I am Kawamura, CEO of the company. Thank you very much for joining us today despite your busy schedule. I'd also like to take this opportunity to thank you for your continued support. Move on to the slide number one. First, I will explain the key points of the FY 2022 financial results. Moving on to slide number two. In FY 2022, sales increased and profit decreased. Net sales totaled JPY 1,062.1 billion, with both food and pharmaceutical segments increasing. Overseas sales totaled JPY 120 billion, and for the first time, the ratio of overseas business to total sales exceeded 10%. On the other hand, operating profit was JPY 75.4 billion, JPY 2 billion below the plan announced in February. By segment, operating profit decreased in food segment and increased in pharmaceuticals. Details will be explained later.
Net income was JPY 69.4 billion, reflecting the absence of gains from the transfer of agricultural chemical business recorded in the previous fiscal year. This was JPY 7 billion higher than the plan announced in February, but this was due to the discrepancy between the forecast and actual results, including gains on sales of fixed assets and impairment losses. In addition, we steadily reduced cross-shareholdings and repurchased approximately JPY 10 billion of outstanding shares during this period. Moving on to the slide number three. The following is summary by segment. The food segment increased in sales and decreased in profits. The graph here shows the factors that contributed to the increase or decrease in operating profit from the previous year. As you can see, raw material costs, which are included in cost variance, were a negative factor of JPY 23.2 billion.
In addition, energy costs, which are included in distribution and manufacturing overhead costs, increased. Although the price hike had a positive effect of JPY 18.3 billion, the cost increase was not offset by the upfront marketing costs and lower than expected sales volumes of some products. Due to these factors, operating profit decreased by approximately 27% to JPY 55.8 billion. This was about 7% less than the plan announced in February. This was mainly due to the fact that the volume of mainstay products in yogurt and cheese business did not reach the plan. Moving on to slide number four. Next is an overview of the pharmaceutical segment. This one shows the results of increased sales and profit.
As shown in the graph, the impact of the NHI price revision, a decrease in contract revenues related to COVID-19 vaccines, and returns of influenza vaccines were the main factors behind this. On the other hand, the growth in sales both in Japan and overseas and cost control contributed to the profit. Profit increased approximately 9% compared to the plan. This was mainly due to the delay of the portion of R&D expenses to FY 2023. Moving on to the slide number five. In the 2023 midterm business plan, we set the Meiji ROESG as an integrated goal, aiming to simultaneously achieve profitable growth and sustainability activities. It was 13.8 points in FY 2022. The base of ROE was 10% in FY 2022, and the 3-year average was 11.5%.
All five ESG evaluation indicators met their targets for FY 2022, the coefficient of achievement was 1.2 times. In particular, we are selected as a A-list company by CDP, the highest rating in the areas of climate change and water security. In addition, the strengthening of initiatives in the areas of environment, governance, and human resources are leading to evaluation. The following pages show some of the examples. Moving on to the slide number six. First, we are working to achieve the carbon neutrality of our greenhouse gas emissions. 85% are from our supply chain, which is called Scope 3. Emissions from purchased products, including raw materials accounting for 70% of these emissions. Reducing emissions from the procurement of raw milk, a key raw material, is an important point.
In FY 2022, we promoted the calculation of carbon footprint of milk and established a business model to simultaneously reduce emissions and create a new source of income for dairy farmers through collaboration with the other companies. We will work to spread this model in the future. In addition, we are also considering human rights management and the nutrient profiling system. We have welcomed one outside director with expertise in these areas, and discussions at the board have become more active. We are currently working on the midterm business plan for the next fiscal year, and I would like to explain our thoughts and direction later. So far, this was the summary of our efforts in FY 2022. Moving on to the slide number seven. Now I will then explain the outlook of, and the key points for FY 2023. Moving on to the slide number eight.
Consolidated net sales for FY 2023 will be JPY 1,102 billion, up 4% from the previous year. Both food and pharmaceutical sales are planned to increase. Operating profit is projected to increase to JPY 78 billion. In food products, operating profit will continue to decline through the first half due to the cost increase that is expected to increase in second half. Although we will recover the volume impacted by the price hike, we have factored in an increase in marketing expenses and one-time IT expenses and others, so decided to keep the full year forecast at the same level as the previous year. On the other hand, the pharmaceutical profits are expected to increase for the full year, but to decrease in the first half and increase in the second half.
The first half will be affected by a decrease in contract revenue of COVID-19 vaccine and an increase in R&D expenses, while the second half will incorporate contributions from the next generation messenger RNA vaccines. Net income is expected to decrease significantly. This mainly due to the absence of extraordinary income that occurred in the previous fiscal year, including the sales of research laboratories land. Since the initial targets of the 2023 midterm business plan were net sales of JPY 1,080 billion and operating profit of JPY 120 billion, profits are expected to fall short of these targets. I will explain the progress of the to date in the following slides. Moving on to the slide number nine . The graph here shows the change in operating profit from food segment.
In the three years of 2023 midterm business plan, we are affected by the cost increase of JPY 69 billion. This is extraordinary level compared to the past midterm plans. The large number of products affected and high frequency of price hike have had a prolonged negative impact. In the past too, the impact of the cost hike has been reversed with some delay. We must have the price hike take root. Consumption lacks strength. We intend to establish the firm foothold by appealing to customers for added value and recovering volume. In addition to establishing this price hike, we also undertake structural reforms. In the past, when we have accumulated profits, we have had benefited from structural reform in addition to top line growth.
Although there will be short-term pain, there is a critical time, so we will think from zero-based approach and proceed with reforms without sanctuary. Moving on to the slide number 10. Next is pharmaceuticals. To date, we have been shifting our business portfolio to one that is less susceptible to NHI price revisions. The acquisitions of Medreich Ltd. in 2014 and KM Biologics in 2018 were part of this shift. In 2023 midterm business plan, we have accelerated structural reforms, including business transfers and spin-offs. This has enabled us to build a corporate structure that can consistently generate profits on order to of JPY 20 billion. Now we are in the position where we can aim for an additional profits in the future. Moving on to the slide number 11.
As mentioned so far, we have positioned FY 2023 as a period for the next midterm business plan. We'll focus on the initiatives as you can see here. From here, I will explain the key points of these efforts. Moving on to slide number 12. The first is to address cost increase. Cost increase will remain high until the first half of 2023. As shown in the orange bar graph, the effect of price hike are expected to outweigh these increases. As shown in the image above right, the key to success is how much you can lift the curve of quantity. As explained earlier, in FY 2022, we implemented price hike for almost all of our products and several times, which had a considerable impact on the decline in volume. In FY 2023, we will step up marketing investments to promote value-added products.
Marketing investments are of course targeted at core products in our core businesses, but we will not only invest in marketing expenditures, we will also strengthen our product lineup to maximize the effectiveness of such investments. At the same time, we will initiate structural reforms to improve profitability. Moving on to slide number 13. Next, I will explain our core business initiatives. First is probiotics. In addition to introducing commercials for R-1 that emphasize the importance of taking care of one's health, we plan to launch a new product with a stronger concept and a more appealing functionality. Yogurt volume recovery is an issue. Meiji Bulgaria Yogurt was relaunched at the end of March with a new manufacturing process prior to the second price hike in April.
Last year, Meiji Bulgaria Yogurt suffered from price competition as retail prices did not match those of competing products. Prices have finally been aligned. This year marks the 50th anniversary of Meiji Bulgaria Yogurt's launch. We will strengthen our marketing efforts in the second half to revitalize the product. Next are chocolate and gummies. In March, we launched Chocolate Cacao Plus, a functional food product. The product has been selling well, attracting a new customer base.
In the future, we plan to strengthen our promotion of cocoa flavanols by adding the two functions of good cholesterol and blood pressure to the label. Next is sports nutrition. SAVAS is adding new products with enhanced functions by blending new ingredients, as well as increasing product lines of SAVAS milk. In the core business, we will improve products and its appeal to secure stable earnings.
On top of the stable earnings from core businesses, we are increasing overseas earnings. The current midterm will only see prior investments, but the next midterm will see accelerated overseas growth. The top right diagram shows the organization from April this year, with the executive in charge of each business held accountable for growth of overseas markets as well. Rather than just controlling numbers, they are now incentivized to monitor the entire overseas business, including product development and marketing.
We have strengthened the support structure from Japan in addition to delegation to local areas. In China, we have new plants commencing operation one by one in the next two years. The burden of depreciation expenses may suppress profits in initial years, but our success will depend on whether we can grow sales by expanding geographical coverage going forward. Confectionery and ice cream will aim for growth based on the uniqueness of products. Milk and yogurt will also enhance their product offerings with new milk products with enhanced nutrition and richness, and a new yogurt which are fruit type products. Such efforts to accelerate the expansion of our value-added product lineup should also help us get ahead of price competition. In the U.S., Hello Panda and other Meiji brand products have been maintaining growth despite price hike.
To capitalize the popularity of unique products, as in China, we will promote the products through the sales channels developed with the Stauffer's brand. Next is the vaccine business, which is positioned as a growth driver of pharmaceutical segment. First, we believe that the vaccine market will expand steadily. There are issues such as unsold and returned influenza vaccines and the so-called vaccine fatigue. The threat of infectious diseases has not disappeared. A system to supply vaccines domestically is critical from a national security perspective. In view of the existing government scheme, as illustrated here, as a company with its competitive advantage in infectious diseases, we are implementing strategies and initiatives in line with the national policies. I would like to reiterate that we are part of a major movement. Page 16, please. In this context, here is what we are focusing on.
First is the development of COVID-19 vaccine. As announced in April, we signed an agreement to domestically supply and distribute ARCT-154, a next-generation messenger RNA vaccine, and filed NDA for initial immunization. The product will be launched as a new vaccine option and contribute to our earnings for the second half of FY 2023. The inactivated vaccine, KD-414, however, is not included in this year's guidance as the progress is slower than ARCT, although clinical trials are progressing well. Next is influenza vaccine. Last year, despite the largest ever supply of vaccine in the market, people didn't take the shots, and the return of unsold stock increased, though influenza did become prevalent later in the season. This year, we will work on early shipments and awareness-raising activities at the same time. There is a threat of new technology-based influenza vaccine entering into the market.
In order to catch up and build competitive advantages, we are acquiring new technologies through ARCT. The second growth driver in pharmaceuticals is the accelerated product development pipeline. We have several items in the late-stage R&D. ME3208 to address unmet medical needs in hematological cancer. DMB-3115, an antibody drug for the treatment of psoriasis and Crohn's disease. ME3183 for the primary indication of psoriasis. We will ensure their successful launch as they are already in the late stage. During the 2023 MTP, we closed the Yokohama research center while promoting open innovation with high-level technical experts hiring from outside. Leveraging this as a platform, we would like to develop new drugs and unique characteristics in them required for overseas markets. The third growth driver is the CMO/CDMO business.
To capture growing demands for contract manufacturing, we will expand the capacity of our key production site in India. One building is already completed, but we are considering further capacity expansion. To contain the increasing trends of packaging and other costs, we will review our product mix and realize profitability and growth at the same time. Page 18, please. Next is integration of business and sustainability. Over the past year, the media has frequently reported on the difficulty of sustainable dairy farming in relation to the rising prices of milk in Japan, grabbing attention of the general public. As a company founded on the blessings of nature, and to secure sustainable businesses for us in the future, we are actively working to solve the issue of dairy farming sustainability.
As examples of how we are addressing this social issue, we have carbon footprint calculation announced in March and initiatives using the J-Credit Scheme. We are committed to taking leadership in the solution of this social issue, taking advantage of the relationships cultivated over the past years with dairy farmers through our Meiji Dairy Advisory initiatives to assist farmers in their dairy business management. Page 19, please. We will also strengthen our own management platform to better support our business and sustainability initiatives. The first part is human resources. Based on the discussion at the group HR committee started last April, we have set numerical targets as shown here for year 2050. To support initiatives to achieve these targets, we will formulate a roadmap as well. The establishment of the CHRO position in April this year should also help promoting a more integrated group-wide HR management.
We will also strengthen intellectual property management. In April this year, we established a special organization to oversee the IP strategy of the entire group, assigning high-skilled talent recruited from outside. We will also promote innovation in collaboration with the Wellness Science Lab, which was formerly known as the Co-creation Center. Page 20, please. That was my explanation about the FY 2023 forecast and the initiatives. Next part is our financial strategy and the shareholder return. Our basic policy under the 2023 MTP is to have a balanced capital allocation between shareholder return and growth investment. Based on this policy, investments of JPY 160 billion has been made so far, with an additional JPY 60 billion or more to be executed during FY 2023, mainly for overseas capacity expansion.
The level of investment, however, is lower compared with the initial midterm guidance due to delays in construction schedules as well as revisions to the plan made during the pandemic. On the other hand, we have a steady progress in the reduction of strategic stock holdings and implementation of structural reforms, resulting in a stronger financial position with a shareholders' equity ratio of over 60%, which made us decide that we should increase dividends for FY 2022 as well as for FY 2023 to appropriately return benefits to our shareholders. Page 22, please. Finally, I will explain the group's direction for FY 2023 onward. Page 23. The company has already started discussions on the next MTP, Midterm Plan.
Looking back on the history of the Meiji Group, we have always had strong performance when we were able to create new markets and generate solid cash flow at the same time. The next MTP will be focusing on strengthening these two capabilities. First is the market creation capability. To create new markets rather than just extending existing markets, we will identify potential markets and build leadership there. The keywords here are integration of business and sustainability and the resolution of social issues. In these areas, we will spare no investment and proactively seek external partners. To finance these bold investments, we need to rebuild existing businesses as well. We will optimize capital allocation by reviewing the business portfolio and implementing structural reforms while building a platform to steadily generate cash.
We will focus more on people who support our business activities and implement an HR strategy that is linked to our business strategy. Meiji ROESG is a proprietary KPI defined as part of the 2023 MTP. It combines ROE with other elements such as integration of business and sustainability and people engagement. It's my personal belief as CEO that the Meiji Group has the potential to become a more influential corporate group globally, recognized not only in Japan, but elsewhere in the world. For FY 2023, my first priority is to get us back on track towards earnings recovery. At the same time, we will start implementing those initiatives that look beyond just FY 2023. This concludes my presentation. Thank you for your kind attention.