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.