Orix Corporation · TSE:8591
Orix — Q2 2022 Earnings Presentation
57 slides from Orix's earnings presentation, Nov 4, 2021
Slide 1: Second Quarter Consolidated Financial Results
ORIX Corporation Second Quarter Consolidated Financial Results For The Six-Month Period Ended September 30, 2021 Makoto Inoue Member of the Board of Directors Representative Executive Officer President & CEO November 4, 2021 1 (TSE: 8591; NYSE: IX) Company Name Copyright © 2020 ORIX Corporation All
Slide 2: Earnings Overview H1 Net Income & ROE
Earnings Overview H1 Net Income & ROE ✓ 146.7 JPY Bn in net income (+56.3% YoY, 58.7% of FY22.3 forecast of 250.0 JPY Bn); annualized ROE of 9.5% ✓ Best quarterly net income since start of pandemic (up 24.9% QoQ) Net income* and ROE Quarterly Net Income and ROE Trends (JPY Bn) 400.0 12.1% 11.6% 15.0
Slide 3: Earnings Overview H1 Segment Profit Breakdown
Earnings Overview H1 Segment Profit Breakdown 173.5 JPY Bn, up by 45.6% YoY (+54.3 JPY Bn) FY22.3 H1 Base Profits Five segments recorded major profit gains YoY: Corporate Financial Services & Maintenance Leasing, Segment profits Real Estate, ORIX USA, ORIX Europe and Asia/Australia 240.1 JPY Bn up b
Slide 4: Segment Performance (1) Segment Profits
Segment Performance (1) Segment Profits ✓ Q2 profit rose QoQ in eight segments ✓ Five segments recorded YoY profit increases of Y10 bn or more, totaling Y83.4 bn (+53.2%) in growth (JPY Bn) (JPY Bn) 240.1 21.3 H1 21.3 H2 22.3 Q1 22.3 Q2 22.3 H1 QoQ YoY Highlight Corporate Financial Services Profits
Slide 5: Segment Performance (2) Segment Assets
Segment Performance (2) Segment Assets ✓ Assets increased on continued new investment (Elawan M&A closed in Environment and Energy segment) ✓ Annualized segment asset ROA recovered to 2.6%, up 0.9 ppt vs. end-FY21.3 (JPY Bn) (JPY Bn) 11,601.5 11,341.8 22.3 H1 YTD ROA* Highlight 1,659.6 Corporate Fin
Slide 6: Review of FY22.3 H1
Review of FY22.3 H1 Current operating environment ✓ Picture of post-COVID “new normal” beginning to emerge ✓ Excessive liquidity worldwide has made it difficult to find cheap assets, creating a better environment for sellers ✓ Continue to seek worthwhile new investment opportunities while retaining
Slide 7: Earnings Highlights
Earnings Highlights ✓ Achieved 58.7% of 250 JPY Bn FY22.3 net income target, H1 net income up 56.3% YoY, annualized ROE of 9.5% ✓ S&P upgraded ORIX’s outlook from A- (Negative) to A- (Stable) Achievement vs. FY22.3 H1 YoY FY22.3 target Net income 146.7 JPY Bn +56.3％ 58.7% ROE 9.5％ ＋3.2 ppt - Shareho
Slide 8: Investment Gains
Investment Gains ✓ Recorded investment gains / valuation gains from ORIX USA, Real Estate segment, and Safie (Corporate Financial Services business partner, cloud video recording platform) ✓ Consistently generating more than 100 JPY Bn in investment gains annually from variety of sources (JPY Bn) Se
Slide 9: New Investments & Pipeline
New Investments & Pipeline ✓ Completed approximately 800 JPY Bn in new investments since start of FY21.3, primarily in Environment and Energy, asset management, private equity ✓ Retain ample investment pipeline for future growth, including Osaka integrated resort project (MICE-IR) Investment Area Ma
Slide 10: Renewable Energy Business
Renewable Energy Business ✓ ORIX’s renewable energy capacity: diverse portfolio of quality assets ✓ Extensive pipeline of projects in development, well positioned to grow generating capacity worldwide Generating Capacity (In Operation / Under Construction) ORIX Group Domestic Company ‘A’ Domestic Co
Slide 11: Osaka MICE-IR Project
Osaka MICE-IR Project ✓ On September 28, ORIX-MGM consortium was selected to operate planned integrated resort development. Osaka Prefecture/City aim to apply to central government for approval of area development plan in April 2022 ✓ Aims to contribute to sustainable growth of the Kansai region, an
Slide 12: ESG-related Material Issues
ESG-related Material Issues ✓ Identification of material issues and focus areas for promoting sustainability Material issues and focus areas to strengthen Material issues and focus areas to reduce Material issues and focus areas to reduce governance based on transparency, compliance, climate change
Slide 13: ESG-related Key Goals
ESG-related Key Goals ✓ ORIX Group has established the following ESG-related key goals based on our material issues and focus areas 1. Outside directors to account for over half of the composition of the ORIX Group Board of Directors by the General Meeting of Shareholders set to be held in June 2023
Slide 14: ORIX Group Sustainable Investing and Lending Policy
ORIX Group Sustainable Investing and Lending Policy ✓ Basic policy is to make decisions based on thorough consideration of the environmental and social effects of each transaction ✓ In addition to sovereign risks such as government finances and legislation, human rights risks are also key factors in
Slide 15: Establishment of Sustainability Committee
Establishment of Sustainability Committee ORIX has established a Sustainability Committee, an executive body to provide solutions for material issues and key goals ⚫ ORIX Group CEO to serve as chair, with members comprised of segment and department heads with direct ESG-related responsibilities. Wil
Slide 16: ORIX Group GHG (CO2) Emissions
ORIX Group GHG (CO2) Emissions ✓ Two coal-biomass co-fired power plants in Environment and Energy segment comprise 941,000 tons of 1.266 million ton total emissions (Unit: 10,000 Tons CO2) FY20.3 ORIX Group GHG (CO2) Emissions (Baseline) Environment and Energy Segment (Major Facilities only) Total T
Slide 17: GHG (CO2) Reduction Targets
GHG (CO2) Reduction Targets Current total: Measures to Reduce CO2 Emissions Key Goal #4 Key Goal #5 1.266 million tons 1. Increase woodchip mix to maximum of 40% at Soma and Hibikinada Coal and Biomass Power Plants 50% 2. Promote conversion to next-generation fuel reduction sources (including black
Slide 18: GHG (CO2) Avoided Emissions through Renewable Energy
GHG (CO2) Avoided Emissions through Renewable Energy ✓ ORIX Group contributes to avoided emissions, primarily through its renewable energy business ✓ GHG avoided emissions total more than 3.6 million tons, far exceeding actual emissions ORIX Group GHG (CO2) Avoided Emissions (Unit: Million tons CO2e
Slide 19: (blank)
(blank) Copyright © 2021 ORIX Corporation All rights reserved. 19
Slide 20: Segment Performance
Segment Performance Copyright © 2021 ORIX Corporation All rights reserved. 20
Slide 21: Segment Performance (1) Corporate Financial Services and Maintenance Leasing
Segment Performance (1) Corporate Financial Services and Maintenance Leasing Segment Profits: 52.4 JPY Bn YoY +21.3 JPY Bn (+69％) Segment Assets: 1,659.6 JPY Bn YTD -16.4 JPY Bn (-1%) ✓ Investment gains, gains on remaining stake recorded via IPO of Corporate ✓ Continue to strategically reduce exposu
Slide 22: Corporate Financial Services and Maintenance Leasing
Corporate Financial Services and Maintenance Leasing Main business: Finance and fee business; Yayoi; leasing and rental of automobiles, electronic measuring instruments and ICT-related equipment Corporate Financial Services Yayoi Auto Rentec Provide solutions for SMEs, Rental & specialized services
Slide 23: Segment Performance (2) Real Estate
Segment Performance (2) Real Estate Segment Profits: 23.9 JPY Bn YoY +12.9 JPY Bn (+117%) Segment Assets: 878.1 JPY Bn YTD +6.0 JPY Bn (+1%) ✓ Profits up sharply on sale of logistics centers ✓ Assets flat on ongoing new development and sale of logistics centers ✓ DAIKYO profits doubled YoY, on stron
Slide 24: Real Estate
Real Estate Main Business: Real estate development, rental and management; facility operations; real estate asset management Segment Assets Unrealized gains on rental Segment Asset Trends （as of Mar 31, 2021） properties* Primarily leased Primarily DAIKYO logistics facilities, condominiums office bui
Slide 25: Segment Performance (3) PE Investment and Concession
Segment Performance (3) PE Investment and Concession Segment Profits: 1.8 JPY Bn YoY -2.5 JPY Bn (-57%) Segment Assets: 368.8 JPY Bn YTD -9.9 JPY Bn (-3%) ✓ Private equity: Solid earnings at investees led to profit growth ✓ Segments assets lower owing to concession business losses ✓ Concession: Stil
Slide 26: PE Investment and Concession
PE Investment and Concession ✓ Currently invested in 17 companies (as of end-Sept 2021); aim to develop new business segments for ORIX Investment Track Record What makes us unique? Leveraging our broad network and ORIX has not only sufficient funding ability but also possesses significant operating
Slide 27: Segment Performance (4) Environment and Energy
Segment Performance (4) Environment and Energy Segment Profits: 9.7 JPY Bn YoY -3.9 JPY Bn (-29％) Segment Assets: 695.4 JPY Bn YTD +206.3 JPY Bn (+42%) ✓ Segment profits higher, excluding valuation gains booked in FY21.3 Q1 ✓ Assets higher with completed Elawan acquisition ✓ Greenko began contributi
Slide 28: Global Renewable Energy Portfolio
Global Renewable Energy Portfolio ✓ Total net owned operating capacity of 3 GW* worldwide （as of September 30, 2021） Around 2 GW of projects under construction, primarily at Elawan, Greenko Pipeline assets include Greenko (more than 8 GW), Elawan (more than 9 GW) Spain & other locations China Japan
Slide 29: Segment Performance (5) Insurance
Segment Performance (5) Insurance Segment Profits: 33.0 JPY Bn YoY -2.3 JPY Bn (-7%) Segment Assets: 1,963.0 JPY Bn YTD +3.4 JPY Bn (flat) ✓ ORIX Life: Profits up on growth in premium income, higher income from ✓ Assets mostly flat vs. end-FY21.3 growth in assets ✓ Segment profits lower YoY on absen
Slide 30: Life Insurance
Life Insurance ✓ Omni-channel strategy utilizing four sales channels - agency, banks and other financial institutions, mail order and Internet sales, and in-person sales by ORIX Life reps ✓ Pioneering Internet / mail-order sales channel first launched in 1997. Industry leader in share of direct chan
Slide 31: Segment Performance (6) Banking and Credit
Segment Performance (6) Banking and Credit Segment Profits: 22.1 JPY Bn YoY -3.1 JPY Bn (-12%) Segment Assets: 2,710.0 JPY Bn YTD +19.4 JPY Bn (+1%) ✓ Banking: Profits higher on increase in assets ✓ Banking: New financing execution for renewable energy, other projects ✓ Credit: Profits fell YoY due
Slide 32: Banking
Banking ✓ ORIX Bank’s differentiated service menu focused on real-estate investment loans helps it realize a high ROE, ROA compared to peers ✓ Low-cost business model with no branches, ATMs, or settlement services delivers a low expense ratio and a high loan-to-deposit ratio FY21.3 Expense Ratio FY2
Slide 33: Segment Performance (7) Aircraft and Ships
Segment Performance (7) Aircraft and Ships Segment Profits: 0.6 JPY Bn YoY -4.9 JPY Bn (-89%) Segment Assets: 615.6 JPY Bn YTD +13.9 JPY Bn (+2％) ✓ Avolon returned to the black in Q2, but profits still down YoY ✓ Aircraft: Assets down owing to sale & depreciation ✓ Ships business profits up on stron
Slide 34: Aircraft Leasing Business
Aircraft Leasing Business GLOBALLY NARROWBODY OEM DIVERSE WEIGHTING BREAKDOWN Owned Committed ORIX （NBV） （number of aircraft） （number of aircraft） fleet fleet 68 0 14% 16% Average age 33% 6.5 years 43% 57% Remaining Managed fleet lease term 154 53% 84% 6.3 years APAC Narrowbody Airbus Americas EMEA
Slide 35: Segment Performance (8) ORIX USA
Segment Performance (8) ORIX USA Segment Profits : 47.6 JPY Bn YoY +37.7 JPY Bn (+381%) Segment Assets : 1,188.4 JPY Bn YTD -31.6 JPY Bn (-3％) ✓ Profits up sharply on investment gains from multiple PE exits, including RoadSafe Traffic ✓ Assets down vs. end-FY21.3 on ongoing caution about credit deal
Slide 36: ORIX USA
ORIX USA ✓ Focused on serving middle market clients across three verticals: Credit, Real Estate, Private Equity Aim to achieve further growth in asset management business in all three verticals (total AUM / AUA $73.3 Bn) ✓ Operates hybrid strategy, investing own principal capital while providing ass
Slide 37: Segment Performance (9) ORIX Europe
Segment Performance (9) ORIX Europe Segment Profits: 28.6 JPY Bn YoY +11.5 JPY Bn (+67%) Segment Assets: 397.1 JPY Bn YTD +27.5 JPY Bn (+7%) ✓ AUM hit new record level ✓ Assets up vs. end-FY22.3 on increase in investment in securities ✓ Robeco, a leader in ESG investing, successfully increased susta
Slide 38: ORIX Europe
ORIX Europe ✓ Segment business: Equities, fixed income, renewable energy and other fund management ✓ Actively promoting ESG investment, especially through Robeco and Gravis Capital Management An ESG pioneer since the mid-1990s, Robeco is Major Subsidiaries Head Office Primary Business Established re
Slide 39: ORIX Group Asset Management Business
ORIX Group Asset Management Business ✓ Expanding scope of business from traditional equity and fixed income management (OCE) to alternative asset management, primarily in U.S., Europe ORIX Group AUM OCE (ORIX Corporation Europe) (as of end-Sept 2021): AUM OCU (ORIX Corporation USA) ~52 JPY Tn 42.6 J
Slide 40: Segment Performance (10) Asia & Australia
Segment Performance (10) Asia & Australia Segment Profits : 20.5 JPY Bn YoY +16.7 JPY Bn（+440%） Segment Assets : 1,125.4 JPY Bn YTD +41.2 JPY Bn（+4％） ✓ Profits up sharply on increase in leasing in South Korea, China ✓ Assets rose substantially on new execution, including auto leasing in ✓ Auto leasi
Slide 41: Asia and Australia
Asia and Australia Main Business: Finance and investment businesses in Asia and Australia Segment Assets NET Segment Revenue* Yields on Financial Assets (as of Mar 31, 2021) （FY 21.3） (JPY Bn) 7.5% 650.0 7.1% 7.1% 4% 6.9% 6.9% 7.0% Other 600.0 7.0% 16% 6.5% 18% 31% 550.0 Other Investment in Net Inve
Slide 42: Appendix
Appendix Copyright © 2021 ORIX Corporation All rights reserved. 42
Slide 43: About ORIX: Proven Track Record of Profitability
About ORIX Proven Track Record of Profitability ✓ ORIX has achieved 56 years of sustained, profitable growth JPY Bn Net Income Attributable to ORIX Corporation Shareholders 350 300 250 FY2002.3 FY2009.3 Burst of IT bubble Global financial crisis 200 FY1998.3 150 Asian currency crisis FY1993.3 Burst
Slide 44: About ORIX: Expertise in Business and Collective Capabilities
About ORIX Expertise in Business and Collective Capabilities of the Group ✓ ORIX will continue to enhance our expertise in finance and tangible assets as we synergistically expand our businesses Copyright © 2021 ORIX Corporation All rights reserved. 44
Slide 45: About ORIX: Global Network
About ORIX Global Network ✓ Using its expertise cultivated in Japan, ORIX has expanded its business globally, with operations in 28 countries and regions worldwide Copyright © 2021 ORIX Corporation All rights reserved. 45
Slide 46: About ORIX: Profits and Assets by Segment
About ORIX Profits and Assets by Segment ✓ Individual businesses demonstrate their strengths to the maximum extent possible to bring about synergies 8% Corporate Financial Services Finance and fee business; leasing and rental of automobiles, electronic measuring 22% and Maintenance Leasing instrumen
Slide 47: Outlook Beyond FY22.3
Outlook Beyond FY22.3 (Announced at FY21.3 Results Briefing on May 13, 2021) ✓ Forecast FY22.3 net income of 250.0 JPY Bn Aim to quickly return to net income of 300.0 JPY Bn and achieve 400.0 JPY Bn in medium to long term ✓ ROE: Returning to ROE of 11% or higher is management’s top priority (JPY Bn)
Slide 48: Three Portfolio Categories
Three Portfolio Categories (Breakdown of Financing, Asset Management and Insurance, Operation and Investment Categories on P47) Three Categories Three Category and Segment Matrix Asset management & Financing Operation & Investments Insurance Corporate Financial Services and Auto, rental equipment, C
Slide 49: COVID Impact on Segment Profits
COVID Impact on Segment Profits ✓ COVID impact bottoming out, and profits in three heavily impacted segments* have capacity to recover to pre-pandemic levels ✓ Growth in Operation & Investments, Asset Management & Insurance have pushed profits in other segments above pre-pandemic levels Segment prof
Slide 50: COVID Impact on Segment Profits
COVID Impact on Segment Profits Segment Profits of Three Heavily Affected Segments (JPY Bn) FY20.3 FY21.3 FY22.3 Vs. FY20.3 Vs. FY21.3 H1 H2 H1 H2 H1 H1 H1 Real Estate (facilities operations)* 7.4 - 1.7 - 8.6 - 6.4 - 5.2 - 12.6 3.4 Aircraft and Ships 16.4 28.5 5.5 - 0.2 0.6 - 15.8 - 4.9 Concession 1
Slide 51: Breakdown of Investment Gains
Breakdown of Investment Gains ✓ Investment gains typically realized in a variety of segments (mainly Real Estate, Private Equity, and ORIX USA) ✓ Portfolio asset rotation also drives investment gains, e.g. sales of ORIX Golf, ORIX Living Investment gains* Major Business Sales (JPY Bn) Business FY18.
Slide 52: Financials (1) Funding Structure / Employed Capital Ratio
Financials (1) Funding Structure / Employed Capital Ratio ✓ Funding structure : Diversified funding methods and maintained a high ratio of long-term debt Funding structure and Shareholder’s Equity / Trends in Long-term Debt Ratio* *Excluding deposits Employed Capital Ratio (JPY Tn) 8 100% (JPY Bn) 7
Slide 53: Financials (2) Liquidity / Credit Ratings
Financials (2) Liquidity / Credit Ratings ✓ S&P raised outlook from Negative to Stable in August 2021; S&P, Moody’s, Fitch, R&I ratings of A or higher all maintained ✓ Ratings may change depending on timing of investments or asset sales, but we will maintain financial soundness commensurate with an
Slide 54: Financials (3) Funding Structure
Financials (3) Funding Structure ✓ Diversified funding. Controlled costs while maintaining a high long-term debt ratio Breakdown of Funding Trend in Funding Costs and Long-term Debt Ratio* *Excluding deposits 5.00% 100% Deposits 4.00% 80% 32% As of end-Sept 3.00% 60% 2021 2.00% 40% ABS, CMBS 2% 1.00
Slide 55: Shareholder Return
Shareholder Return ✓ Full-year dividend per share: FY22.3 78 JPY (H1 dividend of 39 JPY) ✓ Buyback program: FY22.3 50 JPY Bn planned (38.4 JPY Bn executed as of end-Oct 2021) Dividend per Share and Payout Ratio Share Buyback and Total Return Ratio （JPY） （JPY Bn） Total dividend Buyback (actual) Inter
Slide 56: Disclaimer
Disclaimer ◼ These materials have been prepared by ORIX Corporation (“ORIX” or the “Company”) solely for your information and are subject to change without notice. The information contained in these materials has not been independently verified and its accuracy is not guaranteed. No representations,
Slide 57: ORIX Corporation Investor Relations
For the current IR materials and archives of past financial data, please access our website. IR Section https://www.orix.co.jp/grp/en/ir/ IR Library https://www.orix.co.jp/grp/en/ir/library/ ORIX Corporation Investor Relations and Sustainability Department Tel: +81-3-3435-3121 57 Company Name Copyri