Business context and reporting period
ORIX Corporation’s Form 20-F is an audited annual report for the fiscal year ended March 31, 2020, prepared under U.S. GAAP. It is not a standalone 2019 Q4 filing; the company separately describes COVID-19 effects in the fourth quarter. ORIX operates across six segments, including financial services, leasing, real estate, insurance, investment and overseas businesses. Amounts below are in yen unless stated otherwise.
Key financial metrics
| Metric | FY2020 | FY2019 | Change |
|---|---|---|---|
| Total revenue | ¥2,280.3bn | ¥2,434.9bn | -6% |
| Operating income | ¥269.7bn | ¥329.4bn | -18% |
| Income before taxes | ¥412.6bn | ¥395.7bn | +4% |
| Net income attributable to ORIX shareholders | ¥302.7bn | ¥323.7bn | -7% |
| Basic EPS | ¥237.38 | ¥252.92 | -6% |
| ROE / ROA | 10.3% / 2.40% | 11.6% / 2.74% | Both declined |
| Operating income margin | 11.8% | 13.5% | Approximate |
Revenue and operating income fell, while pre-tax income rose on higher equity-method earnings and gains on subsidiary and affiliate sales. Net income attributable to shareholders declined partly because FY2019 benefited from a reversal of deferred tax liabilities related to DAIKYO. FY2020 income-tax provision was ¥105.8bn, versus ¥68.7bn.
Balance sheet, liquidity and cash flow
- Total assets were ¥13.07tn, up 7%; total liabilities were ¥9.99tn, up 8%. Shareholders’ equity rose 3% to ¥2.99tn, while the equity-to-assets ratio fell to 22.9% from 23.8%.
- Short- and long-term debt totaled ¥4.62tn, up 3%; deposits were ¥2.23tn, up 16%. Debt-to-equity was 1.5x, excluding deposits. Interest expense rose 6% to ¥99.1bn.
- Cash, cash equivalents and restricted cash ended at ¥1.14tn, down ¥148.3bn. Operating cash flow was ¥1.04tn; investing cash outflow was ¥1.47tn; financing cash inflow was ¥288.7bn. Year-over-year operating and investing cash flow comparisons are materially affected by the New Lease Standard’s reclassification of lease principal receipts from investing to operating activities.
- Committed credit facilities totaled ¥569.9bn, of which ¥427.6bn was unused. Management said it stress-tests liquidity and seeks diversified funding and staggered maturities.
Segment performance and other metrics
Segment profit increased 4% to ¥417.7bn. Overseas Business rose 25% to ¥156.4bn and Investment and Operation rose 46% to ¥55.7bn, supported by affiliate earnings and investment-sale gains. Profit declined in Corporate Financial Services (-43%), Maintenance Leasing (-13%), Real Estate (-14%) and Retail (-5%). Reported segment revenue and expense comparisons were affected in some businesses by adoption of the New Lease Standard.
Installment loans rose 14% to ¥3.74tn; net investment in leases was ¥1.08tn. Loans individually evaluated for impairment increased to ¥85.8bn from ¥58.8bn, while 90-days-past-due net investment in leases rose to ¥15.3bn from ¥14.8bn. The allowance for doubtful receivables and probable loan losses was ¥56.8bn.
Outlook, risks and unusual items
- Management estimated COVID-19 reduced consolidated segment profit by approximately ¥15bn–¥20bn in Q4. It said the FY2020 financial impact was not significant overall, but warned that hotels and leisure facilities, airport concessions, aircraft leasing, borrowers and asset-management businesses faced further pressure. It did not publish a FY2021 net-income target because uncertainty made forecasting difficult; it also said the timing and process for its prior medium- to long-term ¥400bn and ¥500bn income aspirations needed revision.
- For FY2021, ORIX forecast an interim dividend of ¥35 per share and targeted a 50% dividend payout ratio; the year-end dividend was undetermined. The FY2020 dividend applicable to the fiscal year was ¥76 per share, unchanged from FY2019.
- Expected adoption of the current expected credit loss standard on April 1, 2020 was estimated to increase the allowance for financial-asset credit losses by about ¥32bn, increase other liabilities for off-balance-sheet exposures by about ¥29bn, and reduce retained earnings by about ¥44bn.
- Other notable items: securities write-downs rose to ¥12.0bn from ¥1.4bn; the company issued ¥100bn of subordinated hybrid bonds; and it repurchased 25.8m shares during FY2020. Management reported no pending litigation expected to materially adversely affect financial condition or results, while noting adverse outcomes cannot be ruled out. The filing identifies risks from COVID-19, credit deterioration, asset-value volatility, funding access and costs, interest and foreign-exchange movements, regulation, cyber incidents and operational controls.
- Auditors issued an unqualified opinion on the financial statements and internal control over financial reporting. The auditor highlighted judgment-sensitive valuations of an asset-management contract and Level 3 investment funds.
Most important facts for investors to verify
- How COVID-19 affected FY2021 earnings, credit costs, asset values, lease collections and liquidity after the filing date.
- Whether the reported rise in impaired loans and the forthcoming credit-loss allowance adequately capture borrower and collateral risks.
- How much FY2020 profit depended on affiliate earnings and asset-sale gains, and whether those sources are repeatable.
- The impact of New Lease Standard presentation changes on comparable revenue, expenses, segment results and cash-flow trends.
- The dividend figures: the filing states ¥76 per share applicable to FY2020, while the audited income statement reports ¥81 per share in cash dividends; confirm the distinction in timing and basis.
- Progress against the expected CECL transition adjustments, the FY2021 dividend payout target and the company’s A-grade credit-rating objective.