Earnings Call Transcript - IX Q4 2021

Operator, Operator

Good evening, ladies and gentlemen, thank you for joining this telephone conference of ORIX Corporation for Annual Results for the Consolidated Fiscal Year Ended March 31, 2021. The attendees on today's conference are members of the Board of Directors, Representative Executive Officer, President and CEO, Mr. Inoue; Member of the Board of Directors, Senior Managing Executive Director, Mr. Taniguchi; and Executive Officer, Head of Treasury and Accounting Headquarters, Mr. Yano. As we begin the conference, we have some asks. In order to avoid feedback, if you have communication devices such as mobile phones nearby, please turn them off or move them away from the telephone. And if we experience severe feedback during the meeting, with the consent of the organizer, we may discontinue the meeting for a while and speak to the participant who is causing the feedback. We hope that you understand, and we will hear from Mr. Yano in the first half and from Mr. Inoue during the second half, followed by Q&A. We expect the whole meeting to take about one hour. We would like to begin the meeting without further ado. Mr. Yano, the floor is yours.

Hitomaro Yano, Head of Treasury and Accounting Headquarters

Thank you, good afternoon. I am Yano, Head of Treasury and Accounting Headquarters. Thank you for joining us today for the FY 2021 March and the business performance announcement of ORIX. So let me explain. Please refer to Page 2 of the handout first, the net income and ROE. The net income of FY 2021 was at JPY 192.4 billion, with ROE of 6.4%. The result was lower than the prior year, but we managed to achieve net income in excess of JPY 190 billion, which was provided as guidance at the time of interim. Despite the further spread of the COVID-19 virus and the state of emergency enforced by the government twice over, the profit bottomed in the second quarter and started to improve from the third quarter. Please refer to the chart on the right. At ORIX, there are business results of some subsidiaries and affiliated companies that are recognized with a three-month lag, which means that we hit the bottom in the first quarter in actual fact and continued to recover steadily since then. Please refer to the next slide for the breakdown of FY 2021 segment profits. The total amount of segment profit was JPY 318.9 billion. Please refer to the chart on the left that shows the trend of segment profit over the past five years. Pale blue represents investment gains, while dark blue represents the base profit. The base profit was JPY 229.6 billion. This is a decline of JPY 70.7 billion year-over-year. However, if we exclude the three areas of businesses that were severely affected by the pandemic, which I will explain in a little more detail later, the profit was up by JPY 7.6 billion year-over-year. This was thanks to the robustness enjoyed by Environment and Energy, bank insurance and banking, and credit. We believe that the result proves the strength of our diverse business portfolio. On the other hand, the investment gains were JPY 89.3 billion; a timely exit to ensure a high return on investment allowed us to maintain a certain level of profit generation. In Japan, investment gains were recognized through the disposition of logistics facilities and Environment and Energy businesses, while some gains were also realized in the United States and in Asia. Please turn to the next page. I would now like to explain the impact of the COVID-19 pandemic on our business. On this page, we share the impact on our business segments in each quarter. In some businesses, the impact is still persisting. However, the impacted amount is following a declining trend from the second quarter. Here again, we can confirm the recovery trend of our profit. Now a little more into the details of the impact: first, the three areas of businesses that were severely affected by the pandemic. Real estate operations have followed an uneasy trend due to fluctuations in the occupancy rate of hotels and inns. While the occupancy rate fell to as low as single-digit percentages in the first quarter, it made a significant recovery in November of last year, thanks to the Go To Travel campaign. Due to a rise in the number of COVID-positive cases over the festive season, the occupancy rate fell again in January of this year, but started to recover slowly in February and March. The aircraft leasing business is still going through a tough time. However, the demand for domestic flights is picking up in some countries where vaccination has progressed faster, which gives us confidence in the mid- to long-term that we can expect a recovery trend to start even within this fiscal period. The airport concession business books the results three months back, so the earnings from Kansai Airport in October to December were booked in the fourth quarter results. The number of Japanese domestic flights improved in December and mitigated the negative impact in the fourth quarter. On the other hand, there are some businesses that were negatively affected by the pandemic in the first half but started to recover in the second half, like Corporate Financial Services and Maintenance Leasing, as well as ORIX USA that has steadily recovered in the third quarter with no further negative impact experienced in the fourth quarter. Please refer to both Page 5 and 6; the slides show the segment performance. The breakdowns are shown in both profits and assets. In the fourth quarter, six segments posted growth from the third quarter, providing further evidence of a broad recovery. As to the details of the segment performance, please refer to Page 16 and onward. I would like to make one brief remark about the results at this point in time. First, the Corporate Financial Services and Maintenance Leasing segment profit was down by JPY 3.8 billion, landing at JPY 59.1 billion. The segment was affected by COVID-19 in the first quarter but started to follow a recovery trend towards the fourth quarter, boosted by a recovery in rental car demand, with profit up year-over-year. Segment assets decreased by JPY 131.1 billion year-over-year due to a decline in finance leasing and installment loans, but with excessive liquidity in the backdrop, we avoided extending new loans at lower spreads and did not increase the asset balance just for the sake of it. Now in the Real Estate segment, segment profit was down by JPY 55.5 billion to JPY 24.7 billion. In the Investment and Operation unit, the base profit of hotels and inns decreased, with further investment gains down due to large disposition gains being posted in the prior year with the DAIKYO condominium business. Solid condominium management translated into an increased profit of JPY 1.4 billion compared to the previous year. New investments in logistics facilities are ongoing, and segment assets increased by JPY 50.9 billion year-on-year. The asset management business AUM has been increasing steadily. At the end of March 2021, our AUM stood at JPY 1.3 trillion. Moving on to the PE investment and concessions, segment profit was JPY 3.4 billion, down by JPY 40.7 billion year-on-year. In domestic private equity investments, we have invested in new projects—one in the first quarter and three in the third quarter, and the number of investees increased to 17. Businesses in general are solid, and we are recording more profit. I have already covered the concession business before. Moving on to Energy and Environment, profit for this segment was JPY 28.6 billion, an increase of JPY 16.9 billion year-on-year, signifying a major improvement in profit. The mega-solar business increased in profit in Japan. Additionally, we had gains on sales for wind power in India, which contributed. We announced two major investment projects for renewable energies overseas, one of which was Greenko Energy in India. We have acquired 20% equity as of March this year. The other project is Elawan Energy in Spain. We now have a basic agreement to acquire 80% of the equity. We expect to close in the first quarter for this fiscal year. Moving on to the insurance segment, segment profit was JPY 55.1 billion, which is up by JPY 10.3 billion compared to the previous year. New policies through online and non-face-to-face equipment increased, contributing to stable profit. Profit in the fourth quarter is down compared to the third quarter, but this is due to active investment into advertising for new policies and also expanded sales of foreign currency-denominated investment products. This means that we have U.S. dollar-denominated liabilities and U.S. dollar-denominated assets, and finally, the currencies are matched. However, accounting-wise, the impact of ForEx is different from asset to liability, resulting in a negative impact in the fourth quarter, but we have already implemented countermeasures to minimize this impact. Segment assets increased by 24% due to a higher level of AUM, thanks to the increase of new policies. Moving on to the banking and credit segment, segment profit was JPY 48 billion, up by JPY 8.9 billion year-on-year. Similar to ORIX Life, non-face-to-face online activities were leveraged to capture the demand for real estate investment loans, resulting in stable growth in both profit and assets. Moving on to the aircraft and ship segment, segment profit was down by JPY 40.5 billion, but we secured JPY 3.8 billion profit, which increased compared to the third quarter, as I previously explained regarding the impact of COVID-19. As for the aircraft leasing business, we remain cautious; however, depending on when international flights recover, we can have some expectations of recovery for the future. Moving on to ORIX United States, segment profit was JPY 43.6 billion, down by JPY 13.1 billion year-on-year. In the beginning of the term, we had some reserves and impacts for energy-related assets translating into negative profit. Nonetheless, we have seen some recovery from the second quarter, and profit levels remain high. In the third quarter, we acquired a major arranger targeting low-income housing called Boston Capital. The OCU in this field has become a top player with this acquisition. At the end of March 2021, AUM stood at $78.1 billion. Moving on to ORIX Europe, segment profit was JPY 37.9 billion, down by JPY 5.9 billion year-on-year. However, last year, we booked profit from the sales of part of the business of RobecoSAM, so if we exclude this impact, the profit has actually increased. Globally, this segment has done well; the market is seeing rapid recovery, and the AUM at the end of March 2021 was €307.4 billion, representing a significant increase compared to the previous fiscal year's end. We have seen a very steady increase in AUM balance in this fiscal year as well. In the fourth quarter, we acquired 70% equity in an asset management company in the infrastructure alternative investment called Gravis Capital Management. We will continue to invest in industries where we can leverage our strength in asset management as well. Moving on to Asia and Australia, segment profit was JPY 14.7 billion, and although some impairment was booked with some PE investees, we have seen solid profit coming from local operations in China, Taiwan, and Australia. We have also booked gaining on sales and evaluations with some investees. And that's all from me about the performance at the end of March 2021. Now we would like to ask our CEO, Mr. Inoue, to explain the business.

Makoto Inoue, CEO

This is Inoue from ORIX. The state of emergency has been repeating. Just like the prior occasions, this presentation session has to be carried out in this format, and I apologize for the inconvenience. Let us start my explanation from Page 7. So, as of March 2021, net income was down by 36.4% year-over-year at JPY 192.4 billion. The significant decline from the prior year is something we have not experienced since the global financial crisis, and we are terribly sorry for this result. The major attributing factor to this result was the aircraft-related businesses, Kansai Airport concession, as well as real estate operation businesses. The P&L of these areas, unfortunately, has declined by JPY 99 billion year-over-year. Nonetheless, we hope that these businesses will start to recover rapidly once we begin to see the end of the COVID-19 pandemic. Of course, it is dependent on how fast the vaccination progresses. However, we think that we will soon be able to make a positive contribution from these businesses as well. As for the 2021 March end shareholders' return, at the time of interim, we announced that we would be paying out JPY 76 per share, or a payout ratio of 50%, whichever is higher. This time, we have decided to apply a payout ratio of 50%, resulting in JPY 78 per share for the full year. In other words, in the second half, the per-share dividend is going to be JPY 42. Regarding our financial soundness, S&P, Moody's, and Fitch have given us a credit rating of single A- with a negative outlook, and R&I AA- with a stable outlook. However, depending on the progress we make in our pipeline, there may be some stress that could lead to a downgrade in our credit rating. Please keep that in mind. Now, for the 2022 March end, we are targeting a net income of JPY 250 billion. As for the full year dividend, we aim to pay out JPY 78 with an interim dividend of JPY 39. Of course, many complex external factors affect us, so this year will be a tough one, but at the time of the interim for this fiscal period, we hope that we will have more clarity and be able to revise our net income target at that time. For FY 2022 March end, we have set aside a share repurchase program of JPY 50 billion, so the total payout should be around 57% for this year. Please refer to Page 8. Here in Japan, it very much depends on the future trends of COVID-19, which could provide us with additional clarity. For the time being, we have to continue monitoring developments closely. In Western countries, including Europe and the United States, vaccination seems to be progressing quite rapidly. Therefore, we hope to recover our businesses in those geographic locations. However, in developing nations, including India, they are still struggling with the COVID-19 pandemic, so we have to watch the developments in those countries as well. For FY 2023 March end, we aim to recover the net income to JPY 300 billion. Please allow us a bit more time before we can confidently assert this. Unfortunately, as of March 2021, the ROE was as low as 6.4%. Recovering this ROE back to the level of 11% will require share repurchases, rebalancing by generating investment gains in segments severely affected by COVID-19, and more efforts combined. We hope to recover the ROE in light of the business conditions by allocating the dividend as well as new investments in general reserves and share repurchases earlier than 2026. However, I believe it is too early for us to provide a definitive mid- to long-term idea at this time. Therefore, we would like to prioritize recovering our net income to JPY 300 billion, which remains unchanged. Last year, the ORIX Group was surrounded by very special conditions due to the COVID-19 pandemic. Therefore, we will be very mindful in carrying out day-to-day management cautiously. Not only for this season but we have given you the policy that we will emphasize shareholders' returns. Going forward, the allocation of the net income will be determined by the business conditions regarding the dividend, new investments in general reserves, and share repurchases. It goes without saying that this policy needs to strike a balance with share price levels at the time. And again, as ORIX management, we are not satisfied with the current share price level; I felt the need to reiterate that. At the end of this month, we will be concluding the acquisition of Elawan Energy S.L. We are going to carry out renewable energy initiatives in European countries in earnest. Last year, we acquired Greenko, and we also have completed the acquisition of an infrastructure fund asset management company, Gravis Asset Management, which will allow us to explore the possibility of launching a renewable energy fund as well. Greenko and Elawan have very different projects in their development pipeline; combined, their generating capacity would reach around 17 gigawatts, with a total project amounting to JPY 1.6 trillion, of which JPY 1.2 trillion will be procured through project financing, cash on hand, and financing by each. Additionally, several years ago, we invested in Ormat Technologies, the largest geothermal business in the world, which has a total project value of JPY 100 billion underway with a capacity of 170 megawatts. The renewable energy sector requires additional investment over the next several years, and we see potential for further M&A. This will remain a focal area for ORIX. Here in Japan, the Yayoi plant in the vicinity, a 1.6-megawatt dry biogas power generation plant is under construction, and we will be testing operations at the end of this month. The total investment amount is JPY 6.1 billion, accepting 500 metric tons of industrial and other waste per day at both Yayoi and its vicinity. Here in addition to the geothermal plants, the geological survey has been concluded for the Minami-Kayabe in Hokkaido, and we will be working on development over time. The total project cost is JPY 18 billion, with a capacity of 13.1 megawatts. Other than these projects in Japan, the renewable energy pipeline is being secured at a total investment of around JPY 80 billion. Please refer to Page 10. The ORIX Group, as a solar power operator, is operating facilities with a capacity of 870 megawatts. In June 2018, we established ORIX Renewable Energy Management (OREM), which is an O&M company. Through this company, we have been able to minimize the degradation of power and reduce opportunity loss through AI-embedded generation systems. By minimizing these losses, we can potentially enhance profit by several tens of billions of yen. Based on this knowledge, we are considering participation in AUM activities for third-party operators. Please turn to Page 11. Last year, we experienced a failure with a key investment for Kobayashi Kako. Currently, the company is under business suspension, and we are pursuing the possibility of a turnaround. By the end of this fiscal term, we should be able to decide on the direction. As for private equity investments, we have enjoyed a total of JPY 200 billion worth of capital gains over the last several years. Learning from the experience with Kobayashi Kako, we will continue to be active in Japan, the U.S., China, and Europe in major M&A projects, including carve-out and business succession projects. In 2013, we acquired Robeco, which focused mostly on traditional equity and fixed-income management. However, after that, we acquired a real estate organizer and servicer, Boston Capital, which specializes in low-income housing asset management in the U.S. We also acquired Gravis Capital in the U.K. As of the end of March 2021, our AUM stands at approximately JPY 50 trillion. We will continue to pursue acquisitions at the right time. We are also investing in new logistics facilities domestically. There is strong demand for electric vehicles from overseas investors, and we are continuing our development primarily in metropolitan areas. We already have a pipeline worth JPY 150 billion and will continue to operate our turnover business model, which consists of development, operation, and sales. As digitalization accelerates, the need for data centers is increasing. We are considering new forms of data centers that have lower power consumption for both new development and the replacement of our existing facilities. I would like to report on the current status of MICE IR. The Osaka area is still under a state of emergency, and the situation requires continuous caution. It is important for us to assess investment efficiency and respond accordingly. We need to align with the government's decarbonization policy and minimize specific risks associated with reclaimed land while improving collaboration with MGM and local companies. Moreover, we need to carefully consider whether the business case stands without inbound traffic; we may have to apply some conditions. Still, we are preparing a proposal for RFP. Regarding Kansai Airport, although there is minimal inbound traffic, in preparation for the Osaka Expo in 2025, we are receiving support from the central government, and we will be conducting a large-scale renewal of Terminal 1. The cost of this renewal is expected to be approximately JPY 70 billion. Please turn to Page 12. Next, I would like to discuss ESG-related matters. In October 2021, we plan to renew our sustainability report. Based on specific government objectives for decarbonization, we will indicate our policy at ORIX, including a CO2 reduction target. ORIX has a top-level renewable energy business in Japan, and through our network, we can continuously contribute to a decarbonized society being developed in various countries around the world. CO2 emissions by ORIX Group in Japan were approximately 1.3 million tons at the end of March 2020. On the other hand, we are contributing to CO2 reduction worth 3 million tons at the end of March 2020 through our renewable energy business, which allows us to reduce three times more than we emit domestically. After the termination of the FIT period, we can use the reduction of CO2 as a carbon credit, creating potential asset value. We are calculating and aggregating emissions from our group companies overseas. Although the emissions by overseas group companies are not material, including overseas data, we should be able to announce our CO2 emissions more accurately. Challenges going forward include biomass mixed fuel and the operation of hotels along with CO2 reduction at waste processing plants. It is crucial for us to address these issues specifically, one by one. Please turn to Page 13. ORIX Group runs various businesses globally. We need specialists in each area to remain actively engaged. We provide a support system and programs to help them develop their own careers independently. Diversity and inclusion initiatives are sources of growth for the entire ORIX Group. In terms of female workplace participation, 40% of our professional staff are female, and 26.2% of managers are women. We focus on supporting women's careers so they can work in better environments. To introduce fresh perspectives, we hire many mid-career staff, with 60% of last year's hires being mid-career. We also emphasize hiring disabled persons by establishing a special subsidiary for ORIX business support, which promotes operational efficiency. Since 2016, we have been implementing projects to transform the workplace, including work style reform, improving work motivation, and creating an environment that encourages individuals to take the initiative. In 2018, we began offering support for business succession for small and medium-sized enterprises, including maintaining employment and improving management systems. We are dedicated to supporting job creation and the local economy. Page 14 shows our governance. Half of the 12 directors at ORIX are independent directors. Previously, I sat on the Nomination Committee upon request from external directors. However, since the General Shareholders Meeting in June this year, we have returned to a structure where all members are outside directors. From Slide 21, we have increased performance-based compensation with a share component in directors' compensation. The current ratio is 1:1:1 between fixed bonuses and share components. We are also discussing whether or not to reflect ESG factors in directors' and executives' compensation. High-level transparency and governance must be maintained; this is our fundamental stance, and we will continue to respond to society's demands accordingly. We will also address the requests and demands of stakeholders, including shareholders, with regard to ESG. That concludes my presentation, and thank you very much for your attention.

Operator, Operator

Thank you very much. So to begin with from SMBC Nikko Securities, Muraki-san. Please ask your question.

Masao Muraki, Analyst

I am Muraki from SMBC Nikko Securities. Regarding shareholders' return policy, Mr. Inoue, dependent on progress in business performance, there may be a revision at the time of the interim for net income. If that happens, could shareholder returns be conducted by increasing dividends or perhaps topping up shares repurchased? In conjunction with this, there are various different investments, especially regarding unrealized gains at companies like Yayoi and MICE IR, the major investment at the fall of this year. Do you think that will be taken into account, and will that affect your shareholders' return policy?

Makoto Inoue, CEO

First of all, at the time of the interim, there is a possibility for a revision regarding our earnings reconsideration, but it could be to the upside or downside. Of course, we have great expectations to revise our guidance upward for this year. If it exceeds our current expectations right now, a JPY 78 dividend will not make our investors happy, for sure. Dependent on execution of projects in the pipeline, that will factor in. We may decide to increase the amount of shares repurchased or dividend payout based on the situation at the time. We anticipate a clearer outlook around October, and I hope that this answer is satisfactory to you. Regarding Yayoi and the unrealized gain, we are indeed considering what we can do about it. However, going into more detail could risk crossing into insider trading information territory. Fortunately, there will be new investment opportunities as well. It's not our policy to increase assets continuously. Instead, I focus on carrying out portfolio rebalancing, including Yayoi and the United States, without discrimination. However, concerning MICE IR, execution for our MICE IR project is in excess of JPY 1 trillion. There are CO2 emission reduction targets that will be shared by the government, which will translate into carbon credit. The investment amount will be around JPY 1 trillion total, with equity of JPY 500 billion to JPY 600 billion sourced from banks. This might put pressure on either the dividend payout or share repurchases as options. I hope this answers your question.

Kazuki Watanabe, Analyst

Yes, this is Watanabe with Daiwa Securities. Page 7 mentions shareholders' return; you want to maintain the dividend level and total return is indicated here. Do you plan to change this in the future? Also, during the interim, do you plan to share more specific shareholder return policy?

Hitomaro Yano, Head of Treasury and Accounting Headquarters

Regarding the payout ratio, interim dividend announcements are usually made at this point, and we do not typically talk about the full-year dividend. However, considering the special situation, JPY 250 billion is not really back to cruise speed for us. So, regarding JPY 250 billion, we kindly ask for your understanding. But for the full year, we'll aim for a payout of JPY 78 and a share buyback of JPY 250 billion at a 57% net ratio. This is all about an extraordinary situation. Whether the JPY 78 dividend could be lower will depend on if we cannot fully achieve JPY 250 billion for any reason. We want to direct JPY 78 but also intend to pursue a share buyback of around JPY 50 billion. We believe we have sufficient cash flow to cover all this. The question becomes how much we can achieve net income-wise. Another aspect to consider is whether we can exclude COVID-19 impact and observe improvements in profits in the affected three businesses. We acknowledge JPY 99 billion is down from the previous year, but if we see gradual recovery, we will have to adjust these numbers as well. We hope that during the interim announcement in October, we can provide more specifics about this, and potentially incorporate mid- to long-term policies and directions.

Wataru Otsuka, Analyst

Thank you for the opportunity. I am Otsuka from JPMorgan. I have a question regarding net income. This year, you are guiding for JPY 250 billion, signifying you're expecting to recover back JPY 60 billion or so. If you were to break it down by segments, which segments do you foresee the recovery coming from?

Hitomaro Yano, Head of Treasury and Accounting Headquarters

Regarding aircraft-related businesses, the leasing sector, especially back in December of last year, Avolon, is one example. Grounding of 30 aircraft has occurred in that sector. As a result, the risk of financial impact led to negotiations that have now concluded. In terms of aircraft-related businesses, existing low-cost carriers (LCC) show both failure but new LCCs have emerged. Therefore, I hope to see the aircraft businesses starting to recover in the second half. To be honest, hotel and inn businesses in Japan are heavily influenced by vaccination rates. My perception of the vaccination recovery timeframe is somewhat negative, however, there are strong prospects for renewable energy with our Greenko and Elawan projects slated to wrap up this year, which will also influence our pension-related funds. Further, we may divest from those companies or continue operations based on opportunity. Tens of billions in profits could be expected from renewable energy, and we are also considering several logistics facility disposals. While it’s unlikely we'll entirely reach JPY 250 billion, recovering existing assets should help achieve this level. JPY 250 billion is not an aspirational target; however, pushing too aggressively might lead us to mistakes like with Kobayashi Kako. Thus, we need to exercise caution.

Natsumu Tsujino, Analyst

Thank you. You mentioned the possibility of a downgrade if the current situation persists. Why did you emphasize this during the presentation? Can we anticipate significant improvements in profits or vaccinations in Japan that could alter the situation?

Makoto Inoue, CEO

Regarding downgrading, maintaining a single A rating is the standard message from ORIX. With Elawan, there is about JPY 80 billion worth of project, and if executed, the S&P RAC ratio is lower than 10%. Therefore, it’s not an immediate concern. When the timing for a review comes around, it’s possible we may find ourselves rated BBB+. What we wanted was to give you a heads-up on this. Our financing and response would not be affected because of this. We want to clarify that we have been discussing maintaining a single A over time while preparing for a potential re-rating to BBB+. With respect to the MICE IR, you are right that various assumptions need to be taken into account, and I can assure you that we have plans in place for it. From my explanation today, if the state of emergency continues, we need to manage negotiations thoroughly with the Osaka prefecture while ensuring infrastructure is ready for the Expo 2025. We anticipate that the Expo should still go ahead but must monitor developments carefully.

Futoshi Sasaki, Analyst

I would like you to give a brief update. You have shared references before, but now you have had no indications regarding JPY 500 billion. What's the reason for this? Moreover, can you clarify your assumptions regarding the pipeline?

Hitomaro Yano, Head of Treasury and Accounting Headquarters

JPY 192 billion is the quantity we generated this time. We feel a little humble and therefore decided not to mention this JPY 500 billion target at this stage. Our immediate focus will be on JPY 300 billion, following that JPY 250 billion, and then upward to JPY 400 billion as we proceed. While we achieved JPY 300 billion in the past, we are reluctant to share lofty targets given the circumstances. Despite this, we do have various projects in the pipeline, with earnings projection estimating the possibility of JPY 200 billion to JPY 300 billion domestically. Elawan and Greenko have projects in varying degrees of delay. However, as soon as COVID-19 starts to ease, we believe we can resume once more. The ROA of more than 3% can be achieved with the investment horizon being outlined right now, and we will remain cautious in analyzing these projects.

Makoto Inoue, CEO

Regarding new investments, we acknowledge our cautious stance post-Kobayashi Kako situation, which reinforced the importance of thorough due diligence. We aim for complete due diligence while remaining open-minded about new investment opportunities. As for this fiscal period, we can anticipate that every year we need to be making approximately the JPY 300 billion to JPY 400 billion investments to align with our goals, while also planning out JPY 200 billion to JPY 300 billion worth of securitization in existing assets. This means ensuring our total assets continue to grow from JPY 13 trillion upward.

Hitomaro Yano, Head of Treasury and Accounting Headquarters

We expect to recover to JPY 300 billion but are realistic in our approach and will exercise caution while looking to reach beyond this median. Thank you.

Operator, Operator

Thank you. That concludes the Q&A session. Mr. Inoue, please give us your concluding remarks.

Makoto Inoue, CEO

Thank you very much. JPY 192.4 billion net income is regrettable. In relation to that, we will be issuing dividends which might not satisfy everyone, but we aim for a recovery one step at a time, returning to cruise speed and achieving beyond JPY 300 billion as soon as we can. So I hope that you can allow us some time to realize this.

Operator, Operator

That concludes today's conference by ORIX Corporation. We would like to thank all participants for staying until the end of the program.