Orix Corp Q2 FY2025 Earnings Call

Since it is time, we now would like to get started. Thank you very much for attending the earnings call by ORIX Corporation despite your busy schedule. This is the second quarter earnings call for the fiscal year ending March 2025. I'll be serving as the moderator. I am from the IR Sustainability Promotion Department, Nakane. Today, we have Director Representative Executive Officer, President and CEO, Inoue, and Operating Officer in charge of IR, Kazuki Yamamoto. Today, we will be discussing the progress of our performance and the outline of our business. Mr. Inoue will explain, followed by some additional remarks from Yamamoto-san, and we will open up for Q&A after that. We plan to hold this for about an hour. So Inoue-san, over to you.

This is Inoue from ORIX. Thank you for your attendance. Let me explain using Slide #2. For the first six months of FY '25, ORIX recorded a pretax profit of ¥257 billion and a net income of ¥182.9 billion, which is a year-over-year increase of 42.8% and a record high for the first half for ORIX. This marks 46.9% of our annual net income target of ¥390 billion, and we anticipate strong earnings to continue into the second half. We will strive to achieve our earnings target. The first half ROE was 9.3%, and we aim to recycle capital to meet our full-year ROE target of 9.6%. Now, please refer to Page 3, which outlines our progress in three categories: Finance, Operation, and Investment. For all three categories, we achieved first half results in line with expectations. Segment profit for Finance was ¥92.8 billion; Operation was ¥105.8 billion; and Investment was ¥89.2 billion, totaling ¥287.8 billion. This represents 47%, 44%, and 48% of each category's full-year target. The pretax profit, which excludes unallocated SG&A expenses, was ¥257 billion for the first half. Moving to Page 4, in Finance, the sale of two-thirds of ORIX's stake in ORIX credit to NTT DOCOMO converted it into an equity method affiliate, reducing its profit contribution. However, strong performance at ORIX Life Insurance has continued to contribute to earnings in this category. We expect finance category profits to grow year-over-year, excluding last year's ¥57.2 billion gain from the sale of the ORIX credit stake. Within Japan, we anticipated a gradual increase in yen interest rates. However, following recent lower house elections in the National Diet, we foresee a scenario of political instability, a worsening fiscal situation in Japan, and further yen weakness. While there is some room for optimism regarding finance-related spreads and asset management yields, we will carefully monitor trends in interest rates while maintaining our current financial policies. Additionally, the results of upcoming U.S. presidential elections may increase geopolitical risks and uncertainties due to aggressive foreign policy approaches. The U.S. might execute rate cuts and economic stimulus, potentially leading to resurgence in inflation, higher interest rates, and a weaker yen. Consequently, predicting conditions for 2025 and beyond is challenging. Nevertheless, it's an opportune time to grow our assets in the ORIX USA business. This fiscal year, we will maintain a conservative view on credit cards and plan to begin significant asset expansion in FY '26 and beyond. Nonetheless, we are observing signs of recovery in the private equity market and selected segments of the real estate market, with the CLO market also showing recovery. While some upside potential exists during this fiscal year, we haven't incorporated these expectations into our earnings projections for the segment. In light of the ongoing political uncertainty, we have reduced the ORIX USA balance sheet to ¥10.8 billion as of the end of September 2024, a decrease of about $2 billion over the past two years through both securitization and third-party sales. We remain cautious regarding the Greater China region, having refrained from new investments in China, including Thailand, due to sluggish consumer spending and serious real estate challenges. Investments in Greater China constitute less than 3% of our total group assets, so we perceive the associated risks as limited. Our revenues in other regions of Asia and Australia are robust, and we have no significant concerns about these operations. Please proceed to Page 5. In the Operation category, pretax profit increased by 5.1% to ¥105.8 billion, achieving 44% of our full-year target. We expect profits to continue rising for the full year. At Kansai Airport, the number of foreign passengers has increased to 109% of pre-COVID levels. By spring 2025, the renovation of Terminal 1 will enable us to expand capacity for overseas routes to 40 million passengers, preparing Kansai Airports to host visitors for the Expo 2025 Osaka Kansai, Japan. Moreover, an influx of inbound tourists has led to significant improvements in both occupancy and profitability at ORIX’s hotels and inns. Beyond Kansai Airport, ORIX's current businesses in the Kansai region include the Umekita Phase 1 and 2 projects, where ORIX Group, Mitsubishi Estate, and Hankyu Hanshin Holdings collaborate for urban redevelopment. In September 2024, this partnership opened part of the Grand Green Osaka project early, with full-scale opening scheduled for 2025. The MICE IR project development will begin following Expo 2025, with total costs of ¥1.27 trillion. ORIX Group and MGM plan to invest between ¥300 billion and ¥350 billion each, and 22 major Kansai firms will contribute approximately ¥127 billion total, complemented by ¥530 billion in bank financing, completing the capital requirements. We anticipate operations to commence in fall 2030. In the Environment and Energy segment, we announced the acquisition of hydropower resources in Spain by Elawan Energy, producing 175 megawatts, and a power purchase agreement between Elawan and Google in the United States. In Japan, we are progressing in renewable energy initiatives, such as constructing energy storage stations while monitoring interest rates and construction costs, with a long-term focus on contributing to a decarbonized society. Turning to our asset management business, Robeco Group saw assets under management reach a record high of EUR 358 billion, while Robeco asset management companies within the ORIX Group have assets totaling ¥74 trillion as of June 2024. We continue efforts to achieve ¥100 trillion in assets promptly. Please move to Page 6. In the Investments category, pretax profit surged by 200% year-over-year to ¥89.2 billion, representing 48% of our full-year target. Many SMEs are facing challenges with successor shortages, forcing them to close. Our approach is to respect the corporate culture of our investees while collaborating with stakeholders to develop their businesses. During the investment term, we have supported our investees by leveraging our group's sales networks, both domestically and internationally, promoting their new products, and facilitating partnerships. In addition to providing capital, we pride ourselves on offering diverse benefits, not just through PE investment but also the Corporate Financial Services segment, addressing the successor issue for 40,000 clients through M&A referrals and other services. Please go to Page 7. The sale of Sasaeah Holdings and Hundred Circus, a property operation facility, has contributed to our investment category. In the second half, we are reviewing our portfolio for potential asset sales and are currently in discussions with potential buyers to meet our targets. During this fiscal year, we expect to generate between ¥520 billion and ¥600 billion from sales, with new investments estimated at around ¥700 billion. Our capital recycling is proceeding well, and we are managing our financials cautiously. ORIX has focused on unlisted companies and intensified marketing efforts tied to business succession. Moving forward, we will also actively pursue carve-outs related to the restructuring of Japanese companies and delisting of investees. We recently announced an investment in Panasonic Connect’s projector business, which will require us to obtain permits and navigate the spin-off procedures before executing the investment by March 2026, with Panasonic Connect retaining a 20% stake. Additionally, we have invested in Lines, a company specializing in educational software. Outside of PE investments, we have a robust pipeline and will exercise caution while making decisions. In the logistics sector, though several investments are under development, higher construction costs are impacting profitability, necessitating a focus on downside risk. Moving on to Page 8, in the aircraft and ship segment, there was a defect in aircraft from Boeing, and strikes have tightened the supply of new aircraft, causing risks with lease factors and rising aircraft prices, despite improving airline load factors and credit. Overall, the airline industry is growing healthily. ORIX Aviation owns and manages around 200 aircraft and plans to expand mainly with narrow-body aircraft. ORIX holds a 30% stake in Avolon, which has announced the acquisition of CastleLake Aviation, managing 118 aircraft, financed by their own debt of ¥2 billion. Moody's upgraded the credit outlook from BAA 3 Stable to positive. We will maintain our financial stability while expanding our business and focus on capital recycling. In March 2023, Santoku Senpaku joined us, and we purchased 67 ships, including a new eco vessel powered by methanol fuel. We are moving forward with the purchase of three Panamax bulk carriers, and our fleet is valued at over ¥100 billion in today's market. We will continue capital recycling and leverage Santoku's ship management capabilities, exploring entry into the coastal business as well. On Page 9, we will discuss shareholder returns and the interim dividend. At the March 2024 earnings call, we announced the dividend will be the higher of either 39% of annual net profit or ¥98.6, the previous year’s dividend. Thus, the interim dividend will be 39% of ¥182.9 billion, which amounts to ¥62.17 per share. Compared to last year's interim dividend of ¥42.8, this is a 45% increase or ¥19.37. If we achieve a net income of ¥390 billion, the annual dividend per share will be ¥133. Please go to Page 10. While increasing profits, we remain focused on ROE as part of our commitment to enhancing corporate value. We are currently running a buyback program of ¥50 billion, which will continue until we significantly improve ROE. Though profit growth is essential, we will manage the company with a focus on EPS. The fiscal year ending in March 2025 marks the final year of our three-year plan initiated in 2023. While the ¥390 billion target is not particularly impressive, we are dedicated to reaching this goal. Additionally, discussions are already underway for the next three-year plan to ensure stable achievement of over 1x PBR. We aim to reach an ROE of 11% to 15%, supported by our strategies. When we announce the results for FY March 2025, we will provide insight into this direction. That concludes my remarks. Thank you for your attention.

Mr. Inoue, thank you very much. This is Yamamoto speaking, and I will now share some details regarding our financials. Please refer to Page 11. In the first half, segment profits reached ¥287.8 billion, reflecting a 29% increase year-over-year. This includes ¥221.5 billion in base profit and ¥66.4 billion from investment gains. The chart in the lower right-hand corner shows quarterly profit trends, where both base profits and investment gains have shown positive trends, with base profit rising to ¥117.7 billion for the second quarter and investment gains at ¥32.9 billion, marking the highest quarterly figures in three fiscal years. Please turn to Pages 12 and 13 for an outline of segment profits and assets. Seven out of ten segments reported higher profits compared to the previous year. Several of these segments experienced double-digit profit growth, including real estate, private equity, concessions, aircraft and ships, and corporate financial services and maintenance leasing. The three segments where profits declined year-over-year include the Banking and Credit segment, which was affected by the lack of profits from ORIX Credit, as mentioned by CEO Inoue earlier. In the Energy & Environment sector, profits fell due to a slowdown in the overseas wholesale electricity market and one-off losses recorded by an investee in the first quarter. However, ORIX's operational renewable energy capacity has increased from 1 gigawatt at the end of March 2019 to 4.5 gigawatts at the end of September this year, with a 0.2 gigawatt increase in the last twelve months. While we remain mindful of short-term market trends, it is crucial to support the demand for clean energy driven by the significant rise in AI and digital transformation. Simultaneously, we need to closely monitor trends in interest rates and construction costs. Segment assets have decreased slightly by ¥114.5 billion compared to the end of March, totaling ¥15.9 billion, primarily due to foreign exchange factors, which aligns with our initial expectations. Moving on to the financials on Page 14, as of the end of September, our short- and long-term borrowings, including deposits, were ¥8.5 trillion, remaining stable from the previous fiscal year. We continue to efficiently raise funds through the corporate debt market and from financial institutions. The funding cost related to foreign currency has started to decline from the second quarter. We anticipate that the Federal Reserve will continue to lower rates, and in line with market expectations, we foresee a decrease in U.S. dollar interest rates. In contrast, yen-based funding costs are gradually rising, but we expect a favorable funding environment to persist. Currently, interest rate sensitivity remains unchanged from the previous quarter, with slight negatives associated with yen interest hikes due to our asset structure that minimizes interest rate sensitivity, including some foreign-denominated assets tied to yen assets. The impact of foreign exchange rates, with a ¥1 decrease, indicates a before-tax profit reduction of ¥1.5 billion, highlighting the volatility of foreign exchange. Therefore, we must manage risks flexibly and efficiently, including sensitivity analysis of asset and liability management, which does not account for future interest rate projections, business, and financial operations. Our baseline assumption indicates a decline in interest rates for the U.S. dollar and euro, alongside a modest increase in yen interest rates. We will adjust our strategies accordingly. As discussed by Mr. Inoue earlier, the outcomes of the U.S. presidential election, the Japanese Lower House election, and domestic policy directions suggest that both interest rates and foreign exchange rates will remain uncertain, necessitating careful observation. As indicated on Page 15, our debt-to-equity ratio stands at 1.6x, representing conservative leverage. Based on the assumption of an A-grade rating from global credit agencies, our employed capital ratio remains stable at 93%. We will continue our efforts in capital recycling and optimal capital allocation across our portfolio. We will maintain close communication with credit rating agencies to ensure financial stability. That concludes my remarks, and we would now like to open the floor for questions.

We have Tsujino-san from Bank of America.

So I will ask one question. So the ¥390 billion profit for the full year. I know that you have achieved about all the progress of 50%. So therefore, there was much progress as compared to the first quarter. Now in terms of the achievement, how comfortable are you especially in light of the pipeline of the sales that you are scheduling?

This is Inoue answering your question. As you know, our company has a history of achieving most of our fiscal year earnings in the latter half, which was definitely true last year. While we are not as heavily reliant on that this year, we do expect to generate more sales in the second half, and things are looking positive. Regarding the ¥390 billion target, I believe we can achieve it fully. There are some private deals in the pipeline that I can't discuss, but everything is on track.

So I'm sorry to follow up. But especially the electricity power station referring to Page 22. I can see that there may be some major assets that you are planning to dispose. So Spain's electricity price that had fallen in fall. And I think there was some discrepancy in terms of the timing of the posting of these numbers in the past. But with regard to the disposition of these electricity facilities, do you think that you are gaining more appetite or what?

So the case in Spain, in Europe, that is. So the government’s intent or the control of the electricity power, unfortunately, was out of our expectations. So this is why we did generate some losses, but then it is now recovering. And we did acquire hydropower station. And we have – so 150 gigawatts will start generating profit from next year. So as a core income, this will be reflected to our financials. And as for the disposition, if we can sell some of our assets, of course, we would have to refer to the balance of what we can gain on the sales of some of these assets. And of course, there will be a counterparty. If we were to sell these assets, then we would have to get the permission of the government as well in many of the cases. So we would not be able to share when we will be able to dispose of this asset, but we should be able to conclude the sales, and we’ll be able to post some gains. I’m sorry. Please allow me to limit my explanation to that.

Yes. I am Muraki from SMBC Nikko Securities. On Page 4, so after the presidential election, how you recognize the environment, you mentioned a little bit, but in your businesses and also in your investment, what would be the impact, if you could elaborate, to be more specific, in the U.S., you were considering M&A of renewal energy. So will this be impacted, and yen is cheap. So M&A, exchanging yen to foreign currency, you will refrain from making such an investment. So with the politics, your business and your investment policy, what will be the case?

We had a discussion today with our external directors regarding Trump's policies, which are hard to predict and seem to vary with each situation. Currently, the exchange rate is ¥150 to the dollar, with fluctuations up to ¥154. It seems unlikely that Trump will acknowledge this situation. His approach towards China is firm, and it appears he will apply similar pressure on Japan in an attempt to strengthen the yen. Therefore, I anticipate a shift from yen depreciation to appreciation. However, our operations are primarily focused within the U.S. market, and we do not expect to face the same circumstances as the Nippon sales case. With the yen trading at ¥154, it raises questions about potential acquisitions. If we can still generate profit at that exchange rate, we might proceed. The implications in yen-dollar terms are significant at ¥154. We manage our foreign currency transactions separately, procuring and paying in dollars, which means there will be some currency translation on our financial statements. If we can target an internal rate of return around 20%, we are particularly interested in sectors with growth potential, such as infrastructure, private credit companies, and asset management firms. Some of these opportunities are currently in the due diligence stage. Did that address your question?

This is Sato from JPMorgan. So ORIX USA, the second quarter business conditions, if you could be so kind enough to share with us. So 32, 33 on those pages, you have shown the performance of ORIX USA. But it looks as if they have faced a pretty tough second quarter, especially real estate and also private equity because credit loss and also origination of real estate has remained to be sluggish, and that's a qualitative kind of description of the businesses. What has exactly happened in the second quarter which had led to such results? And also if you could be so kind enough to describe the impact as well.

So it's a multifamily when we talk about the real estate property at BlueNet. So finance origination and all these agencies disposition, the sales impact is the main businesses. But as a result of the interest rate hike, the borrowers, unfortunately, the nonperforming loan has increased. So bad debt has increased. So we have taken over these assets and renovate them and to keep them and wait until the market recovers. That's what we are working on. And this is why, unfortunately, it is putting pressure on the profitability. So if the, of course, the interest rate starts to come down, I'm sure we'll be able to enjoy the normalization of the businesses, but it may take a little while until we can enjoy such a normalization. But I think the worst time is almost over. So we hope to enjoy something that is more positive, but reposition, renovation and also the management operations and also the disposition, the timing is to be thoughtful. So with regard to multifamily assets, I think for the next 6 months to 12 months, the current situation is likely to persist. Private equity, they are small in size and already at fair value. The book value had risen, but there has been some correction. So we are trying to kind of adjust ourselves to the fair value by way of carrying out an impairment. So in other words, we're working on the correctional adjustment. And this correction phase should be over and done with by end of this calendar year. And thereafter, we would like to watch over the development of the interest rate in the United States as well as the economic stimulus, which may be introduced by President Trump, so that we'll be able to resume our activities in the investment so that we can be ready any time. So that is where we are in the United States.

If I could ask a follow-up question, particularly regarding real estate. For the second quarter, if we were to exclude the three months, I believe it's limited to USD 5 million as explained by Mr. Inoue. Considering the market risk, it’s important to maintain the current situation. Do you think the current level of profit generation is likely to continue into the next quarter and beyond?

For the second half, in other words, October through to March, we do not foresee much of the upside coming from the United States. We are remaining to be defensive in the United States. So therefore, so about USD 250 million or so of profit is what we are foreseeing to be generating, but it will not reach to $300 million, that is not our expectation. So this by achieving this – in achieving this ¥390 billion of the profit for the entire group, we do not expect a large contribution coming from the U.S. That’s what it is.

Yes. This is Watanabe from Daiwa Securities. On Page 10, this is about improvement of corporate value through investors meeting. The feedback has been shared at Board meetings. So if you could share some of the major points. And if you could give us some updates on the current trend of achieving midterm management plan.

So in the U.S., I did IR roadshows and executive officers have made some explanations, and we share that to the Board members. And finance, investment and operation, we are disclosing these three categories, and now investors have a better idea of disclosing in such a way. So with these three categories, we would like to evolve how we go about disclosing the information. So that was some comments made by external directors. So ORIX is very difficult to understand, but we want to make it easier to understand. So as an effort in doing that, we will continue to disclose from these three category perspectives. Then we may foster the understanding of the market and external Board members also agreed. So that was discussed at today's meeting as well.

So for the next midterm management plan, what kind of KPIs will be introduced? Any additional comments, so at today's Board meeting, so when it comes to qualitative, well, in the past, we created numbers and how we go about achieving those numbers. So from external directors or outside directors, they did not like it. We should start from strategy, talent and deals and projects. So however, the project we have then in front of it, how should we treat them and process them and incorporate that into our strategy. So we should make it upside down. That was the advice given. So in the coming 5 or 10 years, in what kind of direction are we proceeding?

So that was the discussion made at today's meeting, but that was more at a qualitative discussion. So we need to also reflect the qualitative discussion into quantitative discussion and then come up with numbers in 3 years' time or 5 years' time. So those will be the steps. So when it comes to target setting, it will be somewhere between January and March. And then come May, I believe it was May, when we make annual financial results, how we will be discussing and announcing what will be considered. So we still do not have numbers yet. So if you could give us a little more time.

This is Sasaki from Nomura Securities. So as to the outlook for the next year and beyond, I would like to hear your idea, Mr. Inoue, for this fiscal year to the guidance, I know that the progress has been pretty smooth, and roughly about 10% of ROE is likely to be achieved. And this 10% of ROE, if you were to raise it to the level of 11% or 15%, with the current uncertainty that surrounds you and also making use of the capital may not that be easy, I suppose. So Mr. Inoue, what is the image that you have in your mind? If you were to continue the way you are, do you think that you can achieve 15%? Or is there any kind of other ways that you may have to explore in order to achieve this 11% or even beyond? So what is your kind of strategy that you have in your mind?

That is a very difficult question. But if we remain to be where we are, as we are, I think it will prove to be very difficult for us to achieve 11%, of course, let alone 15%. Even if we were to repurchase our shares by ¥50 billion or even more, I don't think it would be possible for us to achieve such a level of ROE. So if we were to buy back a share to the extent of ¥1 trillion, we may be able to achieve that high an ROE, but that doesn't sound realistic. So why we proceed with like M&A, like acquire a company that enjoys high profitability or to sell some of the businesses that experience low kind of ROE, or to gear up, perhaps. But in any case, I think we would have to raise the ROE and there are various different means and matters that we can utilize. But currently, if we remain to be as we are and who we are, then I don't think it is difficult to achieve 11% and beyond. So this is why we may have to continue to replace or recycle our capital and assets. That has to be continued. So if we remain to be where we are, 11%, maybe achievable. But going beyond the 11% to like 13% or 15% is not possible.

So if you could follow up by sharing 1 piece of information. So are you thinking about something that is different from the past, and that could be like M&A or to divest low ROE company? You have given us some clues. But if you were to think about the business management from next year onwards, out of those 3 options that you mentioned, which one, in fact, would you put the priority on? Which one do you think that you would like to focus on?

We are looking to expand our asset management business. However, even with expansion, the growth in assets under management may be restricted, targeting amounts like ¥1 trillion or ¥2 trillion with limited returns. Currently, we have about ¥75 trillion and aim to grow to ¥100 trillion and beyond within one to two years. It's crucial for us to manage third-party investments responsibly, and we intend to acquire an asset manager, although the pricing isn't favorable at this time. If negotiations for acquisition go well, it could boost our assets under management. Additionally, in our aircraft business, we have a fleet of 200 aircraft, with 150 financed by our investors. Our goal is to increase this number beyond 200. This will take time and is not a short-term fix, but we believe utilizing third-party capital for principal investments is a vital first step. We also intend to divest from low return on assets companies while acquiring those with higher returns. This represents my primary focus for the next one to two years.

Yes. It's Sakamaki from Mizuho Securities. I have 1 question. So the asset, the credit status of your assets, I would like to confirm. So data book on Page 27 or 28. Using this, if you could respond, that will be helpful. So the concerns that I have are the allowance for the credit loss from end of June, we can see the trend. But as you explained in the U.S., the credit, you're very prudent in provisioning and perhaps there are some concerns. So why did your concern come down since then?

So this is Yamamoto speaking, if I may. So I think you're looking at the supplementary materials for the credit loss provisioning on Page 28. So this is the number or this is the pace that you're looking at?

Yes. Correct.

So here, as Inoue-san mentioned, in the U.S., the mid-cap market, the credit situation, of course, we cannot be optimistic. So where we are investing in some of the loans, we are provisioning. We are being conservative, and we reassess. So that is the reason. So the credit, of course, it is not increasing significantly and also nonperforming loan or loan under management, we have been controlling and we have been picking up signs to deal with this. But rather, in terms of our business direction, the market or the environment has not come back so that we can be proactive in getting these credits.

Okay. Understood. So the provisioning for credit loss from end of June, it's coming down. So were there drawdowns? And where was it?

Well, the general provisioning, total asset in the U.S. is coming down and how we are reducing this. We are using CLO or selling fund of loan assets and also ORIX USA credit. The profitability is improving, and this is because we’re lighter in the balance sheet. So that is why general provisioning has been drawn down.

This is Niwa speaking from Citi Securities. I hope you can hear me. I have some questions regarding the investment pipeline, specifically on Page 45 of your presentation. If you could help me understand how to interpret this, I would appreciate it. It seems there haven't been any major changes based on this information. I assume you are adhering to a disclosure policy and only including information you are certain about. However, do you think we could adopt a more optimistic outlook? It would be helpful if you could provide additional insights on what this page reflects.

So in specific terms, we will not be able to share anything at this point in time. Just to give you an example, Avolon, for example. So 70%, in fact, is owned by Bohai right now, but we may be able to acquire the 70% from Bohai so far as Avolon's stake is concerned or to acquire asset manager in the United States or here in Japan, private equity can be built up more here in Japan. So these are some of the conversations that are underway. So in total, although we have been sharing that we may be spending as much as ¥700 billion. But if you were to build all those up, we may be spending about ¥1 trillion or even more. So this is why we will not be spending that much, which means that we will remain to be quite selective. And so that would be contributed to the enhancement of our ROE. So that is continued. It is still underway. But if it becomes a more kind of a sure deal, then we may be able to disclose it. But I'm very sorry for this. But because of the non-confidentiality or non-disclosure agreement, we will not be able to share anything anymore. But it is not just a thing at the pipeline. But while we would acquire some of the assets, we will recycle. So therefore, ¥700 billion of acquisition and maybe ¥1 trillion or close to that much of divestment. So if you could allow me to limit my explanation to that. Well, we do not describe between non-domain because we go from transaction by transaction. It just so happens that this – one of the transaction made all into like new domain such as the medical area. Some discussion is underway. I don’t know whether you can describe it to be a new domain because you do not segregate new to old or existing. So the private equity, M&A, there are several kind of deals that are under discussion right now.

Yes, this is Takemura speaking. I have 1 question. So going forward, the capital gain, your ideas towards generating capital gains is my question. In the first half, there was a progress in profit, and the dividend is 39%. So that's your DPS this time around. So like last term, if a capital gain is skewed, then perhaps dividend will fluctuate. So which means that going forward, capital gains you will be leveling between first half and second half. Is that your idea for against the first half profit, it's 39%. So will you be applying that throughout the year?

Well, this time, in the first half, yes, profit against that, 39%. So with 33% in the previous term, the interim dividend, it was the same. But if we raise to 39% and then same dividend as last year, interim dividend, I think everyone will be mad. So for the first time, we used the number of first half and multiplied by 39%, and it's the first time that we have carried this out.

So 39% of first half or second half?

Yes, that's what we need to continue going forward. Then what concerns me is, okay, first half is already okay, but what's going to happen if we don't achieve the second half? So that is why in order to avoid a discussion, we are committed in achieving this ¥390 billion. So 39% against the first half. This idea will continue down the road. So for the first half, well, I think we have trended quite well. But the market remains to be uncertain, so I will not be able to say out loud that we are okay for the full year by 100%. But at the moment we have confidence in achieving ¥390 billion for the full year. So please continue to watch over the development warmly that is. So with this, we'd like to conclude the second quarter result briefing for ORIX. Thank you very much for your participation today.