TOKYO -- Japanese financial services company Orix is forecasting a record group net profit in the year through March 2015 -- the first time in eight years. The company's stock, however, is less than half of its price that it was eight years ago.
Orix Deputy President and Chief Financial Officer Haruyuki Urata said his company should find ways to monetize its active investments both at home and abroad to help improve evaluations from investors. Excerpts from a recent interview follow.
Q. Your company's net profit is forecast to rise 12% on the year to 210 billion yen ($1.91 billion), based on U.S. accounting standards, in the current fiscal year. Do you think your company can continue doing that even after the next fiscal year?
A. I think we can post a record profit in the current fiscal year, unless something very unusual happens. These days, our performance is driven by overseas operations, which provide a great business opportunity. For example, we acquired the European asset management company Robeco last year. It has been a very good year for Robeco, with its commission revenues increasing steadily. In addition to our existing markets in Western countries, we will also expand our business in the Middle East and in Asia, including Japan.
As chief financial officer, I want to place an emphasis on the growth in earnings per share. Earnings per share will come in at around 159 yen in the current fiscal year, up 8% from the previous year's 147 yen. I want to improve it to roughly 200 yen as soon as possible. I want to see a 10% to 20% rise in net profit on average even after the next fiscal year to improve earnings per share steadily.
Q. What is the investment strategy in Japan, which generates 70% of total sales?
A. Among other areas, we are increasing investment in renewable energy. Outstanding assets of our environment and energy business are currently 100 billion yen. I expect those numbers to rise to roughly 400 billion yen in the year through March 2018. We also plan to invest in photovoltaic, biomass, geothermal and wind power generation facilities.
I expect our power generation and electric power supply businesses to start contributing to earnings from the year ending March 2016 and later.
Q. Is there any possibility of you using your ample cash on hand of roughly 1 trillion yen to buy back shares?
A. We want to use cash on hand to increase earnings in the future. I think investors are expecting us to increase profits steadily. We would think of returning profits to our shareholders if we have nowhere to invest, but we do have many areas to invest in. Now that our financial condition has improved, we can consider promising investments.
We plan to strengthen dividends actively. Actually, we increased dividends by 10 yen in the previous fiscal year. We would like to use 20% of our profits to dividends, based on profits excluding one-time profits such as gains on stock valuation.
We would also like our individual investors to have stakes in Orix, although only a few investors do so at this time. We will also consider enhancing our shareholder special benefit plan, such as discounts on tickets for our professional baseball team, the Orix Buffaloes.
Interviewed by Nikkei staff writer Shinnosuke Iiyama