Good evening, ladies and gentlemen. Thank you for joining this teleconference of ORIX Corporation for annual results for the consolidated fiscal year ended March 31, 2022. .

The attendees of today's conference are members of the Board of Directors, Executive Officer, President and Chief Executive Officer, Mr. Inoue; and Executive Officer, Head of Treasury and Accounting Headquarters, Mr. Yano. .

Before we begin, there is a request to all the participants. In order to prevent feedback, please either turn off your mobile phone nearby or move it away from the telephone. If we experience a severe feedback during the meeting, we may decide to discontinue the meeting for a short while in order to communicate with the person causing the feedback. .

So the first half will be Mr. Yano. Second half will be Inoue's presentation, followed by a Q&A session. We expect the meeting to last approximately 1 hour, and we would like to begin the meeting. Mr. Yano, the floor is yours. .

Good afternoon. I am Hitomaro Yano, Head of ORIX' Treasury Accounting Headquarters. Thank you for joining us in this session despite your busy schedules. Without further ado, I'd like to get us started in explaining about our financial results for FY '22, March end. .

Now in FY '22 March end, ORIX recorded net income of JPY 312.1 billion, which is up by 62% year-over-year. We met our net income revised forecast of JPY 310 billion announced on December 17, and finished the year with an ROE of 9.9%. Please look at the right time side chart that shows the quarterly net income trend in fourth quarter.

ORIX posted net income of JPY 100.8 billion, a new record high. .

Please turn the page. This slide shows a breakdown of segment profit. Total segment profit were JPY 551.2 billion. The graph at the lower left shows trends for the first -- past 5 years in segment profit. Base profits are in the blue while light blue is investment gains.

Base profit rose 32% year-over-year to JPY 363.3 billion, the largest amount recorded in the past 5 years. 8 of ORIX' 10 segments reported higher segment profit with Overseas Business being strong drivers of earnings.

Investment gains increased by 235% year-over-year to JPY 187.9 billion, which was also the largest amount recorded in the past 5 fiscal years. In addition to the fourth quarter gains on sale of Yayoi, ORIX USA also achieved multiple PE exits. Investment gains from real estate property sales had also continued. .

Please note that from this financial closing, this time, we have changed the definition of base profit and investment gains and retroactively adjusted past results to reflect the change. Please see the chart on the right of Page 3.

Previously, base profits were comprised of finance revenues, operating leases, service income and other income with impairments netted out from this quarter. However, [ there ] were net impairments out of investment gains.

This change was based on our view that both investment gains and impairments are generated primarily from fixing investees, and subtracting impairment from investment gains was more appropriate. .

Now we recorded about JPY 70 billion in impairments in FY '22 margins, which came primarily from write-downs in the PE, Environment and Energy and OCE segments. Please refer to Page 4 as well as Page 5. Here, we have breakdown of segment profits and assets by each segment. Details are presented on Pages 26 and onwards.

Please refer to them at your leisure time. I'll quickly go over the highlights here. .

First is the Corporate Financial Services and Maintenance Leasing segment. Segment profit were JPY 251.4 billion, which includes a JPY 163 billion gain on the sale of the Yayoi, the largest ever investment gain for ORIX. We will continue to recycle capital in this manner.

In addition to Yayoi, the corporate financing, auto and Rentec businesses all performed well, contributing to profit growth. So segment assets declined by JPY 159.3 billion due to the sale of Yayoi and strategic reduction in the lending balance and leasing assets. .

Next is the Real Estate segment. Segment profit was up by JPY 7.7 billion year-over-year to JPY 36.36 billion (sic) [ JPY 33.6 billion ]. In the Investment and Operation unit, we have seen great success with the business model of developing assets such as logistics facilities, leasing them up into productive efforts and then selling them.

The facilities operating unit, including inns and hotels, was impacted by ongoing pandemic, but the occupancy is on a recovery trend. Segment assets were up JPY 38 billion year-over-year as development of new logistics facilities and other properties including DAIKYO Group continued, while we also moved forward with asset sales. .

Next is the PE and construction business. This segment posted losses of JPY 11.3 billion, a decrease of JPY 15.1 billion year-over-year, owing to write-downs and losses associated with Kobayashi Kako -- sale of Kobayashi Kako's manufacturing facilities and our assets to Sawai Group Holdings was completed in March. All other investees performed well. .

In the Concession unit, domestic routes at Kansai Airport are recovering, but international routes remain challenged, and the unit continues to record losses. Japan's restrictions on immigration are slowly being eased, and we hope for a rebound in the future. .

Next is the Environment and Energy segment, where segment profit was down JPY 24.6 billion versus the prior year of JPY 2.9 billion. The main reason for lower profits is the Soma and Hibikinada coal and biomass plant. We wrote down these assets in line with the previously announced pledge to reduce GHG emissions. .

Meanwhile, in our Overseas Business, Greenko began contributing to group earnings from second quarter and Elawan from the third quarter. We also recorded a gain on the sale of our stake in ESCO, Vietnamese renewable energy company in the third quarter. Segment assets were is [Audio Gap].

Next is insurance. Segment profit fell JPY 1.6 billion year-on-year to 40 -- excuse me, JPY 54.6 billion. Earnings from the former Hartford Life part of the business fluctuated in line with the market conditions. However, excluding the impact of former Hartford Life, ORIX Life posted higher profit year-on-year.

ORIX Life utilizes a diverse range of sales channels, including mail order and Internet. As outlined on Page 36, policies in first half increased by 2.4x in the past 7 years. Segment assets were up 6% versus the end of the previous fiscal year on growth of new contracts. .

Next is Banking and Credit. Segment profit fell by JPY 6.1 billion year-on-year to JPY 43.8 billion. Like ORIX Life, ORIX Bank has capitalized on non-face-to-face marketing efforts using online resources and maintain steady earnings by growing real estate investment loans despite the pandemic.

The credit units for profits declined year-on-year owing to the absence of year-earlier reversals of credit cost. .

Next is Aircraft and Ships, where segment profit fell by JPY 7.2 billion year-on-year to losses of 1.5 -- JPY 1.8 billion. In the aircraft unit, Avolon wrote-down the entire value of these fleet assets, which remain in Russia, and we also recorded a loss as a result.

Despite this, the aircraft leasing market continues to recover and earnings are in an uptrend. We expect further improvement going forward. .

Meanwhile, in the ship business, favorable marine shipping rates have accelerated sales of own fleet vessels and execution of ship collateralized loans leading to strong profit growth. Segment assets declined in aircraft but increased in ships on new loan executions, leading to a 14% increase in segment assets overall. .

Next is ORIX USA, which posted new record segment profit of JPY 76.3 billion, up JPY 36 billion year-on-year. In addition to booking substantial investment gains from several PE exits, earnings in all three verticals grew. Lument, which originates and sells real estate loans and offers related asset management, the services performed well.

Segment assets rose primarily due to ForEx impacts and the -- when translated into yen. .

Next is ORIX Europe. Despite recording impairments in intangible assets, segment profits rose JPY 10.1 billion to JPY 49.6 billion. This is another record. AUM was down slightly in fourth quarter, owing to a snap in the capital markets, but net inflows were positive. .

Finally, Asia and Australia. Segment profits rose JPY 39.1 billion to JPY 52.3 billion. Again, this is the highest on record. Situation differs for each country and region within Asia and Australia. With new COVID variance on the rise, we continue to control assets exposure in line with conditions of each country and region.

New leasing business in South Korea and China grew, contributing to segment profit growth. Segment assets fell substantially, primarily due to growth in new leasing business and ForEx impact. .

And this concludes my remarks on ORIX fiscal ended March '22, full year results. But I would also like to make a comment on the impact that interest rates and ForEx has on ORIX as U.S. dollar interest rates are rising and the yen is depreciating rapidly. .

First, regarding interest rates. This financing is aligned with interest rate fluctuations. And as necessary, we may hedge our exposure using derivatives. And this kind of management is applied to each single currency. As a result, a 1% increase in U.S. dollar interest rates has an annual pretax P&L negative impact of about JPY 2 billion.

For euro, a similar move would have a roughly JPY 2 billion to JPY 3 billion negative impact on annual pretax profit. Impact of higher yen interest rate is extremely limited. If anything, higher interest rates are positive. .

For ForEx, any investment or financing carried out in foreign currencies is hedged in principle, making the P&L impact extremely limited. However, profits denominated in foreign currencies are translated into yen when brought into consolidated accounts and will therefore appear to fluctuate, depending on ForEx rates.

In other words, yen depreciation leads to higher profit from overseas when they're translated into yen. So that is the situation with ForEx and interest rate. .

That's all from me. Next, Makoto Inoue, our CEO and President, will speak. .

This is Inoue of ORIX. Some of my explanation may overlap with that of Mr. Yano, but please refer to Page 6 as well as 7 to begin with. .

In FY '22 margin, ORIX reported pretax profit of JPY 504.9 billion and net income of JPY 312.1 billion. This marks an increase of 162% versus '21 March and figure of JPY 192.4 billion, and this translates to record high EPS of JPY 259 per share.

We will pay our FY end year dividend of JPY 46.6 per share for a total of JPY 85.6 per share for the full year. Now more than 2 years have passed since the 2020 start of the COVID pandemic.

And although I cannot say it is completely over, I believe that the stable earnings generated by our diversified portfolio contributed to attainment of these figures. .

Investment gains on the sales of Yayoi contributed to JPY 163.0 billion of the JPY 504.9 billion pretax profit. Meanwhile, on a more challenging front, ORIX booked JPY 30.6 billion in write-downs related to the sales of assets associated with Kobayashi Kako.

We reported JPY 8.2 billion in write-downs on 10 aircraft lease to Russian carriers held by Avolon, which is equivalent to 30% of the total write-down of JPY 27.2 billion. We also recorded JPY 19 billion in impairments of intangible assets associated with the business model change at one of the asset management subsidiaries at ORIX Europe.

In addition, we have announced a decision to either responsibly close or redevelop the Soma and Hibikinada coal environment power plants by 2030 as one or our key sustainability goals and as a result, recorded JPY 90.6 billion in write-downs associated with these assets.

Please note that the Avolon-owned aircraft leased to Russian carriers were fully covered by [ Hayward Insurance ], and we have started the claims process with the insurance company. .

Excluding onetime profits and write-downs I just mentioned and other investment gains, FY '22 margin base profit was JPY 363.3 billion. So it may indeed take a little more time for base profits to return to pre-COVID level.

In particular, the aircraft leasing, airport concession and real estate operation businesses are currently well below their pre-COVID levels, but we expect them to contribute to a substantial improvement in base profits going forward. .

Unfortunately, just that the negative impact of COVID was starting to wane, the conflict in Russia and the Ukraine has led to higher crude oil prices, rising U.S. interest rates, semiconductor shortages, a surge in material prices and the rapid depreciation of the yen. Uncertainty is increasing.

Although the direct impact on ORIX Group is limited, higher energy prices and the economic sanctions meted against Russia are likely to be prolonged. We, therefore, need to analyze what and how much impact this could have on the global economy. .

The U.S. Federal Reserve has begun to raise interest rates, and several economic indicators are pointing towards signs of a recession. For FY '23 March end and beyond, I believe we will need to manage ORIX with much more careful attention to changes in the external climate than before. .

During this time of growing uncertainty, rather than disclosing short-term goals, I set the need to show what kind of firm we envisage ourselves in 3 years from now. For this reason, I will take this opportunity to set out our medium-term target of achieving JPY 440 billion in net income for FY '25 March end.

These figures represent a 41% increase in net income over the 3 years as compared to FY '22 March end, which translates to a double-digit growth every year. It also means that we will return to ROE of 11% or higher. .

Although we will not disclose short-term figures, we will maintain our basic policy of allocating 33% of net income each year to dividend payment, while splitting the remainder between new investments and internal results or share buyback.

Furthermore, we commit to, in principle, paying a dividend payout ratio of 33% of net income or maintaining the previous year's dividend, which is higher. .

We will opportunistically carry out share buybacks considering net income levels and the pipeline of new investments. ORIX management believes that the shares are still undervalued compared to the company's true enterprise value. And therefore, we plan to carry out JPY 50 billion worth of share buybacks during FY '23 March end. .

Now yen depreciation is accelerating. And excluding gains on the sale of Yayoi, ORIX' ratio of profit from Overseas Business is currently more than 50%. I think this trend is likely to continue for now. Although the timing of new acquisitions and sales of overseas assets will require extremely careful considerations, including the availability of U.S.

dollar financing, we intend to continue to grow our overseas businesses. .

Now please refer to Page 8. I wish to announce that at today's Board of Directors' meeting, it was decided to terminate ORIX Group's shareholder benefit program following distribution to shareholders of record as of March 31, 2024, holding 100 shares or more.

ORIX introduced the gift catalog-style shareholder benefit program at the end of FY '23 March -- '50 March end fiscal period with the aim of increasing ownership among retail shareholders. At first, our retail shareholders' number is just 92,000, but this figure has grown to over 800,000 now, contributing to the stabilization of our shareholder base.

.

When we first introduced the catalog-style shareholder benefit program, our annual dividend payment was JPY 36 per share. This has risen substantially to JPY 85.6 per share this fiscal year. ORIX has also carried out opportunistic share buybacks and we believe our original goals for the shareholder benefit program have been fulfilled.

Based on this, and on our desire to return profit to shareholders, including those overseas in a more equitable manner, we made the decision to terminate the program. ORIX will continue to improve corporate value while remaining conscious of capital efficiency, and is grateful to its shareholders for the understanding in this matter. .

Now please turn to Page 9 as well as Page 10. Although I have announced our FY '25 March end fiscal period net income target of JPY 440 billion, I will now explain how we intend to achieve it as part of our medium-term direction.

We expect the aircraft leasing, real estate operations and airport concession businesses to recover to around JPY 80 billion of their pre-COVID levels. We hold out high hope that the inbound tourists are once again welcome to Japan, especially ahead of the Osaka Expo in April of 2025. .

For financial segments, we hope that financial market outside of Japan will return to a more normal state where higher interest rates will allow us to carry out arbitrage activities. .

In a real estate -- please refer to Page 11 as well as 12. In the Real Estate segment, industrial demand for logistics facilities remain strong. We have a pipeline of over JPY 100 billion in assets and expect these projects to be completed and transferred to their owners within the next few years.

We plan to continue to promote recycling -- asset recycling model of development leasing and disposition of assets centered primarily in the Tokyo Metro area. .

In PE investment, we made mistakes with Kobayashi Kako. However, in addition to business succession support, we plan to aggressively pursue large-sized M&A deals, including carve-outs and other projects. We plan to achieve continued success with new investments centered on the U.S., Europe, Asia and Japan. .

Please turn to Page 13. Now among other existing businesses, we plan to allocate capital between real estate development, new M&A deals, including PE investments and Greenko and Elawan in our overseas Environment and Energy business. .

Elawan possesses a wealth of pipeline assets in Europe and the U.S., and projects are, by and large, proceeding on schedule. From FY '24 March end fiscal period, a large number of projects will begin its operations, and we expect these to contribute substantially to those base profits and investment gains.

Elawan operates in more than 10 countries worldwide, and plan to increase its operating capacity to 9 gigawatts, including pipeline assets. .

Greenko, that develops and operates solar, wind and hydroelectric power, is one of the largest renewable energy companies in India. The integrated renewable energy storage, or IREP, or I-R-E-P project, which combines renewable energy and storage capacity is a promising growth driver.

In March, Greenko, another strategic partnership to help ArcelorMittal, the world's second-largest steel manufacturer, introduced renewable energy in its steel manufacturing processes. The incorporating capacity, including pipeline asset, is 18 gigawatts. .

Please turn to Page 14. Robeco, the core asset management firm in ORIX Europe Holdings, has been a recognized leader in the field of sustainable investment since it developed its first-ever investment product in 1995.

The firm recorded highest AM levels in FY '22 March end, and we see that the firm has additional room to grow against a backdrop of rising demand for ESG-related investment products in the future. .

Although we do not expect high growth rates from our domestic asset management businesses, we plan to increase the scale of our business in areas where there's room to expand, such as management of mega solar project suites, aircraft fleet management and REITs. .

real estate operations, aircraft leasing and airport concessions were heavily impacted and so segment profits declined by about JPY 90 billion versus the pre-COVID levels. However, earnings in these businesses have already bottomed out, and we have entered a recovery phase in the first half of FY '22 March end.

By FY '25 March end, we expect segment profits to these businesses to return to roughly 80% of pre-COVID levels translating to an increase of roughly JPY 80 billion. We expect Japan to reopen inbound tourism by April 2025 Expo, which should allow the hotel operation and the airport concession business to recover.

In the aircraft leasing business, our exposure to Russia and Ukraine crisis was fortunately relatively small, which should allow us to maintain in a comparatively strong position versus other leasing companies. .

Please turn to Page 16. Although we continue to view Japan as a source of our [ exclusive ] profits, there are a limited number of businesses which can be expected to generate double-digit growth.

Against this backdrop, we expect business succession support, real estate development and PE fields to be potential new sources of earnings, and we will therefore continue to invest in human resources and capital in these areas. .

ORIX Life has a record growth in new contracts that is double that of the industry average, and it remains a promising growth area. ORIX Bank aims to improve its ROA to 1% or more by providing products for ESG-related investment needs and the expansion beyond commercial banking. .

Please turn to Page 17. Starting with our 1971 move into Hong Kong, ORIX have expanded in its businesses network globally and now operates in 28 countries and regions around the world. Through the 1990s, the bulk of our operations was financing-related carried out by leasing subsidiaries in Asian countries.

From the 2000s, we expanded our business areas overseas focusing primarily on operating investment and asset management categories. .

In FY '22 March end, Overseas Business contributed 47% of segment profits. Excluding the Yayoi and factoring in recent depreciation, Overseas Business is contributing more than half of ORIX earnings. Over the near term, our focus will be on these global operations.

I believe that the most important factor in expanding Overseas Business is our human resources. In order to attract specialist human resources in each business line, it is absolutely necessary that our overseas operations are managed by personnel who are well versed in the laws, regulations and the business practices in their local regions.

Localization is ORIX Group's overseas strategy, and it involves securing special resources for each functional area and our local offices and then leaving the management to them. .

From an AUM perspective, we have a business and the jurisdiction of the U.S. Securities Exchange Commission and we also require management which is knowledgeable of the U.K. Independent Anti-Slavery Commissioner, the Committee on Foreign Investment in the United States and other laws and regulations in different countries.

For this reason, I don't believe that the older prevailing practice of depending on Japanese expat management will function. Although Japanese expat employees do stay at the head of some overseas subsidiaries, business development, analysis, management operations are left to the local management team.

And as a rule, we plan to maintain this policy going forward. .

Although the rapid depreciation of yen make it challenging to sign new overseas investments, we plan to expand our Overseas Business, including ORIX USA, ORIX Europe, Elawan and Greenko. Group expansion assumes the establishment of global governance structure which is centered on our global general counsel team and legal and compliance headquarters.

In addition, we must strive to secure personnel with a long experience in their respective industries, especially its knowledge and management ability. .

For a company to be accepted into the ORIX Group via M&A, in addition to the management quality and capability, it is necessary that they share a total agreement with ORIX' basic philosophy and policies. If it's not possible, then we cannot really complete such an acquisition, and we will maintain this policy.

Pages 18 through 23 outline the management teams of our overseas subsidiaries for your reference. We have included them to show you how localized our overseas management teams have become. .

Please turn to Pages 24 and 25. In order to continue to grow as a global company, ORIX, including our overseas subsidiaries, will need to create a sense of unity to be shared across the group as a whole. We have therefore initiated a project to redefine ORIX' overall mission, vision, values and reason for being for the group.

The source of growth is in Japan, but looking ahead through the next 5 to 10 years, our expansion will be overseas. In order to achieve this, we need to attract human resources, both domestically and internationally.

I recognize that in addition to training, development, spreading the ORIX DNA throughout the organization, making group communications, establishing governance and improving the accuracy of information sharing through global digital transmission would be absolutely necessary. .

In our November 2011 sustainability report, ORIX identified 7 key goals to achieve the following detailed analysis of ESG-related material issues. Of the 7 key goals, we have already created the first, which is moving to a majority external Board of Directors.

Likewise, we are steadily moving forward in the execution of -- in the execution process of a goal to reduce greenhouse gas emissions by 50% by FY '50 March end, with the announcement of responsible closure and development of Soma and Hibikinada coal and biomass power plants.

In addition, I'm aware of the importance of establishing a governance program robust enough to manage the global corporate group and will aim to make steady progress in achieving this. .

Finally, as I mentioned in the beginning of my remarks, the next phase is clear, so we have a vital preparation period for achieving our FY '25 March end net income target of JPY 440 billion and ROE of 11% or higher.

To realize these goals, we will achieve growth by improving the profitability of each segment's business portfolio, and in particular, we will aim to increase base profits at overseas businesses. To repeat, this target for net income of JPY 440 billion translates into annualized growth of double digits.

ORIX will continue to return capital to our shareholders at the same time. Thank you very much for your kind attention. .

[Operator Instructions] So we have from SMBC Nikko Securities, Muraki-san is going to be asking the first question. .

This is Muraki from SMBC Nikko Securities. So you have shared with us your target of JPY 440 billion of net profit. So thank you very much by explaining how you're going to get there. If you could be so kind enough to explain to us your investment plan going forward.

So according to the plan, it is about JPY 350 billion in the next year, JPY 350 billion, and therefore if it was JPY 440 billion in March end '25, I think JPY 1.1 trillion worth of, I think, the total investment, I suppose, in order to generate 33% of payout.

So in the next 3 years, in terms of the new investment, out of this JPY 700 billion to JPY 800 billion, how much of this fund will be appropriated to the investment is my question. And also, the area, too? So you have, in fact, shared with us your idea in trying to identify the area that replaces Yayoi.

So if you could be so kind enough to share your investment plan for the next 2 years. .

So according to Page 9, I know you may perhaps try to measure it by making use of your scale -- different scales, but this is just an image. And going to -- back to Page 7, on a segment asset basis, so JPY 12 trillion is going to be increasing to JPY 14 trillion. However, these numbers are not precise.

So I suppose it will increase by JPY 2 trillion to JPY 3 trillion, I suppose. Out of which, majority, in fact, accounts for bank and also life insurance. And the bank and life insurance, of course, has its proprietary funding source. So therefore, ORIX' corporate loan is not required. .

However, Elawan as well as Greenko -- well, Greenko Holdings is just to the extent of 20%, though. However, Elawan and Greenko, if we were to combine the two, they have a pipeline of about JPY 2 trillion or more. So we will not be making an investment through equity for the time being.

And if we were to -- of course, we would have to think about, of course, disposing some of the assets, but I think we would require more than JPY 1 trillion of fund. So renewable energy would be the likely area and the private equity, PE, but we'd do it. So we'd make an investment in opportunistic manner.

So pipeline is about the several hundreds of billions of yen. .

And so to be honest with you, some of -- many of these cases are going through the due diligence. I would not be able to disclose these cases, but ORIX' corporate loan being made use of in generating the fund, it would have to be -- I think the amount would lead to JPY 1 trillion or so.

So in other words, we are not, of course, considering to procure the money in other ways, but we would, of course, try to recycle some of the capital and also, basically, we will be targeting an investment in renewable energy and also some of the acquisition deals in United States. Those will be the main target. .

Other than that, PE, maybe carve-out deals perhaps, but I'm not sure, in Japan perhaps, but these are the ideas that we have.

And what is borrowing mix? JPY 1 trillion or JPY 2 trillion of corporate loan, will we be able to have enough credit to receive the extension of the loans? But that would be pretty tough if you were to think about the next 3 years. So which means that the PBR below 1 must be pushed up to more than 1x.

Otherwise, we will not be able to achieve the flexibility that is needed. .

So the first 1 or 2 years, we need to, of course, bring back the share price level so that we'll be able to achieve PBR of more than 1x. And thereby, we'll be able to expand the new investment further. And with that in mind, in the next 3 years, we want you to provide us with a graceful period of about 3 years.

And that's what we meant by showing of this slide. I hope this answers your question. .

Yes. .

So as to your last point, so it is, of course, dependent on the deals, the availability, of course, but dependent on the deals. So it may perhaps be 24% in order to maintain the equity ratio of 24%. Equity funding, the financing is not going to be denied altogether. No, I would not deny the possibility.

But however, talking about the equity ratio, this is an end result. It could be 20% or whatever. We remain to be flexible in the maintenance of this equity ratio. But we don't have the idea of remaining to be not proactive in terms of making a new investment just because of this -- the lack of flexibility in terms of financing. So this is our idea. .

Daiwa Securities, Watanabe-san, please ask your question. .

Yes. This is Watanabe with Daiwa Securities. On Page 6, you are talking about shareholder return. JPY 50 billion buyback was set and this is until in the March, which is a little bit long. Are you going to add more? And 11.7% ROE, this means that JPY 3.6 trillion.

So excess cash is maybe about the JPY 700 billion or JPY 800 billion in terms of accumulation of profits. If this is correct, maybe JPY 200 billion or JPY 300 billion could be allocated to buyback according to my potential scenario.

So what is your policy or approach for share buybacks?.

I was expecting this question. 11.7% ROE, you want to go back to this higher than 11%. Basically, equity ratio, well, it will be 24% according to this scenario. When I explained in the past, I said that we should not exceed 25%. So shareholder return has to be done more opportunistically if the situation is to exceed 25%.

That is the thinking behind this. For FY '22 March end, JPY 85.6 dividend. And also for '22 March, buyback, this is about 48% return or payout ratio. So it is possible that we may be short by about JPY 50 billion if you do the calculation, but we want to be flexible..

JPY 50 billion within 1 year may look wrong. You may question what I'm doing. But if we do the buyback for JPY 50 billion, for example, we want to monitor the situation on the market and we want to respond in a flexible manner..

So with regard to the buyback, I think I've mentioned this before, we did have a lot of discussions at BOD. There are many new projects that we can invest into, and we don't want to be unable to finance the new investments just because we have to pay more for the buyback. We don't want to hesitate in investing into new potential deals.

So this is the capital policy that we want to maintain. So we want to keep that in mind. And capital policy and shareholder return is considered based on that..

Sorry, JPY 3.7 trillion equity may be achieved if we go forward with this. And we believe that this is maybe too much, JPY 3.7 trillion. And if we do the asset turnover, recycling and the segment asset, it does not inflate too much, and we can maintain it at about JPY 12 trillion or JPY 13 trillion and achieve that rate of equity that I mentioned.

In that case, it would be necessary to increase the buyback or the new investments so that we can get more profit than a share buyback. .

Can we find such deal? If not, we have to consider share buybacks.

So that is the structure that I'm trying to run the management by, do you understand?.

I see. .

So this JPY 50 billion -- well, if there are no other deals and there's only JPY 50 billion, everybody will be upset. So if that's the situation, we'd have to go back to that and reconsider. .

I understand. .

UFJ Morgan Stanley, Tsujino-san, please ask your question. .

So thank you very much for sharing with us your medium-term direction. So I suppose you would say please refrain from asking the question for this fiscal period. But that was the same, even at the time of pre-COVID period. So this time, for the full year, after the dividend, you have kindly come out with your expectations for the full year dividend.

So it is easier for us to figure out what is your expectation for the full year. So the reason why you have not come up with a forecast for the profit generation for this year is because the dividend is flat. So I suppose you can write down JPY 310 billion of profit.

But if your achievement is lower than that of JPY 310 billion, you didn't want to bring about disappointment, and that is why you did not put down the number in such a way.

But is it because you didn't want to show a flat trend expectations going forward? Or because you have this strong kind of intent, you're wanting to grow the profit? So what was the reason behind not putting down the short-term profit expectations?.

No, please continue. You don't have to stop. .

No, the reason why you have stopped this shareholders' benefit program, so you -- is it because that you felt that it was not kind of equitable in offering those just to the Japanese retail investors, the shareholders, and this is why you have decided to -- decide to stop it? And in a total region basis, 48% is to be achieved.

So therefore, if you have any kind of leeway, you would express that or you would kind of make use of this leeway in a -- not in a form of a benefit program but by shareholders return. .

Now let me explain about the shareholders' benefit program. When we made the first announcement, our general affairs department was in complete chaos if we were to make this announcement because I'm sure there will be a lot of, of course, phone calls criticizing for this stoppage.

But thinking about the overseas investors, although they may not have raised their voices, but for sure, it was pretty unfair. .

So this is why we were trying to figure out what will be the best timing in stopping this program offering. But all these gifts that was offered in a form of a catalog, in fact, are all investees throughout the country of Japan.

The other providers or the suppliers of these gifts that appear on the catalog, and they were happy to take part in this catalog, which, of course, created some businesses for them as well. .

And as a result of carrying those products, there are some companies who have made some capital investment in order to provide these gifts to make an appearance on this catalog.

But -- so this is why a short notice of about 6 months in terminating this program would give some kind of burden or some problems being caused to some of these business partners as well. So this is why the cost that incurred from this program is about JPY 3 billion to JPY 4 billion or so.

So therefore, this benefits program that are offered to retail shareholders, of course, will be used somewhere else for the sake of returning the profit to all the shareholders, which, of course, is something that we need to think about in the future. .

Also, I suppose, at the time when we announced the midterm business plan last time, I think there was a similar kind of argument. This JPY 440 billion of profit, I suppose you may be thinking that this number is pretty conservative.

Well, putting this aside for a minute, I think the main challenge for us is, as I have been explaining over and over again, the new investment, inclusive of PEs, for example, Elawan-inclusive that is, the goodwill as well as tangible as well as intangible assets may grow.

And if these fixed assets, intangible assets goes up, increases, then of course, the depreciation charges go up. So in the first 2 years, the earnings contribution from day 1 is not to be expected from any of these deals. .

So this is why in the first 1 to 2 years, we hope that the similar amount as compared to the prior -- the previous year could be achieved. We have such a confidence, 10% of increase or 20% of increase may not be that easy. So this is why we have come out with a 3-year plan and the JPY 440 billion of profit target.

However, the payout ratio is going to be the same or if not higher. And thereby, we seek for the understanding on the part of the shareholders. And hopefully, we will not be in the position to be receiving a lot of negative traits, the criticism. .

So there will be no desire of a profit. But of course, there are a number of uncertainties inclusive COVID, and the impact that is given to the external -- the environment, the society. We are not, of course, intending to, of course, lessen or decrease our profit. And that was all in my mind as we have put together this plan. .

Yes, that is helpful. .

BofA Securities, Sasaki-san, please ask your question. .

This is Sasaki, Bank of America. I have just one question.

JPY 440 billion target, what is the pathway to achieve this? Is it already on the balance sheet? Are the deals already clearly known? And with what's available right now, what's clear right now, how much of this JPY 440 billion can you achieve?.

Considering in the next 2 to 3 years, Fed may increase the rate, and we have to think about the market situation with inflation, material costs may go up and the profitability of renewable energy may go down. The capital market may even suffer greatly. So renewable energy and PE investments, I believe that these are strong drivers.

But at this point in time, how do you assess the risk in these areas? What is your view?.

In terms of numbers, for FY '22 March end, we are talking about best profit of JPY 363 billion or so. And if everything goes smoothly, real estate management and aircraft, we can get about JPY 80 billion or JPY 90 billion recovery. So that's already JPY 450 billion.

And the Overseas Business, when we put the numbers together, we were looking at JPY 115 to a dollar, but now JPY 130 to the dollar, approximately. .

So I don't think this number is too difficult to achieve. And in other words, to be honest, maybe this number was too conservative. So JPY 360 billion for base profit. And if that all three segments recover, pretax profit will be about JPY 450 billion. And all we need to do is add another JPY 100 billion, and that's JPY 550 billion. .

So JPY 440 billion is well within reach. It's not a high hurdle for us to achieve, that we cannot really see the situation very clearly. When the yen is weak, overseas assets should be sold, that's the basic policy. And when the yen is strong, we make investments.

And basically, we finance denominated in local currency, and we use the local currency for hedging as well. So it's not such a big deal, but for profit part, there is no hedging. So when the yen is weak and the -- you make investment, then the high price will be put on the books, and this is something that we want to avoid. .

To be honest, at this point in time, we have to be very careful about investing overseas. That is the basic thinking. When the yen is week, what we need to do is allocate investments into Japan, we can buy Japanese assets cheaply. So once yen becomes stronger, then we can go for overseas assets. So that is the basic investments plan. .

But JPY 130 per dollar, well, I think this is a battle between [ Mr. Makoto ] and hedge fund, [ Mr. Makoto ] will lose, and we can reach even JPY 140. So we have to see what happens. .

And in terms of overseas investments, we have to really consider how to hedge. This is going to be a very tricky thing for us to assess. We will try to do that. And also with overseas deals, if we sell something right now, we can get the 30% capital gain because we invested at JPY 100 and now it's JPY 130 per dollar.

So we have to think about profit-taking. And also Elawan, basically, is based on project finance. So we minimize the capital increase. And -- or sorry, equity. And we want to sell, for example, renewable energy, and they use that to finance that, this is another scenario that we can consider.

So for the time being, we need to think about a way of investing without flowing money out of Japan to other countries. So this is the start right now. And I hope that answers your question. .

Fair enough. So you have already all these projects in sight to achieve JPY 440 billion.

Housing loan may crash in the United States or the market may have and that would not worry you?.

Well, if it's Black Monday or global financial crisis, of course, we will be in trouble. But if it's a small decline on the market, I'm sure that we can respond to the situation, adapt to the situation. Your situation is basically stand-alone and that they're trying to do the asset recycling as well.

So I don't think we have to worry about market crash so much. We have considered to some extent, but it's not a big concern for us. That's my stance. .

I understand. .

Let us move on to the next question. And Mr.

Niwa, please?.

I am from Citi Securities. My name is Niwa. I hope you can hear my voice okay. .

Yes, we can. .

Referring to Page 9, on the mid- to long term, I have some questions -- some presumptions. So there are some overlaps with Sasaki-san's question.

From -- first of all, assuming that the official interest rate, in fact, in the United States is to be 3% to 4%, would it be positive for you? And at that time, the finance business is not going to be your pillar but the operations would become your pillar or profit generation rather? So the private PE investment perhaps is going to be your major pillar, may I take it?.

And also on a mid- to long term, so you're going to be targeting at JPY 400 billion. But I think it looks as if you're going to be achieving more than JPY 600 billion by 2030 according to this diagram.

Or have you -- what is your thinking behind this?.

So as a result of interest rate hike, to begin with, talking about the PE investment and also asset management, why did we decided to make a shift towards those business areas is because arbitrage was no longer possible. The lease fee was 15% or so. The cost was 10% or so.

So the arbitrage was pretty possible by 5% or so, whether result of interest rates getting lower and our profit had shrunk. .

But in the United States, you can still be enjoying some spread. But in Japan, at the most, it is about 20, 30 or even 50 basis points. In the case of United States, even if it was to be a middle market, whereas you would enjoy 5% to 6%, 2.3% is quite that tough. And also tangible asset being a collateral is not quite possible.

So intangible will be the only security. So therefore, you will now be able to enjoy high margin or higher spread. So this is why we have decided to shift towards PE as well as asset management. .

Of course, we would -- but there will be some financial kind of engineering that would be possible in generating some margin. So going forward, the financial businesses that did not generate much of the profits in the past, we are going to be enforcing our assets and structure of organization so that we will be able to make the most out of this time.

Thanks to the hike of the interest rate, the financial arbitrage could perhaps be possible. So this is why we want to come back into this market, in other words. .

So while the financial businesses was not fast in its growth, but I suppose we can continue -- we may start to see some contributions coming from financial businesses overseas, not in Japan, though, because interest rate remains to be low. And if the -- however though, if the interest rate goes up to 2% to 3%, the arbitrage may perhaps be possible.

But Japan, unfortunately, is behind its peers in the world. So this is why the recovery or the return back to what we got to be a normal financial market is, I think, what we expect. .

So what was the next question?.

So as compared to the last year, I think, why is the profit level higher by 1.5x? Did you gain like more confidence? What was behind the thinking in your mind?.

So thanks to COVID or because of COVID, there was a delay in achieving our plan. And the process of recovering by the time now, we hope that we would be back to -- almost back to normal, but it was not the case.

So the property operations and the real estate operations as well as concession, we should be able to recover back about JPY 80 billion to JPY 90 billion. And if this is achievable within this fiscal period, then the new investment becomes feasible. .

And in addition to that, I don't know whether it can be described to be recession, but as a result of interest rate hike, private equity inclusive, so the buy -- or the sellers' market rather, the sellers' market will be able to make some bets in the sellers' market and the new interesting investment opportunity may start to arise.

So if this starts to accelerate, and this is our expectation for this year, time line-wise, we may be able to kind of focus down a little more, we thought. .

So '25 -- year '25 March end, inclusive of the investment and other investments, I'm sorry to say so, but ORIX' presence, in fact, is much higher than before just because -- just by mentioning the name ORIX, we can kind of invite many interesting deals.

So we are pretty confident -- or we have gained more confidence than before in leveraging on this brand, ORIX. And this is why I have come up with this forecast, which is different from last year. .

So JPY 440 billion that I have mentioned, is it just a part of the process and it's still the middle of the journey. So JPY 440 billion and next JPY 500 billion, JPY 600 billion. So this is what we aim to achieve. And the trading companies may be generating much more profit. And the capital gain, of course, is what we can expect.

But the base profit is what we are basing our forecast and expectations on. So CAGR of double digits to be achieved. And so that '25 March end period, it's just a one phase from our perspective, if you could understand it to be so. I hope this answers your question. .

Yes, I think I was successful in reading between the lines. .

UBS Securities, Okada-san, please ask your question now. .

Yes, this is Okada with UBS. I want to ask about net income. Excluding Yayoi, profit increase is about JPY 80 billion to JPY 90 billion.

And what about by segment, what is the plan? Can you please talk about the major factors behind this?.

In addition, in the third quarter presentation, you talked about product equity investment pipeline of about JPY 400 billion. And there are some large deals that would contribute to profit from day 1. That's what you said.

And in the new year plan, how is that reflected? Can we expect an upside on the profit?.

I would like to respond to the second question first from myself and Yano-san will respond to your second question -- or first question, excuse me. With regard to your second question, for this fiscal year and next, our numbers are quite conservative. Large capital gain is not included in the assumption. We want to increase the base profit.

And also, we want to see the growth in the three segments that I mentioned. And the profit from each segment combined should reach JPY 312 billion or higher. .

And with regard to JPY 440 billion, in '23 and '24 March end, private equity capital gain is scheduled to some extent. So these numbers are reflected in the JPY 440 billion. That's our plan.

Can you please respond to the first question?.

Yes, this is Yano speaking, I would like to explain. I will start from some detail. So Yayoi profit was included in the profit of '22 March end, but Soma, Hibikinada impairment also occurred, and we also had the impairment related to Avolon. So there is an offset, which means that in the end, it's about JPY 80 billion. And also, there was a tax aspect.

Kobayashi Kako impairment was included for this fiscal year. But this is not something that we can recover from the tax scheme. .

For Yayoi, the exit impact was not very big. In other words, the tax rate was quite high. So the tax rate for the fiscal term was high. So '23 March end, we have to really increase the profit. Otherwise, the bottom line will not be the same. That would be a concern, but that's not really what's happening. .

So where do we make the recovery? First of all, these segments impacted by COVID-19 pandemic, we are not expecting a rapid recovery, but we are expecting recovery to some extent. So they will turn from negative to positive contributions. .

And then in terms of PE investments, we no longer have Kobayashi Kako. And also excluding Kobayashi Kako, in this fiscal year, we already increased in profit. And also we will be considering exits, which could push up the profit. .

With the Environment and Energy, again, we expect steady growth overseas. And also with regard to other segments, we will be continuously making efforts to grow. So through these efforts, these numbers are achievable. Simply speaking, those are the positive factors that we believe are quite likely.

Does that answer your question?.

Yes. Thank you very much for your kind explanation. .

Thank you very much for the questions. So this is going to be the last question. From Mizuho Securities, Sato-san, please. .

I'm Sato from Mizuho Securities. I hope you can hear my voice okay. .

Yes, we can. .

Well, I'm sorry to ask such a detailed question. On Page 17 of your deck, in the footnote, so there are some JPY 30 billion, which has not been allocated to each segment.

If you could be so kind enough to explain the nuance to this, to all the segments and units, is there any kind of new business that you are going to be getting better over the next 3 years? Is it the image that you have behind this? Or if you -- or would you be able to build up JPY 600 billion by the existing business -- lines of businesses? Or do you intend to top up by this amount? What is your idea behind this footnote?.

First of all, well, as we have been explaining from earlier, so in the midterm business direction or business plan, this is just a direction. And there are some discrepancies in the details of the numbers. On this page, so in each of the areas, the profit that appears, if you were to add them up, there are some differences by JPY 30 billion or so.

So -- because these are approximate kind of numbers that we're imagining to achieve, and as you can imagine, there are some new businesses that will be added, so -- which are not -- which cannot be allocated to any units or segments. So JPY 30 billion, in fact, is going to be some discrepancy because of this kind of setup. .

So if I could perhaps follow up. This is Inoue now, and because of the depreciation of the yen, there are some unrealized gain in the overseas assets, the latent kind of profit. And we may have decided to profit-take in some of these assets. And at the moment, we are in discussion with the overseas location.

And so this JPY 130 against the dollar, if this was to be -- if this is to be integrated as something that is favorable, we may perhaps start disposing some of the assets to end up gaining some on investment, but we would have to make a decision dependent on the market conditions. .

So this JPY 30 billion or so of a number, I know that it is -- the JPY 30 billion was an excess amount that appeared -- or had they managed as a result of all these kind of works in our mind, that was. .

That concludes the Q&A session. Mr. Inoue, can you please provide us with your closing remarks. .

Yes. Thank you. So this is the 3-year plan, and we will, of course, make up most efforts in the first and the second year. I hope that you understand our approach, 41% increase in profit at double-digit growth, we would like to achieve this on an annualized basis as much as possible.

And if we have excess cash, we will -- we may do share buyback and new investments IIR is better, then we will allocate the funding to that. So please allow us with some flexibility in that aspect. Thank you very much for joining us today. .

Thank you. And that concludes the meeting with ORIX. Thank you very much for your kind participation for today. Thank you. Thank you, and goodbye..

[Statements in English on this transcript were spoken by an interpreter present on the live call.].