ORIX Corporation Q3 FY2026 earnings call

Management Statement and Operational Highlights

• Net Income: 9-month net income was JPY 389.7 billion, up JPY 117.9 billion from the same period last year, achieving 89% of the revised full year forecast of JPY 440 billion.
• Pretax Profits: Pretax profits were JPY 567.7 billion, up JPY 184.3 billion year-over-year, with growth in Finance, Operation, and Investment segments. Investment segment saw particularly strong growth even after excluding large gains from Greenko shares.
• Shareholder Returns: Expanded share buyback program from JPY 100 billion to JPY 150 billion; completed buybacks equivalent to JPY 128.1 billion by end of January, with a progress rate of 85%.
• Capital Recycling: 9-month capital gains were JPY 196.6 billion, with cash inflow from divestments at JPY 790 billion and cash outflows from new investments at JPY 700 billion.
• Organizational Reforms: Announced restructuring of 10 segments into 3 business divisions and new banking/insurance units, but continued to manage business using existing 10-segment framework for FY '26 March.
• Impact of Chinese Passengers: Decline in Chinese passengers at Kansai International Airport since December, expected to put downward pressure on earnings, but ORIX Hotels and Inns have steady earnings from individual Chinese travelers.

Segment Performance

• Finance Segment: Cumulative segment profit increased by 8% year-over-year to JPY 145.5 billion, with a progress rate of 81% against the full year forecast. ORIX Life saw growth in investment income, and finance revenues increased in Australia and Asia (excluding Greater China).
• Operation Segment: Segment profit rose by 17% to JPY 189.5 billion, with a progress rate of 79% against the full year forecast. Gains from partial sale of Canara Robeco shares, improved airport concessions and real estate operations, strong auto segment due to a robust used car market, and the Ships business benefited from synergies with Santoku Shipbuilding.
• Investment Segment: Segment profit surged by 100% to JPY 261.4 billion. Large gains from sales of Greenko and Ormat geothermal power business, sales of properties including Hotel Universal Port VITA and office buildings, and strong performance of domestic PE investees contributed to this increase.

Guidance

• No change to full year net income forecast at this time.
• Continue to make steady progress on share buyback program to complete the JPY 150 billion program.
• Ongoing evaluation of business plan for next fiscal year, focusing on sustainable growth and capital efficiency.

Risks

• Chinese Passenger Decline: Decline in Chinese passengers at Kansai International Airport since December expected to put downward pressure on earnings.
• Credit Costs: Credit losses and impairments in ORIX USA due to real estate lending, higher U.S. dollar interest rates, and uncertain economic outlook.
• Real Estate and Overseas Operations: Uncertainties in real estate operations affected by inflation and construction costs, and cautious outlook on development and operation projects in some overseas firms.

Question and Answer

Q: About ORIX USA and Hilco Global integration, is there progress and any impact on earnings outlook?

A: OCP investees saw EBITDA growth, and Hilco Global integration is proceeding with a 100-day plan, aiming to leverage collaboration. Outlook for OCU business is being scrutinized in the current business plan.

Q: Compared to the plan, how was the third quarter progress, and any downside expected in fourth quarter?

A: Investment, Operation, and certain domestic economy aspects progressed strongly. However, outlook for next fiscal year and capital efficiency needs verification, with ongoing evaluation of business plan.

Q: About employed capital ratio and capital strengthening for insurance?

A: Employed capital ratio was updated due to detailed portfolio risk management, not changing risk appetite. Insurance contract liabilities reduction was due to mark-to-market on long-term bonds, with ongoing discussion on improving evaluation indices.

Q: About PE investees in U.S. and China, why were there evaluation gains despite cautious stance?

A: Evaluation gains in U.S. PE investees (especially tech-related) were due to fair value expansion, while China and Asia had mixed situations. Remain cautious on investment, with earlier actions taken on underperforming businesses like Elawan.