Mitsubishi HC Capital : Financial Results for the Fiscal Year Ended March 31, 2024 with script

Financial Results

for the Fiscal Year Ended March 31, 2024

Mitsubishi HC Capital Inc.

May 15, 2024

Greetings, everyone. This is Taiju Hisai, President & CEO.

Thank you for attending today's financial results briefing despite your busy schedules.

For today's meeting, in addition to those gathered here at the meeting site, we are also joined by many people watching live online.

Today, I would like to give an overview of the Financial Results for the FYE3/2024, which we announced earlier today.

Following that, Director and Managing Executive Officer Haruhiko Sato will explain the financial results for the period, and our forecast for FYE 3/2025.

Then, I would like to talk about the progress we have made on our Medium-term Management Plan, the 2025 MTMP, which began last fiscal year.

Finally, we'd like to take questions from all of you, so please feel free to ask.

Let's get started. Please take a look at the Highlights on page 4 of the Financial Results for FYE3/2024, which you should have in front of you.

Legal Disclaimer

This presentation contains forward-looking statements regarding estimations, forecasts, targets and plans in relation to the results of operations, financial conditions and other overall management of Mitsubishi HC Capital Inc. and/or its group companies.

These forward-looking statements are inherently subject to a number of risks and uncertainties that could cause the actual results, performance, achievements, financial position etc. to differ materially from the information expressed or implied by these forward-looking statements, which is based on assumptions and beliefs in light of information currently available to the management of Mitsubishi HC Capital Inc. at the time of publication. Accordingly, due to various risks and uncertainties, the statements are not a guarantee of future performance or developments. We may not be successful in implementing our business strategy, and management may fail to achieve its targets for a wide range of possible reasons.

Amounts are rounded down in this presentation, which may cause a fractional error in total amounts. We undertake no obligation to update or correct any forward-looking statements after the date of this presentation. The information set forth in this presentation is subject to change without notice.

This presentation is not intended to solicit, offer, or sell investments in any jurisdiction, and should not be the sole basis for making investment and other decisions. The reader is cautioned not to place undue reliance on forward-looking statements.

We assume no liability for any damage resulting from the use.

This presentation is created in Japanese and translated into English. The Japanese text is the original and the English text is for reference purposes. If there is any conflict or inconsistency between these two texts, the Japanese text shall prevail.

Definitions of Terms and Figures Used in this Presentation

MHC: Mitsubishi HC Capital

MUL: Mitsubishi UFJ Lease & Finance

HC: Hitachi Capital

1. European Energy (Became an equity-method affiliate in April 2024) JSA: Jackson Square Aviation (Aircraft leasing company)
   ELF: Engine Lease Finance (Aircraft engine leasing company)
   CAI: CAI International (Marine container leasing company)

BIL: Beacon Intermodal Leasing (Merger with CAI (surviving company) completed in January 2023)

DAF: Diamond Asset Finance (Share transfer completed in March 2023)

CPD: CenterPoint Development (Became a wholly-owned subsidiary in April 2023)

CA: Mitsubishi HC Capital Auto Lease (Merger with Mitsubishi Auto Leasing (surviving company) completed in April 2023)

Asset-related gain/loss:

The sum of gain/loss on sales and impairment losses of owned assets based on gross profit in the Customer Solutions, Environment & Energy, Aviation, Logistics, and Real Estate segments

Base profit: Gross profit other than asset-related gain/loss

Income Gain: Base profit + non-operating income/loss(do not include gains on bad debts recovered)

Net Income: Net income (quarterly/annually) attributable to owners of the parent

ROA:	Net income
(total assets at the end of previous FY + total assets at the end of this FY) / 2
ROE:	Net income
(equity at the end of previous FY + equity at the end of this FY) / 2
Segment Assets:
Operating assets + equity-method investments + goodwill + investment securities, etc.	1

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Index

	Highlights		Financial Forecast for
Ⅰ	Ⅳ
FYE3/2025
	Financial Results for		Progress of the Medium-term
Ⅱ	Ⅴ
FYE3/2024	Management Plan (2025 MTMP)
	Segment Updates		Reference Information
Ⅲ	Ⅵ

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2

I. Highlights

Back to Index

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Highlights

Net income for FYE3/2024 increased by 7.6 billion yen YoY to 123.8 billion yen.

Annual DPS is to be 37 yen, increasing for 25 consecutive years.

Net income exceeded the initial forecast (120.0 billion yen) by 3.8 billion yen (3.2%), hitting a record high for two consecutive years.

While net income had been slow compared to the initial forecast until the 3Q due to losses and expenses not anticipated in the initial plan, the initial forecast was achieved because profits in Aviation and Logistics businesses and gains on sales of assets in Real Estate and Environment & Energy businesses exceeded the plans.

The annual dividend per share is to be 37 yen* (up 4 yen YoY) as per the initial forecast, increasing for 25 consecutive years.

Forecast net income of 135.0 billion yen and annual DPS of 40 yen (+3 yen) for FYE3/2025.

We forecast the net income for FYE3/2025 will increase by 11.1 billion yen (9.0%) YoY to 135.0 billion yen thanks mainly to the growth in Aviation and other businesses, and an absence of large losses recorded in FYE3/2024, despite a reactionary fall in extraordinary income recorded in FYE3/2024.

The annual dividend per share will increase by 3 yen YoY to 40 yen (payout ratio of 42.5%), increasing for 26 consecutive years.

The first year of the Medium-term Management Plan (2025 MTMP) for the enhancement of the medium- to long-term corporate value got off to a satisfactory start.

We had a smooth start for financial and non-financial targets. The replacement of business portfolios has also progressed steadily.

While there are issues with the pace of the "Evolution and Layering of Business Models" and the Americas of Global Business, we will recover on a company-wide basis.

Regarding the "Frameworks to Promote Transformation", we have steadily fostered the awareness of transformation through the use of the Innovation Investment Fund, etc.

* The fiscal year-end dividend for FYE3/2024 will be resolved in the Board of Directors meeting to be held on May 22, 2024.

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Regarding our results for the period at the top of the page, you can see that we achieved net income of 123.8 billion yen, an increase of 7.6 billion yen YoY.

This exceeded our initial forecast of 120.0 billion yen, and we were able to post record profits for the second consecutive year.

The annual dividend per share increased by 4 yen YoY to 37 yen, as per our initial forecast. This resulted in our 25th consecutive year of increased dividends.

Next, in the middle of the page, you can see our forecasts for FYE3/2025. We expect net income of 135.0 billion yen, an increase of 11.1 billion yen YoY.

We also expect an annual dividend of 40 yen per share, an increase of 3 yen YoY.

Lastly, regarding the 2025 MTMP at the bottom of the page, we got off to a satisfactory start toward enhancing Medium- to Long-term corporate value. I will go into more detail about these shortly.

For now, I would like to hand over to Mr. Sato.

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II. Financial Results for FYE3/2024

Back to Index

This is Haruhiko Sato, Managing Executive Officer.

I would like to introduce "II. Financial Results for FYE3/2024",

"III. Segment Updates", and "IV. Financial Forecast for FYE3/2025" in the materials.

First, let's look at page 6 of the materials.

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Financial Results for FYE3/2024

Net income increased by 7.6 billion yen YoY to 123.8 billion yen, exceeding the initial forecast and hitting a record high.

New transactions volume increased by 411.3 billion yen YoY to 3.0519 trillion yen. New transactions increased in Aviation, Real Estate businesses, etc ROA was 1.1%, as per the initial forecast, while ROE was 7.7%, slightly lower than the initial forecast due to depreciation of the yen.

		(a)	(b)	(c)=(b)-(a)		(d)=(c)/(a)	(e)
						YoY	Change
		FYE3/2023	FYE3/2024
		Change	%	(Excl. Impact of
(Billion Yen)
					Exchange Rates*1)
1	Revenue	1,896.2	1,950.5	+54.3		+2.9%	-4.7
2	Gross Profit	357.3	380.0	+22.7		+6.4%	+5.8
3	Recurring Income	146.0	151.6	+5.5		+3.8%	-1.9
4	Net Income	116.2	123.8	+7.6		+6.5%	+2.0*2
5	New Transactions Volume	2,640.6	3,051.9	+411.3		+15.6%	+261.0
					Change from FYE3/2023
		FYE3/2023	FYE3/2024				Change
		Change	%	(Excl. Impact of
(Billion Yen)
					Exchange Rates*1)
6	Total Segment Assets	9,632.9	10,179.4	+546.5		+5.7%	-41.7

1. (g)=(b)-(f)

FYE3/2024	Change
Forecast

-	-
-	-
-	-

120.0+3.8

• -

		FYE3/2023	FYE3/2024	YoY Change		FYE3/2024	Change
			Forecast
7	DPS	33 yen	37 yen	+4 yen		37 yen	0 yen
8	Payout Ratio	40.8%	42.9%	+2.1pt		44.3%	-1.4pt
9	ROA	1.1%	1.1%	0.0pt		1.1%	0.0pt
10	ROE	8.2%	7.7%	-0.5pt		7.8%	-0.1pt

*1 An impact of the YoY difference in exchange rates when incorporating the financial statements of overseas subsidiaries (refer to page 53 for applied exchange rates)

*2 The YoY change was approx. +1.3 billion yen, excluding a decrease in exchange revaluation losses (approx. +0.7 billion yen) in relation to foreign currency-denominated borrowings for leasing transactions of aircraft owned by MHC

(Note) As MHC denominates financial statements in JPY, foreign currency-denominated assets and liabilities are converted into JPY. However, for accounting purposes, while assets (aircraft) use the exchange rate as of the lease start date,	6
the liabilities (borrowing) use the exchange rate as of the final day of the fiscal period. Therefore, exchange revaluation losses or gains (weak yen: revaluation losses, strong yen: revaluation gains) may occur

Here, I will explain our Financial Results.

In row 4, you can see net income.

As Mr. Hisai said earlier, we saw an increase of 7.6 billion yen YoY, or 6.5%, resulting in net income of 123.8 billion yen.

As there were losses and expenses that were not in the initial plan, progress against our initial forecast was slow until the third quarter.

However, we were able to exceed the initial forecast by 3.8 billion yen and post record profits for the second consecutive year, thanks mainly to profits exceeding the plan in both Aviation and Logistics segments, as well as sales gains on assets exceeding the plan in Real Estate and Environment & Energy segments.

New transactions volume in row 5, recorded an increase of 411.3 billion yen YoY, for a total of 3.0519 trillion yen, with increased new transactions in Aviation and Real Estate segments.

In row 9, although we posted an ROA of 1.1%, as per our initial forecast, ROE in row 10 shows us coming in at 7.7%, slightly below our initial forecast, due to the depreciation of the yen beyond our initial forecast.

Let's move on to page 7.

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+ : Positive effect on net income

- :Negative effect on net income

Increase/Decrease Factors in Net Income (YoY)

Though there were impairment losses not included in the initial plan and an increase in credit costs in Global Business (the Americas),

net income increased by 7.6 billion yen (6.5%) YoY thanks to business growth mainly in Aviation business, and large gains on sales of assets and strategic shareholdings, etc.

Increase/Decrease in Net Income		(1) Business Growth*1 (Excl. Impairment Losses, etc.*2): Up ¥28.8Bn

(Billion Yen)							Global Business (+¥14.6Bn):	Impact of exchange rates and positive effects of the
	(1)						Net		reorganization of subsidiaries in the Americas*3 (+¥3.1Bn)
						Aviation (+¥13.5Bn):	An increase in leasing revenues, etc.
	+28.8				(5)		Income
		-6.9			+8.9		+7.6	(2) Impairment Losses, etc.*2: Up ¥6.9Bn
		-5.8
		(2)					Real Estate (-¥6.8Bn):	Losses in U.S. real estate businesses
			(3)	-10.5		-6.9		Environment & Energy*4 (-¥5.8Bn):	Impairment losses related to a solar power generation project
	Business		(4)		(6)			in Japan
	Growth*1+21.9						Aviation (+¥3.2Bn):	A decrease of impairment losses
116.2							123.8	Logistics (+¥2.4Bn):	An absence of impairment losses in FYE3/2023
								(3) Credit Costs: Up ¥5.8Bn
		Positive Factor		Negative Factor		Global Business (-¥15.9Bn):	An increase in credit costs in the Americas, etc.
				Aviation (+¥9.7Bn):	A large reversal of allowance for doubtful accounts
FYE3/2023	Business	Impairment	Credit Costs	Operating	Extraordinary	Other	FYE3/2024	(4) Operating Expenses: Up ¥10.5Bn
	Growth*1	Losses,		Expenses	Income/Loss	(Tax Expenses,		Global Business (-¥9.6Bn):	Impact of exchange rates and negative effects of the
	(Excl. Impairment	etc.*2				etc.)
	Losses, etc.*2)								reorganization of subsidiaries in the Americas*3 (-¥2.2Bn)

(Billion Yen)	FYE3/2023	FYE3/2024		(5) Extraordinary Income/Loss: Up ¥8.9Bn
(1) Business Growth*1 (Excl. Impairment Losses, etc.*2)	372.9	401.7
(2)	Impairment Losses, etc.*2	11.3	18.3		Customer Solutions, etc. (+¥9.2Bn): An increase in gains on sales of strategic shareholdings, etc.
(3)	Credit Costs	13.7	19.5		Real Estate (+¥5.8Bn):	Extraordinary income as a result of making CPD a wholly-
(4) Operating Expenses	201.7	212.3			owned subsidiary, etc.
(5) Extraordinary Income/Loss	7.0	16.0		Global Business (-¥5.0Bn):	An absence of gains on revaluation of securities in Europe
(6)	Other (Tax Expenses, etc.)	36.9	43.8			in FYE3/2023, etc.

(Note) Figures shown in (1) through (5) are on a pre-tax basis. Tax expenses are included in (6)
*1	Gross profit + non-operating income/loss (however, non-operating income/loss do not include gains on bad debts recovered)	*3	Refer to page 43 for details
*2	Impairment losses and losses in the Real Estate business in the U.S.	*4	The segment name was changed due to the reorganization on April 1, 2023	7

This waterfall chart shows the factors for changes to net income YoY in some more detail.

The pink column on the very left of the chart shows net income of 116.2 billion yen in the last fiscal year (FYE3/2023). The red column on the very right shows net income of 123.8 billion yen in this fiscal year

(FYE3/2024). Between them, positive factors are shown with orange columns, while negative factors are shown with blue columns.

Numbers (1) to (5) show figures on a pre-tax basis. Number (6) shows final net income with tax expenses included.

First of all, (1) shows Business Growth excluding impairment losses, etc. The profits increased by 28.8 billion yen YoY thanks mainly to the influence of the depreciation of the yen and positive effects of adjusting the fiscal period in line with the reorganization of subsidiaries in the Americas in Global Business segment, and an increase in leasing revenue in Aviation segment associated with the recovery of the market, our accumulation of new assets, an increase in the utilization rate of engine leases, etc.

Next, (2) shows Impairment Losses, etc. within Business Growth. The losses increased by 6.9 billion yen YoY. Although there was a reduction in impairment losses in Aviation segment, impairment losses related to a solar power generation project in Japan were recorded in Environment & Energy segment, and losses were recorded in line with the worsening condition of the U.S. market in Real Estate segment.

With regard to (3) Credit Costs, losses increased by 5.8 billion yen YoY. A large reversal of allowance for doubtful accounts was recorded in Aviation segment, however, in the Americas of Global Business segment, credit costs increased in truck financing, a major business in the region, due to worsening market conditions in the transportation sector, which was strong during the COVID-19 pandemic.

In (4), Operating Expenses, e x penses increased by 10.5 billion yen YoY mainly due to the impact of the depreciation of the yen in Global Business segment and negative effects of the reorganization of subsidiaries in the Americas.

In (5), Extraordinary Income/Loss, p rofits increased by 8.9 billion yen YoY mainly through an increase in gains on sales of strategic shareholdings, etc. and extraordinary income on step acquisitions recorded in relation to making CenterPoint Development Inc. a wholly-owned subsidiary in Real Estate segment.

As a result of the above, net income for FYE3/2024 was 123.8 billion yen, with an increase of 7.6 billion yen YoY.

Next, then, I would like to talk about each segments. Please turn to page 10.

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III. Segment Updates

Back to Index

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Increase/Decrease Factors in Segment Profit (YoY)

Segment Profit

(Billion Yen)
	Total: 123.8
Total: 116.2
	38.1
38.1
	16.6
29.0	7.3
11.6	27.3
6.2
15.3	17.8
12.6	11.9
3.7	2.7
-0.6	1.8
FYE3/2023	FYE3/2024

	Segment Profit			Major Factors for Changes in Segment Profit
(Billion Yen)	FYE3/2023	FYE3/2024	YoY
Customer				【+】	An increase in gains on sales of strategic shareholdings, etc.
38.1	38.1	0.0	【−】	Absences of large gains on sales related to real estate leasing and
Solutions
				of non-operating income (insurance claim income) in FYE3/2023
Global	29.0	16.6	-12.4	【−】	An increase in credit costs in the Americas and an absence of
Business		gains on revaluation of securities in Europe in FYE3/2023
				【+】	An increase in gains on sales of owned assets and a decrease in
					tax expenses associated with the absorption-type merger of
Environment	11.6	7.3	-4.3		subsidiaries
& Energy	【−】	Impairment losses related to a solar power generation project,
					a decrease in profits from equity-method investments,
					and the temporary expenses in infrastructure business
Aviation	6.2	27.3	+21.1	【+】	An increase in leasing revenue, a large reversal of allowance for
	doubtful accounts, and a decrease in impairment losses
Logistics	15.3	17.8	+2.4	【+】	An increase in gains on sales of owned assets
				【+】 An increase in gains on sales of owned assets, extraordinary
Real Estate	12.6	11.9	-0.7		income as a result of making CPD a wholly-owned subsidiary
【−】	Losses in U.S. projects and the negative effects of the
					deconsolidation of DAF in FYE3/2023
Mobility	3.7	2.7	-1.0	【−】	Negative effects of the deconsolidation of CA in FYE3/2023
Adjustments	-0.6	1.8	+2.4	【+】	An increase in gains on sales of strategic shareholdings, etc.
Total	116.2	123.8	+7.6

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