ORIX Corporation

It's time to begin the meeting. Thank you very much for joining us for the 12th Conference of Oryx Corporation for Annual Results for the Consolidated Fiscal Year ended March 31st, 2024. My name is Nakane from the Investor Relations and Sustainability Department. I'll be the Master of Ceremony today. Thank you. The attendee at today's conference is Mr. Inoue, member of the board of directors, representative executive officer, president and chief executive officer, and also Mr. Yamamoto, operating officer responsible for investor relations. As we begin, we would like to request all the participants to make sure that any mobile phone or other communication devices nearby would be either turned off or be put far away from the phone in order to prevent feedback. We will first of all hear from Mr. Yamamoto, and then followed by explanation by Mr. Inoue, and then Q&A session. The whole program should take approximately one hour. Mr. Yamamoto, the floor is yours.

Thank you for the introduction. I am Kazuki Yamamoto, Operating Officer in Church of Corporate Planning and IR Departments. I'd like to make use of the deck in front of you to provide you with FI24 merchant for year earnings briefing. So please turn to page 2. So the right-hand side of page 2 shows Oryx's record high profit for the year, FI24 merchant, with net income of 346.1 billion yen. And this is a year-on-year increase of 55.8 billion, up 19%, ROE rose to 9.2%. Now, quarterly trends in net income is shown on the right. Q4 net income was 126.9 billion yen. This is OREC's highest quarterly net profit figure to date, even higher than the 22 fiscal year March end when we sold Yayoi. Profit was boasted by investment gains from the sales of partial stake in OREC's credit and excess from domestic PE investment. Please stand to page 3. Segment profit rose 22% year-over-year to 494.2 billion yen. As shown on the right-hand quarterly graph, FY24 March end ended tail heavy in terms of exit as initially forecasted. In other words, we were able to maintain a consistent uptrend in base profits and investment gains over the fiscal year as a result. Next, please look at the full year graph on the left-hand side. Base profits were up 14% year-over-year to 367.6 billion yen, which also represents a new record high. Profit recovery in the facility operations and concession business, thanks to higher inbound tourism as well as growth in investment income in the insurance segment, were the main reasons behind growth in base profit. The light blue investment gains were also up 54% year-over-year to 126.5 billion yen, while we have been maintaining an average of 100 billion yen. Yen over the past five years, thanks to ongoing capital recycling in our asset portfolio including the real estate and domestic PE businesses and a portion of OREC's credit shares, we exceeded the average this time with 126.5 billion yen of gain. Note that from the fourth quarter, we have reclassified earnings from the investment in affiliates account into either equity method investments or goodwill, depending on the type of asset. As a result, we have retroactively restated both base profits and investment gains. Next, please turn to page 4 and 5 for the breakdown of segment profits and segment assets. Detailed information can be found further back in the presentation from page 20 onwards. Please take a look after. I'll just give a brief overview of the highlights here. First, the corporate financial services and maintenance leasing segment profits were up 6.2 billion yen to 81.2 billion yen. In corporate financial services, profits were up as fee businesses were solid, and M&A brokerage businesses also contributed to profits. In the auto unit, strong leisure demand for rental cars and ongoing high prices in the used car market helped the business achieve its third consecutive year of record high profit. Segment assets were up by 38.3 billion yen to 1,552.3 trillion yen. 1.5523 trillion yen as assets increased in the Corporate Financial Services Unit as it undertook a variety of financing deals while remaining careful in selecting new businesses. Assets also increased in the auto unit thanks to rental car fleet replacement. Next is the real estate segment. Segment profits were up 14.3 billion yen to 65.8 billion yen. The real estate investment and facilities operations unit saw profits rise as inbound tourism demand led to strong earnings at hotels and inks. In addition, we put gains on the sales of a large property in Q3. The Daikyo unit secured profits in line with the previous fiscal year, aided by robust sales of high-margin condos. Segment assets were up. Although still being selective, we are setting investment and facilities operation to need and continue to develop new logistics facilities while actively selling properties as part of capital recycling. Daikyo assets increased by 59.1 billion yen as compared to 23 merchant, bolstered by the acquisition of a very well situated site for large-scale development. We continue to operate this segment based on a business model of acquiring promising properties and then monetizing them after adding value. Next is the P.E. investment and concession segment. Segment profits were up sharply by ¥40.5 billion to ¥43.4 billion. Although Oryx booked costs associated with a purely financial stake in Toshiba, we saw two P.E. investees, including Primages, in second half. This plus a start to contribution to base profits from DHCC acquired last year led to strong upswing in segment profits. The concession unit returned to profit on a full-year basis for the first time since the pandemic, aided by a sharp rise in earnings following growth in international passengers thanks to a strong inbound tourism. Segment assets were up by 167.4 billion yen net versus March end of 2023, although assets rose due to 200 billion stake in Toshiba. We had several exits from investees. Thank you.

Environment energy segment profits were down 9% year-on-year to 29.9 billion yen. Domestic business secured profits in line with the year-early level despite some quarterly fluctuations owing to the impact of output cap over solar power. Overseas, profits were down year on year, owing to elevated euro interest rates and the absence of year-earlier investment gains. However, electricity sales rose due to steady expansion of incapacity at LR1. Segment assets were up 73.4 billion yen versus end of March FY23, owing mainly to changes in Forex. Assets in real estate, PE investment and concession and development on energy segments are each less than 1 trillion yen, and we remain aware of maintaining balance between different segments. Insurance segment assets were up 11% year-on-year to 70 billion yen. Profits were up mainly driven by lower COVID-related payout expenses versus the prior year and higher investment income added by yen depreciation and high interest rates. Insurance premium income is also rising steadily, with whole life insurance being marketed more aggressively. Segment assets were up by 258.9 billion yen versus end FY23 March, reflecting the impact of FX and increasing investment securities. Banking credit profits were up, 59.1 billion yen to 96.7 billion yen. In the credit business, OREC sold 66% of share to entity DoCoMo to create joint venture. This transaction resulted in investment gains and variation gains valued at 57 billion yen. In banking, interest income from real estate investment loans grew. due to higher long-term interest rates, with only marginal increases in deposit-related expenses, profits were a pioneer. Higher trust fees also contributed, resulting from Oryx Bank's focus on growing trust assets. Segment assets rose ¥34.3 billion, reflecting higher lending in the merchant banking business in Oryx Bank. Based on the stake, Oryx Credit is now considered an affiliate rather than a consolidated subsidiary. Total assets for banking and credit and insurance segments are about 5 trillion yen. This represents 37% of Oryx's total assets. And we continue to manage this ratio with an awareness of the quality of insurance and banking-related assets and overall balance within the firm. Next is aircraft and ship segment. Profit rose 44% year-on-year to 26.8 billion yen. In aircraft leasing, passenger demand in the US and Europe reached record high levels. Recovery in airline earnings and tight supply demand for aircraft led to an increase in both leasing income and gains of the sales of aircraft. This led to higher profits year-on-year. In the ship's business, profits were in line with our target but lower Ionia, owing to proactive sales of owned vessels a year ago when prices were favorable. At the end of February, Orixa acquired Santoku Senpaku, which will begin to contribute to profits in fiscal year 25 March on a three-month lag. At Avalon, hedging costs rose owing to elevated U.S. dollar interest rates. Growth in lease revenues fueled by a rebound in passenger demand helped the firm achieve profitability on a full-year basis for the first time since the pandemic. Segment assets were up 315.5 billion yen versus the end of FY23 March, reaching 100%. slightly more than 1 trillion yen. This reflects aircraft purchases in aircraft policing, in addition to Santoku Senpaku, which owns 67 vessels as a consolidated subsidiary, Orix USA, Segment Profit, was declined by 65% year-on-year to ¥17.3 billion. In Q4, OCEA booked losses associated with withdrawal from an investee, as well as preventative and allowances impairments based on conservative view a risk from long-term inflation and elevated interest rates. The resulting segment loss was ¥10.5 billion for the first quarter alone. Segment assets were upped by ¥74.3 billion, reflecting the substantial impact of weaker yen, we remained price-sensitive and selective with new deals and through the sales of assets in real estate business. Used or dormant assets excluding FX impact were down by ¥107.2 billion versus end of the prior year. Oryx Europe segment profit was down 30% to ¥28.6 billion. In FY23 March and 22 March, OEC booked 10 billion yen or more in performance fees, but this amount declined substantially in FY24 March, and higher currency hedging costs resulting from rising euro interest rates led to lower profits year-on-year. In the mainstay asset management business, assets hit €324 billion, a new record high at the end of FY24 March, buoyed by strong equity market and management fees. Segment assets were essentially flat after excluding the impact of yen depreciation. Finally, the Asia and Australia segment profit were down 2% year-on-year to €34.3 billion. Profits were flat versus a year ago thanks to growth in lease and lending assets in South Korea, Australia, India and other countries from new executions. Gains from the sale of an investee during Q4 also contributed. Segment assets were up 192.4 billion yen as a result of favorable new lease executions in ASEAN countries and India and the impact from FX changes. We maintain a cautious stance on investments in Greater China. The aircraft and ships and the US, Europe and Asia segments comprise a total of 22% of segment profits and 34% of segment assets. We will continue to carefully monitor economic and financial trends in each country. This concludes my explanation about the FY24 March 4-year results. Next, we would like to hand over to our CEO, Mr. Inoue. Please begin.