consider to purchase. And loan-to-value, of course, has to be kept low. And pricing has to be aligned with what we want. And we now have an opportunity to be selective. So we expect such opportunities. You store the funding cost will have to be also taken into account. And finally, how much profit or revenue can we generate from each deal? Well, it's not really liable, but so far recently, but the 600 or 700 so far deals will definitely appear. So we believe that this is another type of opportunity that would be available to us in terms of scenarios for this year. Centered on Japan, we will be building good assets and we will promote sales centering Japan. As far as the USA is concerned, asset management business is currently the focus. But the U.S. market, actually some asset managers are struggling already. which means that it will push the prices down, and at lower prices, we should be able to purchase things. So private credit deals will appear, as I have mentioned earlier. So based on this kind of assumption, for the second half of this fiscal year, as well as next fiscal year, we will continue to deploy our business. I hope that answers your question.

Yes, that's very clear. Thank you very much for your answer. Thank you. Thank you for the question. So from Mitsubishi UFJ Morgan Stanley, Tsujino-san, please. Thank you very much for the opportunity. And the first question that I'd like to ask is with regard to the business in the United States. I want you to answer in more specific terms. I know that you are remaining pretty cautious on the commercial properties in real estate asset, but the exposure that you may have directly So how much of what would you mind sharing in more specific terms as to what you own currently? And one other thing that I would like to ask you. So this time, by segments, if you were to look into the details, it looks as if environmental energy may not be particularly good for a seasonal reason, winter, in other words, and also Robeco and in Europe, that is. So interest rate, the cost is rising. So at the time of acquisition, the... And so the cost of acquisition may have been affected because of the interest rate hike. That was my assumption or imagination. And so it is in the United States as well, I imagine. So... So there are quite a number of negative factors that I need to dig down into. So therefore, environmental energy and also European business. So if you are to dedicate more effort in the next year, what do you think about the business to develop this year as well as the next? So you have asked me a lot of questions. So if you could refer to page 35, Oryx USA, credit, real estate and PE and segment profit assets breakdown. And so the real estate asset is mostly affordable housing. And via NXT, we do have commercial real estate, but the loan-to-value is pretty low. So mostly we're participating in the syndication. So therefore, in terms of the value, $3,350 million it says in the real estate, but out of which... So more than $2 billion is housing-related, so we're not impacted very much. As to the rest of $1 billion, NXT's syndication, we are participating via NXT's syndication. And so as to the appropriation of the loan losses, the reserves, we are not appropriating any reserves yet. But we are remaining to be cautious. Now, with regard to credit, they are all private credit. So therefore, there are like two to three deals that may perhaps aggravate and that may, of course, raise the credit cost. And this is why we are adding the reserves amount. But as to the private equity, it is a small amount in any case. But for these, we would continue to up and run the business. And the operation has not deteriorated yet. But as to the companies, the cost of borrowing, of course, is rising. So we need to, of course, manage this well. And as to Robeco... It goes without saying that as of now, AUM, in fact, is on the decline. However, we are making positive profit from TransTrend and also Boston Partners, Robeco, Anahaba Capital. So we have these major subsidiaries. TransTrend is focused on commodities. So they have been posting record high, and we should be able to do the same this year as well. Whereas Boston Partners, up until now, they were very much value-focused. And the value focus was not particularly good in the past, but the value investment, in fact, is gaining profit. So, therefore, I think we can perform better. And Gravis Capital is struggling, but we are, in fact, going to be changing the active ETF, the AUM. In fact, it's on the rising trend, expanding trend. So from the latter half of this year, we are hoping that we'll be able to generate positive results. And also from the mutual fund, Robeco, that is, we are now trying to convert to active fund. And the private credit fund is also to be formulated or formed. And so therefore, there should not be very much of an undershoot. So all in all, I think it is on the upper trend. And what was the other question? And that is to do with the energy and environment. So if I may perhaps add to, this is Yano, and with regard to environment and energy, just as you have pointed out, there is something that I need to make a note about. There is some seasonal factor, especially in India, that may affect our businesses in a significant manner. But in the domestic market, the solar power business is, there was some snow that had affected our business in a negative way and we had to carry out some construction works but we decided not to overstretch ourselves and this is why we have decided to impair some amount although it is not significant but rather than repairing it so therefore in a very short time period it looks as if our environment and energy in fact has in terms of their performances, but that is not the case. So the first quarter, we do expect the recovery to take place in the segment. And as to Elevan, as a matter of fact, electricity, of course, price is rising. So therefore, the earnings, in fact, is on the trend of improvement. Yes, for sure. This is Yano again. And Erawan, I think Tsujino-san, I think you're asking about the quarterly trend, the changes that is for the negative. But Erawan, in fact, was boosted and then it may have come down. But Erawan overall is enjoying a positive trend. And what was the other question? I think that answered to all the questions. Yes, that is all. Thank you. Thank you very much for answering to my question. Thank you.

UBS Securities, Okada-san, please ask your question. Yes, this is Okada from UBS Securities. I'm looking at page 11. 25 March, consolidated results forecast. profit plan was actually revised downward but domestic non-financial and overseas others actually the profit plan is increased so if possible can you please talk about the forecast of the plan and the background of why you have increased the profit which segment is strong so on and so forth thank you thank you FY25 March numbers. Well, you only see one number actually. But simply speaking, I could say that overseas, environmental energy and aircraft and ships are expected to grow. And excellent ships, this is mostly aircraft, including Avalon. And going forward, we know that there's going to be some movements around narrowbody and also south new fuel. Because of this impact, new model of aircrafts will be introduced. So there's going to be cycling. And also, Joko for Japanese investors are receiving a lot of inquiries about Therefore, we believe that we can expect strong growth. That's our plan. For OCU and OCE, in FY24, the assumption is hardly any growth. But this is the U.S. So once the recovery happens, it would happen very quickly. So around FY25, we expect new investments happening, especially in the United States. And as for 25 March, private equity assets that we own will be sold in 24 and 25 gradually, and that is also the background for this number. I hope this answers your question. Thank you. Just one follow-up question. Overseas energy segment forecast was revised upwards. What is the background of this? Is it energy prices or is it because of the asset building on your side? As far as Elowan is concerned, in the beginning of the fiscal year, we basically decided to own 100%. And by doing so, we removed partners. In other words, we now have a higher degree of freedom. And the solar power and wind farm developed by Elowan can be turned into funds. and we can incorporate third-party money, and we can increase this. And there are many projects in place. And also, pension fund, ESG investments, many investors are keen to increase that, which means that we can be more actively promoting investments. However, interest rate is going up. Construction cost is also up. So we have to look at this very carefully and find deals where we can get arbitrage and capital gain. And if that is the case, we will be actively doing those deals. As for Greenco, there is the hydropower and also hydrogen as well as ammonia. And these will be developed around green coal. And this is all brownfields. So we believe that they can start contributing to profit starting from FY25. That is the assumption behind this number. That's very clear. Thank you.

Thank you for the question. From JP Morgan, we have Sato-san asking the question. The next. Thank you very much. I am from JP Morgan Securities. My name is Sato, and I'd like to ask a question by referring to page 47 of the deck, and that is to do with the capital... usage and I think I have been asking the question sometime before as well and so 91% was the ratio of the long term but employed capital ratio has it been bringing about any kind of impact or do there be any changes in the future and And so the risk-taking, I know that you remain to be cautious, but the risk capital may increase. But on the other hand, the shareholders' equity, on the other hand... And I'm sure you're referring to the capital from the accounting perspective. If the interest rate hikes embedded value, even if it was to be kind of added, I think from an accounting perspective, it could turn to negative. And also, at the same time, it may bring about some negative repercussion. So therefore, I think you may perhaps use up some of the retained earnings, and therefore that may perhaps affect you, and therefore the employed capital ratio may go beyond 91%. So would that give any kind of impact in terms of the capital management? Yes. So if it starts to kind of impact the capital management, it means that we may have to slow down some of the new investment, execution of new investment. And to be very frank with you, so as to the funding side, we do not foresee any major risk. That is not in our assumption. But sometime in the future, As we have been saying, our equity ratio of 22%, 23%, and it may reach to 25%. And this equity ratio, what is regarded to be appropriate is what we need to think about. And also bank borrowing, at the moment, we have no issue. But what concerns me is the Euro-denominated or U.S. dollar-denominated funding ratio. whether it would proceed in the smooth way as it has done so in the past or not. So we have to take that into consideration. And as I have been saying, I think we have to proceed with this capital recycling effort, and that there's no way that we can continue to build up our asset as we have done so. So it is currently about $11 trillion, and I think... it is about the total of 14 trillion yen or so, and PBR would be 1.5 times, which means that we may have to consider third-party allotment. So even unless we reach to that extent within the 12 trillion yen of an asset, I think we would have to just enhance the profitability and the borrowing ratio, the debt ratio should be maintained. So that is our basic policy. Dependent on the project, though, the deal, though, it may perhaps bring about a kind of further aggravation, but I don't think it will be the case. So I hope this answers the question. So listening to you just now, at the end of the day, I know that you would try to strike the balance by referring to different numbers, but if you were to think about the capital in light of the risk, what you need to do on the capital side, the risk control, I think, comes first, I suppose. And on the other hand, you may perhaps increase the retained earnings, which may perhaps put a pressure on the payouts. In other words, So that may perhaps be the kind of the last resort kind of strategy. That is true. But, you know, everything is kind of interrelated. So I will not be able to give you a straightforward answer. But I think we would have to refer to ROE after all, because if we can raise that to the level of 11%, we would have to exert our effort to bring it up to 11%. And but by, you know, of course, increasing the retained earnings, the ROE would be lower. So this is why we have to strike the right balance. And if there was to be any kind of new deals, a new project that is attractive, there may perhaps be a case whereby the shares repurchase may be carried out. But we are still trying to achieve what we had intended to. And so therefore, you know, we you know, this is our idea to the return earnings level. And also as to the borrowing, there may perhaps be the repeat of the global financial crisis. Who knows? So therefore, I think we need to keep a right balance between offensive as well as defensive attitude. I suppose I don't know whether this answers your question, but as of now. I think you have given us the best possible, I think, answer. Thank you. City Group Securities, Mr. Niwa, please.

Yes, this is Niwa. Can you hear me? Yes, we can hear you. This is not about the earnings, but more about the long term. 2030 March, 600 billion level of profit. That is the ultimate target. And I think 25 March is just a milestone. 400 billion was just a milestone. That was my understanding. And there are some environmental factors too, but you're struggling maybe to achieve 400 billion yen, which is just a milestone. So 600 billion or higher, is this still your target over the long term? And I understand that overseas may be a growth factor, but... Is it really true? And 25 March, which is supposed to be a midpoint or milestone. I understand what has happened until then, but what about beyond 25 March? Are you going to revise downward or maintain the original target? Or is it too early to say? To be honest, I don't think this is the right time to talk about that right now. 2030 is seven years more to go I'll be dead by then in other words the next generation of leaders will have to make the commitment I don't want to leave my wrong legacy assets so I don't want to say the wrong thing but right now we are opportunistic in participating in all the different types of segments and we are not necessarily successful as a board but generally speaking we are maintaining growth and compared to 10 years ago we have grown a lot And we want to maintain this trend going forward. And right now, environmental energy and overseas markets, as well as asset management, are in our focus. We want to grow them. But several years down the line, maybe we will focus on a different segment or different area. because they will emerge, and we want to capture this opportunity in a timely manner. We want to be able to do that, we want to have the capability for that, and also funding to be able to do that. So 400 billion yen is just a milestone for us, and if possible, we want to achieve 600 billion. We're not really a trading company, so it's really difficult to say that we can achieve 1 trillion yen easily, but 600 billion is definitely within our sight. We have not really revised that downward. Very clear. Thank you very much.

Thank you for the question. It is almost time for us to conclude this session. It looks as if there are no more questions, so we would like to conclude today's conference, and I would like to invite Mr. Inouye to provide us with the closing remarks. You know, because of COVID, and I think it's been four times since we have been carrying out this briefing session in this way, teleconference, in other words, we would very much like to perhaps hold a session in a in person manner and I'm sure we'll be receiving much tougher questions if we were to meet you in person but still we look forward to seeing you then. So with this we'd like to conclude today's briefing session. Thank you for your participation and you may now disconnect. Thank you so much. Thank you.