IR InformationThird Medium-Term Management Plan
Summary of the Third Medium-Term Management Plan
Fiscal 2016 - Fiscal 2018
Promote the shift to a high-revenue business model with a focus on asset efficiency in order to lay the foundations for sustainable growth.
Strengthen the Sales Base
- 1Transform to take on new business areas that transcend the conventional concept of leasing
- 2Create new values by integrating finance and business
- 3Make a Group-wide effort to become first in the overall ranking for the automobile finance business
- 4Expand overseas businesses by promoting alliance strategies
- 5Engage in business planning and development aimed at lasting corporate development
Strengthen the Management Base
- 1Strengthen consolidated management
- 2Enhance and reinforce the financial base
- 3Raise the level of risk control
- 4Bolster development of human resources
- 5Strengthen corporate governance
|Plans for the year ending March 31, 2019||Results for the year ended March 31, 2016|
|Consolidated ordinary income||80 billion yen or more||68 billion yen|
|Consolidated ROA (ROA = Ordinary income/ Operating assets)||2.3% or more||2.3%|
|Shareholders’ equity ratio||11.0%||9.6%|
Ordinary Income Targets for the Third Medium-Term Management Plan
(Years ended March 31)
Basic Policy of the Third Medium-Term Management Plan
In the past, we emphasized quantitatively expanding operating assets and generating growth in promising fields such as specialty financing, domestic automobile financing, and international business. As operating assets diversified and increased to about ¥3 trillion, however, management faced greater challenges such as the need to boost profitability to handle new sources and levels of risk.
The third medium-term management plan announced in May 2016 addresses this shift in our operating environment. Over the course of this plan, we will transition into a high-revenue business model focused on asset efficiency in order to lay the foundation for sustainable growth.
The third medium-term management plan marks a major turning point in building the foundation for lasting growth. We intend to shift the goal of our business model from quantitative expansion to the generation of high-revenue based on accumulating highly profitable assets. The omission of targets for consolidated operating assets in our management plan follows from our emphasis on asset efficiency. We will establish an organization that can consistently achieve consolidated ordinary income of at least ¥80.0 billion, and consolidated ROA (the ratio of ordinary income to operating assets that we use internally) of at least 2.3%. Financial leverage will be addressed by further strengthening our financial base, with a target of 11.0% for the consolidated shareholders’ equity ratio.
Third Medium-Term Management Plan Strategies:
Strengthen the Sales Base and the Management Base
We will strengthen our sales and management foundations in accordance with the basic policy of the third medium-term management plan.
Strengthen the Sales Base
Although the equipment leasing operating environment is expected to remain harsh, we intend to reach beyond conventional leasing concepts by entering new business domains. This means that we will emphasize ROA through service as we expand into businesses where we possess a competitive advantage. At the same time, we will concentrate on joint ventures with leading partners. Moreover, we will strengthen businesses that are focused on high-value areas such as operating leases and the rental business and expand reuse and recycling operations. We expect these efforts to contribute to the creation of an environmentally-sound, sustainable economy and society.
Specialty financing concentrates on the highly specialized domains of shipping, aviation, environment and energy, and real estate, with the goal of creating new value by combining finance and business. In concrete terms, we will shift our focus from the quantitative expansion of operating assets to qualitative considerations such as credit quality and earnings potential. We will also enhance the expertise of those responsible for creating value on the front lines of our businesses and expand the range of businesses with strategic partners. In addition, we plan to establish a sound earnings foundation through, for example, creative, intelligent schemes and exit strategies in each of our focal business areas to improve profitability while generating non-interest income, including fees and capital gains from equity investments.
Domestic Automobile Financing
Domestic automobile financing will take on the challenge of mobilizing Group strengths to become first in Japan’s automobile finance business. This business stands on one of the most solid foundations in its industry in Japan, encompassing Nippon Car Solutions Co., Ltd., which serves corporate clients; Orico Auto Leasing Co., Ltd., which serves individuals; and Nippon Rent-A-Car Service, Inc., which serves both individuals and companies. We will integrate our unique advantages as Group strengths while considering the environment of the automobile leasing and rental markets to enable us to create new offerings and prevail against the competition. In addition, we will aggressively form alliances and engage in M&A with leading partners to take on new challenges, such as advanced automotive technology.
Our international business reaches across the globe from East Asia and ASEAN to the United States, and we will further expand overseas operations by building alliances. We will work with leading local partners by complementing their strengths, including extensive customer bases, with our unique knowledge and expertise, to generate synergies and expand business with a sense of urgency. We will also address the key issue of improving profitability by increasing transactions with non-Japanese companies with due regard for risks and returns.
Strengthen the Management Base
We will establish a more robust management foundation by (1) strengthening consolidated management, (2) enhancing and reinforcing our financial base, (3) raising the level of risk control, (4) bolstering development of human resources, and (5) strengthening corporate governance. Greater stability will be achieved by improving and enhancing organizational support capabilities to ensure close alignment with the Group’s global business development. We are committed to maintaining effective management that increases the Group’s corporate value in accordance with the Corporate Governance Code enacted in June 2015.