ORIX(IX) - 2026 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Net income for the 9-month period was JPY 389.7 billion, an increase of JPY 117.9 billion year-over-year, marking the highest third-quarter cumulative net profit ever [2][3] - Pre-tax profits reached JPY 567.7 billion, up by JPY 184.3 billion year-over-year, with all three categories of finance, operation, and investments showing profit growth [3][6] - Shareholder returns were enhanced with an expanded share buyback program from JPY 100 billion to JPY 150 billion, with JPY 128.1 billion completed by the end of January [3][4] Business Line Data and Key Metrics Changes - Finance segment profits increased by 8% year-over-year to JPY 145.5 billion, driven by growth in investment income and finance revenues in Australia and Asia [4][5] - Operation segment profit rose by 17% to JPY 189.5 billion, supported by gains from airport concessions and real estate operations [5][6] - Investment segment profits surged by 100% year-over-year to JPY 261.4 billion, significantly boosted by gains from the sale of Greenko shares and other investments [5][6] Market Data and Key Metrics Changes - The environment energy segment profit increased by JPY 109.1 billion year-over-year, reaching JPY 122.2 billion, primarily due to gains on the sale of Greenko Energy Holdings [16][17] - The ORIX USA segment showed a profit of JPY 14 billion for the 9-month period, reflecting a positive recovery despite previous credit losses [20][21] - The Asia and Australia segment profit increased by JPY 11.4 billion, a 41% rise year-over-year, driven by financial income from local operations [23] Company Strategy and Development Direction - The company aims to drive sustainable growth and improve capital efficiency while maintaining its full-year net income forecast [7][8] - Organizational reforms were announced to restructure into three business divisions, although the current fiscal year will continue under the existing 10-segment framework [10] - The company is focusing on capital recycling, with JPY 196.6 billion in capital gains and ongoing investments in operations and asset valuation businesses [8][9] Management's Comments on Operating Environment and Future Outlook - Management expressed caution regarding the impact of declining Chinese passenger numbers on earnings, particularly in the tourism sector [24][25] - The company anticipates a mixed outlook for the next fiscal year, with potential downside risks due to economic uncertainties and rising interest rates [39][43] - There is a focus on maintaining financial soundness while enhancing future profitability, especially in light of rising funding costs [18][31] Other Important Information - Total assets increased by JPY 1.2594 trillion compared to the end of last year, with significant contributions from the consolidation of Hilco Global [29][30] - The company reported a reduction in insurance contract liabilities by JPY 234.2 billion, attributed to a higher discount rate used for measurement [30][51] - The employed capital ratio was adjusted to reflect more detailed risk management, resulting in a decrease from 92% to 89% [49][50] Q&A Session Summary Question: Details on ORIX USA and Hilco Global integration - Management confirmed that valuation profit within the portfolio showed significant growth, and they are executing a 100-day plan for Hilco Global integration [32][34] Question: Progress against the business plan - Management noted strong progress in investments and operational performance, particularly in the divestiture of non-core businesses [37][38] Question: Credit costs and potential losses - Management acknowledged the potential for credit costs and losses but emphasized ongoing monitoring and proactive measures to address risks [41][42] Question: Changes in employed capital ratio and future investments - The employed capital ratio was recalibrated for more precise risk assessment, allowing for flexible investments while maintaining a conservative approach [49][50] Question: Outlook for next fiscal year - Management indicated that while the current fiscal year is performing well, they remain cautious about the next fiscal year due to economic uncertainties [56][58]