ORIX Corporation

Now that it's time, I would like to begin the Oryx Corporation's second quarter financial results briefing for fiscal year ending in March 2026. Thank you for joining us. I'll be the facilitator. I'm from IR, Sustainability Promotion Department. My name is Nakane. We have two speakers today. We have a director, representative executive officer, president and COO, Hidetake Takahashi, as well as our operating officer, head of IRR, Kazuki Yamamoto. First half will be presented by Takahashi, second half by Yamamoto. Then we'll have a Q&A session. We are planning to have 60 minutes for this briefing session. Takahashi-san? Thank you very much. for taking the time out of your busy schedule to attend the OX Group's financial results briefing today. I'm Hidetake Takahashi, OX Group's COO. I'll explain the key initiative is business progress toward achieving the long-term vision announced in May this year, which is making impact through alternative investments and operation and business solutions, as well as management indicators of 15% ROE and 1 trillion yen in net profit for the fiscal year ending March 2035. And following this, Kazuki Yamamoto, who is in charge of management planning and IR, will explain the second quarter financial results for the fiscal year ending March 2026. If you could please refer to the page three, there are five points that I would like to convey today. First, I'd like to discuss the revision to our earnings forecast. Our first half, all three categories, finance, operation, investment, performed well, and capital recycling is also progressing smoothly. As a result, we decided to raise the net profit forecast from the previous 380 billion yen to 440 billion yen. We also revised the 4-year dividend forecast per share from ¥132.13 based on a net profit of ¥380 billion to ¥153.67. And in addition, As we move forward, proceed with optimizing our portfolio and capital structure, and considering the completion of the sale of the green coal announced yesterday, we have decided to increase the amount of our share buyback program from 1 billion yen to 150 billion yen. Kazuki Yamamoto will explain more details shortly. The second point is the establishment of a PE fund together with the Qatar Investment Authority, which was announced yesterday. Oryx is strengthening our asset management function to help us achieve that long-term vision. As a milestone, we aim to achieve 11% ROE and 100 trillion yen in AUM by the fiscal year ending in March 2028. Since the establishment of a PE investment segment in 2012, We have executed over 30 investments in Japan, all utilizing our own balance sheet. We have reached an agreement with the Qatar Investment Authority to establish a fund aiming at investing in Japanese companies. For the first time, we will incorporate third-party funds into this business. Through this fund, which has a total scale of 2.5 billion U.S. dollars. We will expand our investment, including those in a large-scale project. Oryx will contribute 60% and QIA Qatar Investment Authority 40%. The main investment target will be business suction type deals, privatization of listed companies, and carve-outs. We expect an investment size of 30 billion or larger in EV projects. We will intend to continue strengthening our asset management function, including our business segments. The third point is our future business expansion with Hilco Global. In September, we acquired a US company, Hilco, a subsidiary. Hilco provides services globally, such as evaluation and disposal of mobile assets like inventory and equipment, intangible assets like IP and trademarks, and ABL, asset-backed lending. ORCS USA will position HILCO as a platform for creation of ABO investment funds, strengthening its origination capability, and expand private credit business. Similar to the domestic PE fund mentioned earlier, this is a strategic investment to aid expansion of our asset management business. And further, HILCO's asset evaluation services are a counter cylindrical business. In an uncertain economic environment, we believe we have acquired a fee-based business at a good time. Here, Kozabashi Kepopeiki said disposal expertise will be utilized in assessing risk as we expand credit globally. The fourth point, Osaka IR project. integrated resort. We aim to open the IR in Osaka city around fall of 2030 and construction began in April this year. In September, some changes were made in existing plan. Primarily, these involve higher costs after taking inflation into account from approximately 1.27 trillion yen to approximately 1.51 trillion yen. After carefully reviewing business income and expenditure plan, we believe that the higher cost will not significantly impact the project profitability. The Osaka Kansai Expo completed successfully in October. We were able to confirm growing inbound demand in the Osaka Kansai area with many foreign tourists visiting in Osaka, which is also a birthplace of Oryx. The Kansai area, we are engaged in the development and operation of our sales office, which offers financial services. Kansai 3 Airports, Enumikita Project, and Kyocera Dome. We also operate the business such as hotels and inns. We will maximize synergies by adding Oisaka IR to these resources. Finally, my final point. is portfolio optimization. As I discussed in May, the most important measures to achieve our ROE target are disciplined portfolio management and sophisticated risk management and new business creation. Those three points. We have begun utilizing a dashboard to visualize the status of our business portfolio in finer detail and are progressing with our portfolio optimization. We have sold all or parts of shares in GreenCorn Energy, Oryx Credit, and Ormat, and Yusei Leasing, Canara, Robelco, and other businesses. We will continue to review our portfolio based on our four criteria, growth potential, capital efficiency, and impact on credit rating, and group synergies. We will continue to revisit our portfolio. And furthermore, in July, Oryx Bank paid a dividend of 30 billion yen to Oryx Group. We will also optimize the capital scale of other group companies, not just the bank. As of the end of September 2025, the AUM became 88 trillion yen, bringing us one step closer to the medium-term target of 100 trillion yen. also will continue to proceed with a transition to an asset-light portfolio. Out of the plan that we discussed, in the mid- to long-term corporate value enhancement is in ROE in order to further improve the efficiency of capital use. And all the measures that I mentioned that we carried out in the last six months is a good sign that we are making the right stride toward achieving a mid-term business plan. We will continue to work toward achieving a mid-term business plan and to achieve long-term visions through various tactics and measures. That's all from me. Next, Yamamoto will explain about the most recent financial results. Please go to page 5 of the presentation material. First, I would like to talk about the first half result and an upgrade update to our full year forecast. Net income for the first half was at 271.1 billion yen, a record high for the first half year, and an increase of 88.2 billion yen, up 48% compared to the same period last year. Our first half, we achieved a healthy 71.2%. Our initial four-year net income forecast, NROE, reached an annualized figure of 12.7%. This is a result of a contribution from gains over sales and valuation gains from a large exit deal such as green coal energy. As explained to our president, our efforts enhance profitability through portfolio optimization and beginning to bear results. And we rise our four-year profit forecast upward. As our CEO, Takahashi, explained, a four-year profit forecast is 440 billion yen. Expanded the share buyback program to 150 billion yen. A four-year ROE is forecasted at 10.3%, an increase of 1.3% just compared to the same period last year. Second point is the three categories, earning and capital recycling. First half, all three categories, finance, operation, investment, and book to profit growth year on year. and already improved, and even excluding a gain of the sales of Greenco. First off, ROE was healthy at around 10%, exceeding the previous full fiscal year ending in the March 2025 level. That was 8.8%. The third point is shareholder returns. In line with the upward revision of net income forecast, should Oryx achieve a full fiscal year net income target of 440 billion yen, A DPS forecast will increase from 132.13 yen to 153.67 yen. The share buyback program also expanded from 100 billion yen to 150 billion yen. At the end of October, 78 billion yen has already been repurchased to represent a 78 progress rate toward a previous 100 billion yen. Page six. Here I'll explain the details of revision of our earning forecast and expansion of shareholder returns mentioned earlier. Based on the stellar performance in the first half and the current business environment, we have revised our forecast and second-hand earnings. Specifically, we raised the pre-tax profit forecast from 540 billion yen to 640 billion yen, net income forecast from 380 billion yen to 440 billion yen. This represents an increase of 100 billion yen and 60 billion yen respectively on increase. As a result, we forecast a four-year EPS of 394 yen. ROE will improve to 10.3%. Outline earlier, we raised a four-year dividend forecast accordingly, expanded share buyback program. Total shareholder return should reach 320.7 billion. Total payout ratio expected rise from 65% to 73%. While improving ROE and maintaining a healthy DE ratio, OREC also aims to expand AUM. As CEO Takahashi mentioned, the total group AUM reached 88 trillion at the end of the first half. In addition to growth in nitrogen-acid AUM, such as aerobical, which has performed very well, OREC aims to expand its AUM in an acid-light fashion and is not overly reliant on our balance sheet. Please go to page 7. And also, we newly announced a joint PE fund with QIA too. This shows the first half result for the three categories, and for both previous year and this year, and segment profits, pre-tax profit, net income, and shown at the bottom. Pre-tax profit for the first half was 391.5 billion yen, an increase of 134.5 billion yen compared to the same period last year, like the net income. it reached a record high. We implemented capital recycling not only in the investment category, which achieved a large exit, but also in finance and operations category. All three categories achieved growth year-on-year. This page shows our first half results for previous current year, three categories, investment on top to bottom. The dark blue represents finance. Profit increased 8% year-on-year, 99.6 billion yen. Progress rate 55% versus four-year target. Gross investment income was strong in the insurance segment. Asia, Australia saw steady increase in financial income from leases and loans. In addition, as a part of portfolio optimization, contribution from the sales of OX asset management, loan services corporation, Nisei, these shares also contributed to the profit gain. Next, the light blue part. Represents operation, profit increased by 9% year-on-year to 114.9 billion yen, with a progress rate of 48% versus our forecast, which we raised by 10 billion yen. Business driven by inbound tourism demand, such as Kansai airports and real estate operation at inns and hotels, continued to perform well. Strong used car market helped auto business, with rent that captured The demand for Windows 11 replacement PCs, both businesses saw growth, increased profit, environment, energy segment. The gain on the sales of Zeek Lite, which operates a waste and finance disposal site, also boosted profit. The pink represents investment. Profit was up sharply at 117% year-on-year to $194.9 billion. The sales of Hotel Universal Port Avila in the first quarter and Greenco in the second quarter, as well as a gain from the sales of shares of NYSE-listed renewable energy company ORMAC contributed to this increase. In addition, performance of domestic PE investments such as Toshiba was strong, leading to higher profit contribution. As a result, segment profit, pre-tax profit, and net income all increased by 42%, 52% and 48% respectively. Next, please look at page 8. Now, on this page, I explain ROE, shareholders' equity, for each of the three categories. You see on the right, at the end of previous year, shareholders' equity was 4.1 trillion, while annualized ROE was 8.8%. For first half of this year, these figures were 4.4 trillion and 12.7 respectively. Please look at the graph on the right. The dark blue ROE of finance improved from 8.3 at the end of the previous period to 8.5%. The allocated capital finance is 1.8 trillion yen. Now light blue ROE in the operation category improved from 13.5% to 14%. due to the sale of subsidiaries and other factors. Allocated capital here is 1.3 trillion yen. And then pink, ROE in the investment category, rose significantly from 7.4% to 16.6% due to sales of brinko and hotels. Allocated capital is 1.6 trillion yen. The total allocated capital for three categories is 4.7 trillion yen, which is slightly different from shareholders' equity amount of 4.4 trillion yen on the consolidated BS. As explained last time, this is because the allocated capital is a management accounting figure. Next page shows ROA and assets for the three categories. With the start of portfolio optimization, total asset ROA improved by 1.03% from the end of previous period to 3.15%. The ROA for the investment category improved significantly for the reasons that I just outlined. ROA for the both finance operation category also improved in first half. This page shows the progress of capital recycling. In the first half, we recorded the capital gains of 157.1 billion yen. We had cash inflows from sales amounting of 500 billion yen. Major asset sales included green coal energy, that was a cash in of 178.9 billion yen, capital gain 95 billion yen. Hotel Universal Portal Beta, cash in about ¥34 billion, capital gain ¥21.9 billion. We also sold Oryx Asset Management and Loan Service Group and Nisei Lease in the Corporate Finance Business Segment 2, and Zeek Light in the Environment Energy Segment 2. In all three categories of finance, operation, and investment, we flexibly recycle capital to optimize our portfolio while balancing new investment.

Cash outflows from new investments amounted to 470 billion yen. The main new investments made in the first half were Hyuco Global, 776 million, and convertible bonds for the next generation energy company AM Green. Hyuco Global is a leading asset appraisal company in the United States and a platform for asset-based lending. Additionally, we made a PE investment in specialty capsule toy retailer Ruru Art. as well as new purchases of aircraft where prices are favorable and new investments in logistics. We also made additional investments in Osaka Integrated Resorts project as planned. We continue to have a promising investment pipeline for the future and will carefully select projects. For the fiscal year 26, we forecast realization and new investments of between 600 to 800 billion yen. By flexibly recycling capital in all three categories in a well-balanced manner, we will, as Mr. Takashi explained, work to optimize our portfolio. Page 11 is about OREC's financial strategy. This shows the important balance sheet items and the breakdown on the left, and the key indicators from the perspective of financial soundness on the right. In the table on the left, you can see the total assets increased by 738 billion yen compared to the end of FY25, with a half of about 600 billion yen amount excluding FX due to the US-related factors. The remainder was primarily caused by asset growth in the insurance segment, which saw strong sales of single premium whole life insurance 131.4 billion yen and at Oryx Bank, which increased the new execution of the real estate investment loans 109 billion yen. Next, short-term and long-term debt, the deposit increased by 416.9 billion yen. mainly due to higher deposit at Oryx Bank and issuance of the corporate bond. We continue to diversify our funding methods and currencies and have realized competitive funding cost levels through this and maintaining a stable ratio of the long-term debt. Insurance contract liabilities and policyholder reserves decreased by 223.2 billion yen, mainly due to the lower liabilities. from the higher discount rate for insurance contract liabilities. This was offset by the increase in the single premium insurance policyholder accounts. Of the 351.9 billion yen increase in shareholder equity in the row below, 223.2 billion yen is due to the lower insurance contract liabilities. and policyholder accounts explained earlier. Other factors contributed to the increase of the shareholders' equity are mainly net income. Debt equity ratio was steady at 1.5 times. Looking to the graph at the right, we maintain the capital utilization rate at an appropriate level in the 90% range as a result of the capital recycling in first half. This has helped us sustain A-level credit ratings at global agencies. While yen funding rates are gradually increasing, including those for the bank deposits, our overseas currency-based funding costs, mostly U.S. dollars, remain in downtrend. We are working to reduce our cost of capital by keeping competitive A-level credit ratings and by utilizing diversified funding source. Pages 12 and 13 are segment summaries. Please refer to the slides from the pages 16 and onwards for details. Links to supplementary financial materials and the integrated report are included in these slides for your reference. First, segment profits for the corporate financial services and maintenance lease segment increased by 13.1 billion yen, or 29%, to 58.6 billion yen. Corporate financial services posted significant growth thanks to the sale of Oryx Asset Management and Loan Services Corporation and Nisei Lease in Q2. Growth in various fee revenues was also positive. The auto business continued to enjoy robust used car sales, achieving a record high profit for the first half. RENTEC profit grew on higher rentals from ICT equipment inventories fueled by demand for Windows 11 PC replacement. Auto assets for auto and RENTEC increased due to new executions in car racing and PC rentals. The sale of Oryx Asset Management and Loan Services Corporation reduced the total segment assets by ¥29.2 billion versus the previous year. 1,855.3 billion yen. Second, the real estate segment's profit decreased by 1.3 billion yen, 3% year-on-year, to 49.1 billion yen. The RE Investment and Facilities Operation Unit saw significant increase in profits from hotel and inn operations, in addition to the sale of the anniversary Port Vita. However, profits were down slightly year-on-year due to the previous year's gain from the sale of 100 Circus. Meanwhile, the profits at Daikyo units increased on the sale of rental apartments, properties, and other factors. Real estate segment assets remained flat compared to the end of previous fiscal year. In addition, in response to the expanding investor demand, we increased asset size of our first equipment equity commitment type real estate value-advant established in January this year from 100 billion to 120 billion yen. Please refer to page 18 of the real estate. The third is PE investment and concession. Segment profit increased by 9.7 billion yen, or 21% a year, to 56.7 billion yen. PE investment unit enjoys steady performance of the investees such as Toshiba and DHC, resulting in higher profits even after considering the previous year's gain. Regarding the domestic PE fund information with the Qatar Investment Authority mentioned by Takashi, you'll find the details on page 20. The concession unit saw a significant increase in profits as Kansai Airports continue to perform well. Please refer to page 45 for related data, such as passenger numbers. The segment assets for PE investment and concession increased by 31.9 billion yen versus the end of fiscal year 25, totaling 1.548 trillion yen. The main reason was the new investment in Lula Arc and increased profit contribution from the investees, leading to an increase in equity method. All the environment and energy segment profit increased by 117.3 billion yen year-on-year, to 119.7 billion yen. Profit was bolstered by sale of green coal energy, which resulted in gains on sale and valuation gains, as well as gains from the sale of shares of Jig Light OMAD. Additionally, the domestic electricity retail business enjoyed both higher sales volume and unit price. Segment asset decreased by 38.8 billion from the previous year end to 977.4 billion yen because of the progress in capital recycling. The fifth is insurance segment profit increased by 10 billion yen or 24% to 50.9 billion yen. Continuing the recent trend, asset income rose sharply on growth in investment assets and effort to diversify portfolio management. In terms of business, both the single premium wholesale life insurance SmoothShop And Rebump, the income protection insurance keep-up launched this June, are selling well. Insurance segment assets increased by 131.4 billion yen versus end of FY25 to 3.14062 trillion yen. Sixth, the banking and credit segment profit decreased by 600 million yen or 5% a year to 12.5 billion yen. Amid rising interest rates while deposit procurement costs are increasing, the asset management yield is also improving. The main reason for the decrease versus the first half of FY25 is the recording of the losses from the sale of public and corporate funds in Q2 to improve bond portfolio quality. Banking and credit segment assets increased by 109 billion yen versus the end of FY25 to 3.2536 trillion yen. Both investment real estate loans and the merchant banking business saw increase in new executions. As explained in Q1, Oryx Bank paid parent group a dividend of 30 billion yen in July to optimize in capital size. The seventh, the aircraft and ship segment profit decreased by 10.1 billion yen or 31% a year to 22 billion yen. Aircraft leasing profit for the first half was roughly in line with the previous year, but with lease rates remaining high, the number of owned aircraft increased, and the business climate as a whole is positive. Avalon profit rose year on year, partly due to the contributions from Castle Lake, which was acquired in January this year. Profits in ships unit was lower year-on-year on the absence of higher charter fees from certain contracts last year, reflecting the impact of marine shipping prices. Segment assets increased by ¥24.1 billion versus the end of FY25 to ¥1,256.1 billion owing to aircraft purchases. Segment number eight is Oryx USA. Oryx USA's segment profit decreased by 18.1 billion yen year-on-year, resulting in a loss of 1.8 billion yen. Compared to the same period last year, the main reasons for the substantial profit decline were absence of reversals of the provisions recorded in last year, a decrease in capital gains, and the booking of credit costs and impairment in the first half this year. Credit losses and impairment stem from the real estate financing originated during the period of monetary easing during the pandemic and legacy assets from before that. The extended period of the elevated interest rate inflation and uncertain economic conditions in the US negatively impacted these assets. More recently, based on our disciplined investment policy, we have conservatively chosen deals and thus have no exposure to the first brands group or tricolor holdings. We see pages 30, 31, and 32 in this presentation for more details. Excluding the HILCO, global segment assets in U.S. dollars shrunk from 12.2 billion yen at the end of March 23 to 11.3 billion yen at the end of September 2025. This is a decline of 7.4% in the past two and a half years. With the addition of HILCO as a subsidiary, we will review the Oryx USA business portfolio and continue to responsibly manage the portfolio while controlling asset risk, asset size. Uncertainty persists in the operating environment for Oryx USA. And we are conservatively reviewing four fiscal year forecasts for Oryx USA compared to the initial plan. Next is Oryx Europe. The segment profit increased by 1.3 billion yen or 6% earlier to 22.1 billion yen. Net fund inflows grew thanks to the favorable global capital markets and AUM rose to a record high of 425 billion euros. This resulted in higher profits even after adjusting for performance fees booked in the same period last year. Oryx Europe assets were flat year-on-year, excluding the currency impacts. Finally, Asia and Australia segment profit increased by 600 million yen or 3% year-on-year to 19.7 billion yen. In Greater China, profit contributions from investees decreased. versus the same period last year, we maintained a constrained investment stance and reduced our exposure to in both of these season investments. Meanwhile, the financial income increased in countries such as Singapore, India, and Australia, resulting in higher profits. Segment assets increased by 15.5 billion yen versus at the end of fiscal year 25 to 1,741.1 billion yen. The main reason was the FX impact, but the breakdown shows a decrease in assets in Greater China region while there was an increase in Australia and India. And that concludes each segment explanation. Next is page 14. Finally, regarding the shareholder returns and enhancing corporate value, we added 50 billion yen to 100 billion yen share buyback program announced in May for the new total of 150 billion yen. Regarding the dividends, the four-year DPS forecast was raised from the previous 132.3 yen to 153.67 yen, 39%. increase over a four-year net income target. Compared to 525 DPS, we expect an increase of 33.66 yen per share, or 28%. Since announcing the three-year plan and long-term vision in May, CEO Inoue and COO Takahashi have been engaged in a direct dialogue with institutional investors both in Japan and overseas. We also plan to provide access to outside directors. And we are providing opportunities to have a direct dialogue from the outside director and the investors. We continue to enhance the corporate value by increasing opportunities for direct dialogue with the market regarding our most important management KPI, ROE improvement. EPS growth, which is also important, and capital costs are also key areas of discussion. This concludes my remarks. Thank you for your attention.

Now I would like to move on to the Q&A session. For those of you who have questions, please use a raise your hand button at the bottom of your Zoom. Once your name is called, please just unmute yourself and ask us questions. Please keep your question to one per person. First, from SMB Nikko Securities, Muraki Sama. Hello, I'm Marky from SMBC NICO. This is a bit off from results, contents, briefing material, but I would like to hear more about joint investment with QIA. What led you to this joint PE establishment? Because in the past, you've been covering everything on your 100% and the asset was a trillion yen. And do you think for the future domestic PE you're going to run off the existing one and balance sheet will reduce and the 60% holding of this new PE that you're establishing with the QIA, it will be on the addition, net additions on the BS, right? ROE or do you think this will allow you to invest more in a large project, but what kind of impact would this have to the total balance? Hello, this is Takashi speaking. Hello Muraki-san, let me answer, take this one. How we came about to establish a joint PE, as I explained yesterday's announcement, Almost about two years we've been negotiating with QIA. We've always been in contact, having a dialogue with various sovereign funds, and QIA was especially interested in investing in Japan, so in which field we can collaborate. We've been discussing that way. We thought that the domestic B investments is probably where we can join the approach so investment criteria policies we've discussed quite a bit. And this includes right fit to we have the right chemistry, that is how we came about this agreement establish the be. And regarding the running off of existing portfolio and to focus on the fund with the QIA, that is not the case. As we mentioned in the first release, our fundamental approach is enterprise value in the market cap of 30 billion yen or mid-cap larger items. We will leverage this joint fund with QIA and This 2.5 billion, 370 billion, that's unlevered base. So one time or two times we will be financing. In the newspaper, I know it says that With the borrowing, we will be able to have this 1 trillion yen investment capacity, but we don't know whether we'll get there. But anything that is below 30 billion yen for market capital investment, that's something that we will continue to handle within the balance sheet. The balance on the balance sheet is... We do have 2.5 billion yen, 60% is what we are committing. So I don't think we will see a significant bloating of the asset balance, but we aim to maintain the balance of the current 1 trillion yen going forward. So far, we had a majority share, so we had a controlling share, so that our target companies, we would Try to keep it in consolidated accounting so that we can get benefits from profit. But for this fund, we would apply the fund accounting so that then incorporate a fair market value. So the way we would incorporate the profit into our business would be different from the one that we are financing fully on our own. I understand. Is this part of your ROE enhancement effort? Yes, that too, plus a goodwill and also the recognition of intangible asset will be different too. And also there will be an impact on the credit rating too. That will be eased too, I think. In the last 10 years, we've been building up a track record in the private equity area. That's one thing. Reflecting the market trend and movement, what we are seeing more and more good quality pipeline in front of us that's building up so. Incorporating that in all in all into our balance sheet, adding them up would impact us in various different areas. So at this timing we wanted to leverage the third party funds. To. Shift to. leverage the third parties funds to try to capture larger, better quality deals. It would be a benefit in long term growth. That's our strategy. Thank you very much. Thank you.

Next from JP Morgan Securities, Sato-san. Thank you. This is Sato speaking from JP Morgan about ROE target and your commitment to that. and also net assets, the balance between the two. I'd like to confirm one thing. Now, the 50 billion yen increase in buyback, I think there are different reasons. But the net profit increase, most of it will be used for the shareholder return, I understand. But at the same time, there is a big impact of the interest rate. So about this insurance with the change of the discount rate, about 200 billion yen in the six months, I think that the profit has expanded. So in comparison to the medium-term business plan, the 20 billion or higher needs to be enhanced so that you can achieve our E-target. And depending on the macro environment, non-cash or cash in without that, there could be some higher risks. So, in that sense, in achieving the ROE, in order to maintain the probability of achieving that, what kind of initiatives are you thinking of taking? Thank you for your questions. Yamamoto will respond to your question. As you pointed out correctly, for this fiscal year, the interest rate higher and the discount discount and also the insurance account, the net asset increase was a little more than 200 billion. And achieving the 11% ROE, of course, the numerator will not naturally increase, so we have to take some measures or initiatives that will be necessary. So U.S. accounting and Japanese accounting, there is some gap, so with the shareholders and ORIGs, we are trying to consider the various initiatives to be taken. So in achieving the targets of the medium term in the final year, we will be taking initiatives. As for the interest rate, I think we have come to an end of the cycle and this would stabilize. So this increase is not going to continue from now on. So in other words, If the interest rate comes down, the denominator will be less. So that is something that will make it possible to reach the ROE that we want to achieve. So we would like to monitor that closely and communicate to you. But that's something that we'll be doing in the future. But the impact of this in achieving the ROE, yes, we do understand that possibilities. I see. Thank you.

Thank you for the question. Next, from Daiwa Securities, Watanabe-san, please. Hello, this is Watanabe from Daiwa. this year's landing forecast and next year's profit forecast. You said that there will be a reduction, reduced provision for the bank and the U.S. business. If you have any trend outlook for the second half for this fiscal year, you will be generating quite a significant profit. What's your outlook for the next year? Is it going to be challenging? Are you going to go with your current you know, cruising speed. What's your thought on the next year? Thank you very much. Regarding Oryx Bank, regarding our debt portfolio, liability portfolio, and this is a reversal of what I mentioned about liability insurance. And various portfolios that we are maintaining for the better liquidity, together with the interest rate hike, there will be more and more incurred losses. And As much as we can within the profit, because we have a profit momentum, we will actively reshuffle the portfolio and recorded some losses from the sale. And this year's credit loss burden in the Oryx USA, as I aforementioned, so far in the fourth quarter, we usually do the checkup of all of our assets. But we are doing more flexible risk management. So we have decided to book the loss to some extent in the second quarter. If you could go to page 32, Oryx USA pre-tax profit, additional information is there as well. For portfolio, as I mentioned, because of the interest rate in the dollar, it will be plateaued in inflation. and equity, real estate, business-related impact, and we are recording capital gain. We are losing opportunity to record capital gain, sorry. And before COVID, we had a real estate legacy asset of the credit loss that is now materialized. So going forward, what would happen? is real estate for multi-family condominium performance. Insurance premium increase will impact the rent. And I believe that we will need to closely monitor property management and appropriate asset monitoring too. So those potential risks, we are quite clear at the ORIX USA side. So we don't foresee this kind of situation will continue. So at least by the end of this second half, or at the latest, in the beginning, within the first half of next year, we will resolve. We will conclude our countermeasures. And going forward, I'd like to have Takahashi to explain. And the second question about next year's forecast, let me give some brief... Thinking about the next year usually the income gains for example in the real estate or private equities exit those are sale gain from a sales we I've been recording pretty much on every fiscal year it's a recurring gain from a sales but the kind of gains from sales like a divestment greenco that is almost like a one-off profit so this proceeds that we received is a reason that we were able to do a share buyback in addition, additional share buyback. And another reason is we averaged out the EPS and we are intending to continue to increase EPS in a linear fashion. If there are some surplus in capital and we would use it for that going forward in the next year, we'll continue to aim to realize sustainable profit growth. So the sales from a gain, especially something in this scale of almost like a one off would be, you know, would be volatile. And sometimes we do, sometimes we don't. And when we have surplus, we will leverage a buyback. to continue to increase our EPS linearly. I'm not sure I'm answering your questions, but it's not that we are aiming to generate a certain amount of profit every single year. That's a bit different, far from our actual business practices in reality. Thank you very much.

Thank you. Next is Mizuho Security, Sakamaki-san. Thank you. Sakamaki speaking from Mizuho. I'd like to ask some questions on the forecast for the second half. On page 10, capital recycling forecast. So for this fiscal year, $200 billion or higher for capital gain. So compared with the past range, there could be some upside in the second half. The segment profit is only 200 billion. So how should we understand this balance between the two? If you can explain it, thank you. Yes, thank you. On page 10, this is 200 billion yen. If I may talk about this further, as you know, usually our capital gain is about 100 billion. That's the normalized level. So green coal part, 995 billion is added. So it's 200 billion. So that is on track. And the real estate market is very solid and private equity portfolio. The performance, as we mentioned, is good. So if there is good opportunities, we will invest and also realize in a very flexible manner in the second half. If you deduct that, the pre-tax income or revenue level, I think that's what you are referring to. We did not specify the first half and second half, but some of them were already realized in the first half. So there could be some differences. So capital gain, about the capital gain, this can be considered as the income or the profit in other areas. I hope that answers your question. Thank you very much.

Thank you for the question from Nomura Securities. Sasaki-sama, please. Hello. This is Sasaki from Nomura Securities. I have a question about your performance. This year's second half pre-tax profit forecast The level is quite declining versus the first half. So it looks like a 250 billion pre-tax profit. This is along the line of your base profit, but you also are going to record some capital gain as well, right? I was wondering, perhaps you have some significant impairment loss or some kind of a negative factor that you're focusing for the first half. Is my understanding correct? And regarding next year's business plan, I'm sure you're in the midst of discussion right now. If you can share as much as you can about the next year's plan, please. So the first question will be answered by Yamamoto. Regarding the first point, you're right, the base profit first half I mentioned was quite brisk. Within our base profit, we have the profit from the company that we have invested. So that is contributing, like Toshiba is performing quite well, that we have invested. And for the second half, we have set that to the regular cruising speed. not a buoyant. So for the second half, we are expecting certain base profit plus some capital gain. It is not that we are expecting some one-off significant loss. Let me add to that. This is a bit of a detail, but as Yamamoto mentioned, Toshiba's performance is quite good now. And divestment of Toshiba material is recorded in Toshiba's performance. And Kyokusha's share price is quite well, so they sold a part of Kyokusha shares. So base profit, our size base profit, and our gain from sales, and also the income from equity method affiliate are all recorded under base profit. So what I mentioned is the, you know, there are various one-time gains that we experience from that are equity affiliate. And those happen in the first half, and that's not necessarily recurring income that we can continue to expect and have. So that's a reason. And you asked me about the second and next year plans. Actually, we will start this discussion from beginning of next year. What we are sharing right now to the market is ROE of 11%. by FY28 ending in March. But of course, we are creating bottom-up plans up to three years into the future. What we'll be discussing going forward is what went well, what didn't go well for the past year, and make a rolling update to what we have established in the last March. And this is March 2, our MTP We are not expecting any downward change to our initial plan. I'm sure next year will be quite positive, but the detail will be discussed from the segment leaders of each division. That's all. May I add one more thing, please? Yes. You mentioned that next year's profit can be volatile. I got the nuance in your wording. This year, 10% ROE, you need to grow the profit at a certain level. Otherwise, I don't think ROE can go up to the 10% levels. Is that okay to say that it can be volatile? You have a point. Needless to say, we need to continuously grow, otherwise we will never get to 11% RE. We are not there yet, so of course we need a profit growth to get there. And with the current portfolio, what can be sold, what price, is something that Some of it where we have a higher probability where we are already in the negotiation process, then we can factor in, but the others are just pie in the sky. So, of course, we need to make a right decision at the right timing, being considered of appropriate capital recycling to maximize our gains from our sales. As I mentioned, this fiscal year, This proceeds from GreenCo is, I would say, a bit extraordinary. So what we've been discussing going forward internally is compared to this year, how much base profit that we can increase. And on top, how much gains from a sales asset we can expect. Ultimately, we would like to achieve our target by 2025 that we have. That's our grant plan. Thank you very much. Thank you.

Next from BOV Security, Tsuchino-san. Thank you. Some detailed question about the environment and energy. If you look at the quarterly number, 117 billion segment profit. The green core sales gain on sales is 95 billion yen. So the gain on securities, OMAT sales gain on sales is included, I think. But we don't know how much that is. So that means it is set at 15 billion, but the equity method, this is 83 billion. So OMAT, gains on sales, and also if you deduct the 95 billion, you are in red in terms of segment profit. So in environment and energy segment, excluding the gains of sales of those two, what is happening? Was there any kind of impairment? And if so, what was it? And what about the impairment risk of others in coming month and years. Takahashi-san will respond. Sorry, this is Takahashi-san responding. If I may talk about the details, the renewable energy in Japan, especially the mega solar that is already operating, and we operate that, so we are getting the stable profit. And also we are in the energy business in the Previous year, Hibikina and Soma, there was our impairment loss, and that led to the lower depreciation and amortization. And maintaining the sales volume included, and this part was profitable. And in environment and energy, the major one is ELA-1. And ELA-1, concerning that, it is break-even or just slightly in red. So a lower interest rate and also the ones that we are developing projects and also the program has started. So in terms of business, we are in the recovery phase. Also on the environment side, the Oryx Environment is a circular economy company and they are generating stable profit. So Oryx Shigen Junkan or Resource Recycling which is engaged in the interim processing, and they are going through the rebuilding or replacement phase. So we expect some red deficit. And in actual performance, there are in red. So it's a mixed performance, but we are not seeing the signs of the major impairment loss. I do not recognize that. Okay, so way of thinking, if you calculate this, you are in red, as I said. So is that correct understanding? Yes. We do not recognize this as a major deficit. It's really close to the break-even level. It's a very small deficit, I see. But if you calculate the 117 billion minus 98 billion, sorry, the loss of 8.2 billion or so, you're talking about Q2. Okay, so Q2, as you said, yes, that's the correct calculation, but the Walmart, It depends on what kind of number that you would include in OMAD. But we did not recognize that in Q2 only. But I think if you look at the bigger picture, it would be almost a break even. OK. Thank you.

Now we are reaching the closing time, so we would like to take one last question from Morgan Stanley, MUFG Security, Takemura-sama. Thank you for taking my question. I am Takemura from Morgan Stanley, MUFG. I have a question about some numbers. You have made a revision to the landing forecast. Page 7, bottom right. In financial, it's remaining 1,800, so no change. Were there any changes on there? Regarding the business profit, increase of 10 billion yen. What's the reason? For investment, Greenco, 95 billion yen addition. plus 80 billion yen. So I would like to know why you are postponing some of it, the reason for that, to the best way you can. Please share. Regarding Oryx USA, I understand that you have a revised performance forecast. So how that impacts this overall segment, please. Well, what you explained toward the end is very much the reason for our finance and life insurance included. We did quite well in asset management. We have a management income in a bank. We also recorded the loss of our debt liabilities. And in order to improve the portfolio quality and the credit related business, we have a conservative recorded some new losses too. And those are what's impacting this finance business. For business, many of the operating units are quite brisk, but in Oryx USA real estate origination, the fee environment competitors competitive landscape we are having quite a difficult situation so that's impacting our profit regarding investment the third point are you you're right regarding 95 a billion yen addition from greencoast divestment doesn't mean that we put some of the sales a plan for the sales to the later date at all we did have a certain uncertainty in the fair value part about the future gain from the sales that the OXUSA is doing in the PE business. As Takemura-san pointed out, regarding OXUSA, we have more conservative outlook because of in transparency. Thank you very much. We would like to conclude Q&A sessions. Now we'd like to have our last remarks from Takahashi.

As I said at the outset, there are a mixture in terms of the business performance between the segment. The businesses are diversified and also in May we announced a strategy. We are executing that steadily in the first half. Relatively speaking, I think we kept good results. But we would like to stay focused. And we took notes of what you pointed out. And we will continue to take initiatives. And we consider those target numbers are not easy numbers. And also, in the medium-term plan and our long-term vision, the numbers that we are committed to We'd like to make sure to try to achieve those targets. And I hope you would continue to support us. Thank you very much. With that, we'd like to conclude today's conference, the briefing on the second quarter results. And thank you very much for your participation.