ORIX Corporation (TSE: 8591; NYSE: IX)

Transcription

1 ORIX Corporation (TSE: 8591; NYSE: IX) Conference Call First Quarter Consolidated Financial Results For the Three Month Period Ended April 1 June 3, 21 August 5, 21 Haruyuki Urata Yuichi Nishigori Takao Kato Deputy President & CFO Deputy Head, Financial Control Headquarters Deputy Head, Financial Control Headquarters Copyright ORIX Corporation All All rights reserved. Disclaimer These documents may contain forward-looking statements about expected future events and financial results that involve risks and uncertainties. Such statements are based on our current expectations and are subject to uncertainties and risks that could cause actual results to differ materially from those described in the forward-looking statements. Factors that could cause such a difference include, but are not limited to, those described under Risk Factors in the Company s annual report on Form 2-F filed with the United States Securities and Exchange Commission, under Business Risk of the securities report (yukashoken houkokusho) filed with the Director of the Kanto Local Finance Bureau. The Company believes that it will be considered a passive foreign investment company for United States Federal income tax purpose in the year to which these consolidated financial results relate and for the foreseeable future by reason of the composition of its assets and the nature of its income. A U.S. holder of the shares or ADSs of the Company is therefore subject to special rules generally intended to eliminate any benefits from the deferral of U.S. Federal income tax that a holder could derive from investing in a foreign corporation that does not distribute all of its earnings on a current basis. Investors should consult their tax advisors with respect to such rules, which are summarized in the Company s annual report. Nothing in this document shall be considered as an offer to sell or solicitation of an offer to buy any security, commodity or other instrument, including securities issued by the Company or any affiliate thereof. 1

2 Contents I. Results II. ORIX is Evolving -Growth Strategy- Appendix 2 1. Results 1. First Quarter Overview Net Income up 129% year on year, progressing smoothly Achieved profitability in all segments for the first time in seven quarters (since the second quarter of FY9.3) Net Income* Trend in Segment Profits (5) (15) *Net Income Attributable to ORIX Corporation Corporate Financial Services Real Estate Retail Maintenance Leasing Investment Banking Overseas Business 3

3 2. Segment Topics (1) I. Results All segment profits up compared to the same period of the previous year Top: 1/4-6 Bottom: 9/4-6 Profit Assets ROA Topics for Corporate Financial Services , ,43..7%.5% Back in the black after four quarters due to decreased provisions Accumulated small-sized quality assets through such means as M&As Maintenance Leasing % 3.3% High expertise maintained stable profit trend Proposed new services responding to the changing environment and new client needs Real Estate ,7.1 1, %.1% Maintained low vacancy rate and high yield by focusing on leasing rental properties Sold large-scale rental property 4 2. Segment Topics (2) I. Results Top: 1/4-6 Bottom: 9/4-6 Profit Assets ROA Topics for Investment Banking ,62.2 1, % -3.1% Continued to take the best action to maximize NRL collections Gradually demonstrating loan servicing superiority Retail , , % 1.3% New life insurance product based on customer needs well received, insurance premiums and related investment income dramatically increased Robust trust and banking growth Overseas Business % 4.9% Continued high profitability in U.S. and Asian subsidiaries Proactively expand both stable leasing and fee-based revenue platform and investment 5

4 3. Straight Bond Issuances I. Results Issued 266.bn in bonds, approx 75% of the 355.5bn of FY11.3 redemptions (1) Issued $75 million (approx. 66.bn yen) in April of U.S. dollar-based bonds globally, aiming to accelerate overseas expansion (2) Spread on new issuances tightening, issued 5 year bonds (JPY BN) Total: Total: Overseas Japan 1 FY 11.3 Maturities Amount Issued 6 4. Application of New Accounting Standard I. Results Total Assets increased approx. 1 trillion yen compared to March 31, 21 due to the application of a new accounting standard No change in actual economic condition Segment Assets (1) 1.3 6,284.3* 1.6 6,244.1 Change (4.2) ROA 1.% Certain VIE Assets(2) , , Other (Corporate assets)(3) 1, ,242.6 (13.3) - Total Assets (1)+(2)+(3) 7, , % * Revised due to a change in segment asset classification Change D/E Ratio Share of Long-term Debt Total Liabilities (excl. Deposits) 4,49.8 5, x 89% Total Liabilities (excl. ABS, CMBS and Deposits) 4,27.6 4,179.1 (28.5) 3.3x 85% 7

5 II. ORIX is Evolving Growth Strategy 1. The Evolution of ORIX ORIX s history is a buildup of ORIGINAL + X ORIX will continue to evolve Principal Investment Established 1964 Rental Overseas Expansion Loan Servicing Residential Mortgages Securities Brokerage Life Insurance Real Estate Business Waste Disposal Loan Securitization ESCO Asset Management Leasing Maintenance Leasing Non-recourse Loans 8 Evolutionary Direction II. ORIX is Evolving Expand existing businesses platform Finance + Services Asia and New Areas(Energy and the Environment) Finance + Services Asia Existing ORIX Businesses New Areas (Energy, the Environment) 9

6 3. Finance + Services (Advisory) II. ORIX is Evolving Industry-leading performance Seize opportunity in any business environment, securing stable high profits HLHZ Performance in the U.S. Number of Deals 1% Change in HLHZ Fee Revenue Breakdown 8% 6% 4% 2% % M&A Advisory Financial Advisory Restructuring Advisory (Source: Thomson Reuters) 1 3. Finance + Services (Auto Lease - Japan) II. ORIX is Evolving Provide solutions with value-added services to resolve client business challenges Build a stable revenue base using the client base and value chain Past Performance Potential Auto Lease Revenue Breakdown 1% 8% 6% 4% 2% % Service and other Revenues Finance Revenue Industry No.1 for autos under management Full-line service ahead of the competition Changing client needs (The environment, risk management) Service menu expansion, improved quality Use know-how acquired in Japan overseas Support current clients overseas expansion 11

7 3. Finance + Services (Auto Lease-Overseas) II. ORIX is Evolving Auto leasing presence in 16 countries overseas Increase number of vehicles and respond to new needs from the growing market Poland Past Performance Existing Locations and Network Korea Japan Pakistan Saudi Arabia Egypt India Thailand Taiwan Oman The Philippines Sri Lanka Malaysia Singapore Indonesia Australia Expanded in 16 countries centered on Asia, Oceania and the Middle East New Zealand Potential Global auto sales growing at an annual rate of 5.7%, mainly in emerging markets. 17 million in sales volume forecasted in 22 8, 7, 6, 5, 4, 3, 2, 1, ASEAN Auto Sales Thailand Malaysia Indonesia Vietnam (Source: JETRO) Finance + Services (Servicer) II. ORIX is Evolving Acquire new opportunities based on high market share and ratings Past Performance Potential 1999: Began investing in NPLs Increased investment as financial institutions disposed of NPLs 25: CMBS market expansion Increased servicing amount High market share in CMBS servicing Only ORIX has the highest ratings for Master, Special and Primary Servicers 2,5 2, 1,5 1, 5 Increased opportunity for feeincome - Refinance arrangement - Real estate collateral and loan sale mediation Capital and business alliance with Tokyo Star Bank OAMLS Servicing Amount (Cumulative)

8 4. Asia (Local Subsidiary Finance + Services) Expanding overseas for almost 4 years, established solid operating platform Diversify services, further expansion as Asian countries develop Past Performance II. ORIX is Evolving Potential 1971: First overseas expansion (Hong Kong) Maintained operations even during the Asian Currency Crisis Current overseas network has 275 locations in 26 countries and regions (213 locations in 14 countries in Asia) Local partners and local management provide services to local clients Organic growth in line with GDP growth of each country Utilize existing locations as a platform to expand additional services Forecasted Economic Growth of Asian Countries (%) China NIEs India ASEAN * 211* 212* 213* *Estimate (Source: IMF) Asia II. ORIX is Evolving Utilize operating platform and expertise to pursue new profit opportunities Past Performance PE Investment Korea Life Insurance (22 27) Korean Steel Manufacturer (23 28) Korean Engine Manufacturer (27 29) Real Estate Business The Philippines: Condo JV with Federal Land Singapore: Nassim Park Luxury condo operations with UO Land Ship and Aircraft Operations Air Asia X (Investment in 27) Aircraft maintenance leasing Ship finance Potential Participate in fund operation in Vietnam Operation of the DI Asian Industrial Fund in conjunction with Dream Incubator Co., Ltd. began in June 21 targeting companies with promising growth Propose full-service packages combining aircraft investment, and maintenance to Chinese leasing companies 15

9 4. Asia: China/Greater China II. ORIX is Evolving Long history of presence in China, track record in Hong Kong and Taiwan Past Performance Potential 1971: Entered Hong Kong 1981: Established first leasing company in Beijing Halted new transactions in 1993 Approached business in China through Hong Kong thereafter 25: Established leasing company in Shanghai Invested in PE (equity investment) fund led by influential partners CITIC and the Chinese Academy of Science (CAS) Promote businesses and rental companies under the CAS umbrella (ORIX Rentec) Established Chinese HQ in Dalian in Dec. 29 Investment in the Haichang Group which has shipping subsidiaries. Considering partnership for JVs Strategic alliance with CAS Concluded business alliance contract with Taiwan real estate agency Sinyi Realty, Inc New Areas (Energy, the Environment) II. ORIX is Evolving Pursue commercialization by swiftly responding to global changes Past Performance Potential 1998: Started waste disposal operations - Important document disposal system - Area recycling systems - Carbon offset service - Supply of Biomass Fuels - Energy Saving Service (ESCO) - Soil contamination countermeasures - Eco-friendly real estate development Established ORIX Electric Power Established in May 21 as a JV with DAIKYO. Provides electricity to contracted condo buildings with the aim of reducing electricity rates Development of condos with individual solar panel systems - Approx. 5% reduction of yearly utility costs by selling surplus power and contribute to CO2 reduction Artistic rendition of the Musashino City Sekimae 3-Chome Design (Tentative name) 17

10 APPENDIX 18 Appendix: (1) Business Overview D/E Ratio 1: Total Liabilities (excl. deposits) / Shareholders Equity D/E Ratio 2: Total Liabilities (excl. ABS, CMBS, deposits) / Shareholders Equity 19

11 Appendix: (2) Assets by Segment 2 Appendix: (3) Segment Performance 1 Corporate Financial Services Trend in Segment Profits (1.5) (6.8) (1.9) Maintenance Leasing

12 Appendix: (3) Segment Performance 2 Real Estate Trend in Segment Profits (1.5) Investment Banking (1.4) (4.) (3.) Appendix: (3) Segment Performance 3 Retail Trend in Segment Profits Overseas Business

13 Appendix: (4) Funding 1 *ABS, CMBS increase (1.3 to 1.6) is due to the impact of VIE consolidation Definition of management indicators Share of Long-term Debt 1: Including ABS, CMBS D/E Ratio 1: Total Liabilities (Excl. deposits) / Shareholders Equity Share of Long-term Debt 2: Excluding ABS, CMBS D/E Ratio 2: Total Liabilities (Excl. ABS, CMBS, Deposits) / Shareholders Equity Trend in Funding Costs 24 Appendix: (4) Funding 2 Current fiscal year straight bond issuances 25

14 Appendix: (5) Non-Recourse Loans Trend in NRL and Held Real Estate Balance *1 NRL and Specified Bond balances prior to 1.3 were revised in line with segment asset balance revision *2 Held real estate consists of real estate under operating leases + Inventories + Advances for Investment in Operating Leases in the Investment Banking segment Trend in Rental Properties in the Investment Banking Segment and NOI Yield *3 Properties acquired by the Investment Banking segment from NRL and Specified Bond collateral that generate rental yields 26 Appendix: (6) Real Estate Segment Rental Properties in the Real Estate Segment NOI Yield and Vacancy Rate Trends Condo Asset Balance in the Real Estate Segment 27

15 Appendix: (7) Provisions and Impairments Trend in Provisions by Segment Trend in Impairments by Segment (Write-downs of long-lived assets, Write-downs of securities, Write-downs of equity-method affiliates, Write-downs of condominiums, etc.) 28 Macro Economy 29

16 Stock Market The Japanese stock market continues to be oversold Performance of Major Stock Markets since January CSI 3 (China) SENSEX (India) KOSPI (Korea) Hang Seng (HK) DAX (Germany) FTSE1 (UK) Dow Jones (US) Nikkei (Japan) Source: Bloomberg 3 Macro Economic Indicators Deflationary pressures remain in the Japanese economy Real GDP Growth in Japan (QoQ Change) National CPI (Ex Fresh Food) (YoY Change) % 5.% 3.% 2.% % -5.% 1.%.% -1.% % -15.% -2.% -3.% GDP (lhs) GDP Growth (QoQ Annualized) (rhs) National CPI (Ex Fresh Food) YoY Change Source: Economic and Social Research Institute, Cabinet Office Source: Ministry of Internal Affairs and Communications 31

17 Employment and Corporate Bankruptcies Unemployment remains high, corporate bankruptcies decreasing Unemployment and Jobs per Applicant Corporate Bankruptcies 6% , 5% 4% 3% , 12, 1, 8, 2% 1% % , 4, 2, Unemployment Rate (lhs) Job-Applicant Ratio (rhs) Liabilities Bankruptcies Source: Ministry of Health, Labor and Welfare; Ministry of Internal Affairs and Communications Source: Tokyo Shoko Research, Ltd. 32 Industrial Indices Industrial Production and Net Exports adjusting to the business environment 8% 6% 4% 2% % -2% -4% -6% -8% -1% -12% Industrial Production (Month on Month Change) , 7, 6, 5, 4, 3, 2, 1, -1, Exports / Imports Exports (S.A.) Imports (S.A.) Net Exports (S.A.) Source: Ministry of Economy, Trade and Industry Source: Ministry of Finance 33

18 Bank Lending in Japan Banks remain cautious toward lending Bank Lending in Japan (YoY Change) Japanese Banks Average New Loan Rates 6% 1.9% 4% 2% 1.8% 1.7% 1.6% % -2% 1.5% 1.4% 1.3% -4% 1.2% -6% Total Banks, Shinkin Banks City Banks Regional Banks I Regional Banks II Shinkin Banks % 1.% Banks Average New Loan Rate Short-Term Long-Term 1.5 Source: Bank of Japan Source: Bank of Japan 34 REIT Performance and Condo Sales in Japan The real estate market remains sluggish, but showing signs of recovery (Yen) Japan TSE REIT Index (Units) Trend in Tokyo Condo Sales 3, 9, 2,5 8, 7, 2, 6, 1,5 5, 4, 1, 3, 5 2, 1, Source: Tokyo Stock Exchange Source:Real Estate Economy Research Institute 35

19 Japan Land Price Index & Office Rent/Vacancy Land prices and rents low, vacancy rates remain high (%) Land Prices (YoY Change) Avg. Rent (Yen/3.3 m 2 ) Avg. Vacancy Rate Japan Tokyo, Osaka and Nagoya Metropolitan Areas Tokyo Metropolitan Area Osaka Metropolitan Area Nagoya Metropolitan Area Regional Areas 25, 2, 15, 1, 5, Tokyo (lhs) Nagoya (lhs) Osaka (rhs) Osaka (lhs) Tokyo (rhs) Nagoya (rhs) 16% 14% 12% 1% 8% 6% 4% 2% % Source: Ministry of Land, Infrastructure and Transport Source: Miki Shoji Co., Ltd. 36 Urban Land Price Comparison Urban land prices in Japan less affected than other major cities Japanese land prices not expected to further decrease significantly 35 (%, 2-1) Tokyo Osaka London Frankfurt New York San Francisco Paris Source:World Land Value Survey (biennial), Japan Assoc. of Real Estate Appraisal 37

20 Additional Information For annual and more historical data please access our website. A list of major disclosure materials is given below. ORIX Website: IR Website: Financial Reports: URL: URL: URL: 1. Annual Reports since Fiscal 2 2. Five-Year Excel Data of Major Financial Data 3. Annual Report Filed with the U.S. SEC Form 2-F If you would like to be included on our list for major news announcements, please send your request to the address below. ORIX Corporation Investor Relations Mita NN Bldg., Shiba, Minato-ku, Tokyo 18-14, Japan Tel: Fax: gregory_melchior@orix.co.jp Copyright 21 ORIX Corporation All rights reserved. 38