I am Kawamura, CEO of Meiji Holdings. I'll explain the financial results for the fiscal year 2021. Net sales for the first year of the 2023 Medium-Term Business Plan were JPY 1,013 billion. Excluding the impact of the Revenue Recognition Accounting Standards, it was a 0.6% increase year-on-year. Operating profit was JPY 92.9 billion, down 12.4% year-on-year. Both sales and profits exceeded the plan announced in February. I'll explain by business segment in more detail later. Profit attributable to owners of parent was JPY 87.4 billion, up 33.3% year-on-year, mainly due to a significant increase in extraordinary income by the transfer of shares of DM Bio and the agricultural chemical business, and the sale of cross-holding shares.
The results were better than the plan, as we did not recognize extraordinary loss, which had been expected. Next page is the summary of the food segment. Net sales were JPY 826.0 billion. Excluding the impact of the Revenue Recognition Accounting Standards, net sales were almost flat to the previous year and on par with the plan announced in February. Operating profit was JPY 75.9 billion, down JPY 11.4 billion year-on-year. I'll explain the reasons for the decline in detail. Changes in sales negatively affected operating profit by JPY 8.1 billion. While the foods for professional use business have recovered from the difficult situation in the previous fiscal year due to COVID-19, and the SAVAS and liquid diet continued to grow, the impact of decreased sales of yogurt and functional yogurt significantly affected the result.
Changes in costs negatively affected the result by JPY 4.5 billion. Cost of raw materials such as overseas dairy, oils and fats, and sugar increased, and this worsened the operating profit by JPY 2.3 billion in the fourth quarter alone. Marketing expenses had a positive impact of JPY 4.7 billion. Other expenses were a negative factor of JPY 1.4 billion due to an increase in depreciation and other costs. The financial results of subsidiaries were another negative factor of JPY 2.2 billion. The results of the segment exceeded the February plan due to various cost reductions, although raw material costs were higher than our expectation. Next is the pharmaceutical segment. Net sales were JPY 187.9 billion, almost in line with the plan.
Excluding the impact of the Revenue Recognition Accounting Standards, net sales were up 3.2% year-on-year. Operating profit was JPY 18.6 billion, down JPY 400 million year-on-year. I will explain the reason in detail. Changes in sales had a positive impact of JPY 5.4 billion. In addition to a recovery in domestic pharmaceutical business, which had been affected by the decrease in the number of patients' visits to hospitals in the previous fiscal year, contract revenues increased for the storage and delivery of AstraZeneca's COVID-19 vaccine. This offset JPY 5 billion negative impact of the NHI price revision. Changes in costs positively affected the result by JPY 900 million attributable to the cost reduction efforts. Marketing expenses also had a positive impact of JPY 900 million.
Other expenses were a negative factor of JPY 4.4 billion due to an increase in R&D expenses and decreased valuation for inventory assets. The financial results of subsidiaries improved operating profit by JPY 1.8 billion. Business of KM Biologics performed successfully, partly due to the contract manufacturing revenues for AstraZeneca's COVID-19 vaccine. Operating profit significantly exceeded the February plan. This was mainly due to lower than expected promotion costs and a steady recovery in the businesses of subsidiaries. In the 2023 Medium-Term Business Plan, we aim to achieve both profit growth and sustainability activities and set the Meiji ROESG as an integrated target. It was 12.3 points in FY 2021. ROE, which is the basis for this target, stood at 13.5%, and its three-year average was 12.3%.
Among ESG evaluation indicators, we met the targets of FY 2021 in four of them, excluding FTSE, to make a coefficient of achievement as 1.0 x. As the importance of environmental issues grows, we have made progress in our efforts, and this has improved the evaluation of the company. In particular, we were selected to be on CDP's A List for water security, the highest rating in about 12,000 companies subject to evaluation. Next, I'll explain about indicators unique to Meiji. We do not set single-year goals for the indicators unique to Meiji. Points will be awarded only in FY 2023 according to the degree of achievement. Among the six indicators, I'll explain the periodic vaccination rate for influenza vaccines and the sales growth rate for health conscious products and others. The latest data for the periodic vaccination rate is 65.6% in FY 2020.
Since this was the year that COVID-19 spread, we assume that there was a proactive move to get vaccinated, partly due to awareness raising activities by the government and experts. We will continue our efforts to raise awareness and provide information on vaccines to contribute to solving the social issues of infection control. On the other hand, items such as health conscious products regrettably recorded negative growth. This is a result of the significant impact of the decline in sales of yogurt and functional yogurt. We'll continue to work on restoring our growth potential as it is an important agenda for our business performance. In FY 2021, the issue of the growth potential remained unsolved for functional yogurt and other products. However, we made progress in a review of the business portfolio, mainly in the pharmaceutical segment.
In addition, the company sold cross-holding shares, resulting in a cash inflow of about JPY 50 billion. With these funds, we increased dividend and repurchased own shares. Sustainability activities and organization and corporate culture reform were also carried out in accordance with the plan. In summary, FY 2021 was a challenging year with remaining impact of COVID-19 and emerging new risks such as soaring raw material prices. We took steps towards reform with a sense of unity under the new slogan, Now Ideas for Wellness. Next, I will explain our plan and major initiatives for FY 2022. The four key points for FY 2022 are recover growth trajectory of core businesses, initiatives against cost increase, foster new growth drivers, and accelerate ESG initiatives. I'll explain in more detail later. This page describes the plan for FY 2022.
Full-year net sales is planned to increase by 2% year-on-year to JPY 1,035.5 billion, with sales increase in both food and pharmaceutical. Operating profit will be JPY 92.5 billion, the same level as the previous fiscal year, with a decrease in the first half and an increase in the second half. In the food segment, our assumption is the cost increase cannot be fully absorbed in the first half, as we will start full-scale implementation of price hike and product volume reduction from May onward to address the increase in raw material and energy costs. The assumption for the plan is, in the second half, the cost increase will be absorbed enough and realize the recovery of yogurt and functional yogurt products, which declined in the previous fiscal year, as well as further sales volume growth in sports nutrition.
The pharmaceutical segment plans a significant decrease in profits in the first half, reflecting the absence of contract manufacturing revenue for the COVID-19 vaccine, eliminating concentration of influenza vaccine sales in the first half, and a year-on-year increase of R&D expenses. On the other hand, in the second half, we expect contract revenues for pre-pandemic vaccines and plan to secure the same level of full year operating profit as the previous fiscal year by increasing sales of Bilanoa and vaccines inoculated periodically. We plan a significant decrease in profit attributable to owners of parent, and this is mainly due to the absence of extraordinary income generated by the transfer of the agricultural chemical business in the previous fiscal year. Next, we will explain the key points by segment. First is the food segment.
As a major challenge in the 2023 Medium-Term Business Plan, we are working to foster a new growth domain based on the Nutrition Statement formulated last June. The keywords are advanced nutrition. We'll offer new values by identifying potential needs of customers and utilizing both products developed based on new technology and scientific findings and a new framework for customer-oriented information and services. It will take some time before they contribute to the business results, but let me explain their progress at this point. There are two points in the initiative. The first is a mechanism to facilitate innovation. Currently, two programs are on the way, in-house value create program and accelerator program. Various ideas for commercialization and collaboration were generated during FY 2021, and concrete actions have already started. Any Meiji employees can apply for these programs, and the morale of the members is high.
I have high expectations for the development of human resources, including the cultivation of an innovative mindset. Another one is an initiative to expand the boundaries of existing businesses with the problem-solving thinking. That is sustainable cocoa business that uses cocoa for other purposes than chocolate and new deployment of nutrition business that focuses on growth and development during infancy and health issues specific to women. In both cases, products will be launched by the end of FY 2022, and the business will be nurtured over the medium to long term. Next, I'll explain initiatives against cost increase. The assumption of the foreign exchange rate for FY 2022 is JPY 120 to the dollar, and we expect a full year cost increase of about JPY 14 billion. We plan to offset this increase with measures like price hike and volume reduction.
However, effects of these measures will become obvious from May onward. Prices of many food items have been raised, and customers have a certain level of understanding about it. However, we cannot deny that the current consumer confidence is lower than the last price hike we did around 2015. In this environment, we intend to minimize the negative impact on sales volume by improving the product value and marketing that conveys the unique value of Meiji. In addition, raw material prices and foreign exchange rates are putting more pressure on profits. We still have stock of raw materials, and this will not immediately manifest as a risk, but we will closely monitor the situation and consider additional price hike if necessary. Next, I'll explain the major initiatives in existing businesses. First is the yogurt and cheese business. As for the market forecast, the yogurt market is expected to stagnate.
In the cheese market, while natural cheese is expected to be stable, consumer spending will decline for processed cheese due to price hike. Against this backdrop, we plan to increase sales and keep profits flat for the full year. For sales, as shown in the table at lower right, sales of functional yogurt and yogurt are expected to increase, while sales of cheese are projected to decrease due to a sales volume decrease affected by the price hike and the reduction in the number of items. I'll explain in more detail about the recovery of functional yogurt and yogurt on the next page. First is functional yogurt. As the number of functional products increases in categories other than yogurt, it is essential how to attract new consumers. In April, R-1 launched the Mitasu Karada series.
This product is with the addition of iron and calcium, and it has been successful in its sales performance. We intend to expand the potential consumers for R-1 by not only promoting the importance of seasonal health management, but also enhancing the functions expected for R-1. We also plan other measures to improve the attractiveness of R-1, and intend to increase sales in stages from the first half to the second half. We implemented the package renewal for LG21 in April to highlight the product recommended by doctors. We have been working on this effort since the previous fiscal year, and we are seeing a certain level of effectiveness as new consumer purchases have been gradually increasing. We will accelerate this trend by the package renewal this time.
On the other hand, we have discontinued the sale of Suhada no Mikata in April, and focus on the development of the fifth functional yogurt product to promote selection and concentration among functional yogurt products. Next is yogurt. As consumers are returning to regular items affected by the pandemic, we will further increase the sales of Meiji Bulgaria Yogurt, which is already performing well. The only weak item was yogurt drink, which was renewed in April to stimulate sales. We intend to make it return to a growth trend by promoting its use in cooking and its health benefit. We also work to revitalize the yogurt market. We have made a new discovery about LB81 Lactobacillus used in Bulgaria Yogurt in the joint research with the Pasteur Institute. Healthy intestines have a layer called intestinal epithelial barrier to protect the intestines from attacks by foreign bacteria.
LB81 Lactobacillus has been confirmed to increase antibacterial peptides, which play an important role in the intestinal barrier. We'll continue this research to make this a new value proposition of Bulgaria yogurt to be used in marketing activities and product development. While health awareness is expected to continue to rise, competition for functional foods is intensifying. It is necessary not only to promote existing functions and values, but also to find new functions and values and create demand. This is only possible for companies with research and development capabilities, technological expertise, and networks. Meiji is proud to be in this position. While the current recovery of functional yogurt and yogurt is of course important, we'll also continue efforts to generate growth a little farther down in the future. Next is nutrition business.
The protein market has grown continuously with each player implementing price hikes and waiting to see market reaction carefully. The liquid diet market is expected to grow further, while the powdered milk market is counting on inbound sales. In this environment, our plan is to increase both sales and profit. The driver of new growth is SAVAS again this fiscal year. Double-digit growth is expected from product lineup expansion, such as bar type. Demand is steadily increasing despite concern about the impact of content reduction.
We believe strong growth is attainable because the customer base is expanding from light users to those who are serious about exercise. We also plan to increase sales of liquid diets, but are carefully factoring in the impact of price revisions. We intend to increase sales mainly of jelly type products in the retail channel and the Gyutto Mini high energy products in the hospital channel. Overall, the segment aims to reach the JPY 20 billion mark in operating profit by overcoming the negative impact of price revision and the content reduction while making effective marketing investments. Next is chocolate and gummy products. The market for both chocolate and gummy is driven by those products that stress health. In this environment, we plan to increase both sales and profits.
In the healthy chocolate category, our mainstay, Chocolate Kouka, has been attracting new consumers due to media exposures in February and March, leading to significant growth expectation this year, both from existing and new consumers. As for gummy products focusing on chewing sensation are performing well, and we will expand the lineup. The segment intends to offset the impact of cost increase and achieve profit growth by expanding core product sales. Next is overseas business. Although sales are expected to grow double-digit, profits are likely to remain flat due to upfront investment in new plant construction and the marketing, as well as increased headcount. In China, we will introduce new products in confectioneries and ice cream, as we did last year. In protein, we will start test sales of SAVAS milk and SAVAS bars.
In the B2B milk and yogurt business, we plan to increase sales in view of the recovery trend in sales after the decline in the second half of last year and a steady acquisition of new customers. On the other hand, we intend to expand the retail sales area and overcome the impact of price competition. Although the lockdown in Shanghai is a risk factor, we plan to increase sales as a whole in China. In the United States, there is an impact of soaring wheat, flour, and other ingredient prices. We will try to enforce price revisions already implemented and consider additional measures if necessary. Next is about functional yogurt in China. One year after its launch in China, functional yogurt has been performing in line with the plan.
In preparation for new plant operations starting sequentially in 2023, we will work on consumer awareness of Lactobacillus value as well as products. Unlike in Japan, TV and other mass media are not so effective, and we are focusing on other marketing activities such as in-store and live commerce. With further investment, we intend to maximize the effectiveness of those marketing activities. The chart on the left shows how we are expanding sales in China. We hope to repeat the same rapid expansion phase that we achieved in Japan through marketing activities, evidence building and outlet and area expansion at the same time. Next is pharma segment. In FY 2022, we expect a JPY 50 impact from NHI price revision.
We will further promote structural reform to establish business foundation that is less affected by NHI price revision by strengthening the vaccine business, rebuilding the domestic pharma business and enhancing drug discovery capabilities. First, on vaccine business. Development of COVID-19 vaccine and a five-in-one vaccine for the domestic market is underway. We will strengthen the structure by integrating marketing functions for future launches. We will steadily advance the development of a dengue fever vaccine with an eye on overseas markets while trying to acquire new technologies such as messenger RNA. In the domestic pharma business, we intend to leverage our advantage in infectious diseases to overcome the difficult situation. Category A medicines, which are the highest priority in terms of stable supply, are now covered by the fundamental drug price system, which maintains the NHI price unchanged if the requirements are met.
Of the 21 substances classified as Category A, four are handled by our company. In addition to increasing sales of such products to support NHI drug prices, we will grow sales of priority products, including those in the CNS field, and then review the production system for generic drugs. Strengthening our drug discovery capabilities is essential for mid to long term business growth. During FY 2021, while closing the Yokohama R&D center, we have enhanced our R&D structure through collaboration with academia in infectious diseases, hematology, oncology and other focus areas. We will continue to focus on those R&D themes with higher productivity and the probability of success. Next, I would like to give you an update on COVID-19 vaccine development. As announced the other day, we started a phase III trial for adults and a phase II and III trials for pediatric patients in April.
We are aiming to obtain approval and start supply by the end of this fiscal year in anticipation of the application with the Emergency Use Authorization system. We have a long track record with inactivated vaccines, thanks to our periodic childhood immunization and other relevant experiences, meaning we have accumulated adequate data on efficacy and safety as well as manufacturing know-how. Even if the supply of overseas vaccines continue, we believe that inactivated vaccines have great potential as an option for those who have been avoiding them due to adverse reactions, allergies, and safety concerns, or for children under five years old for whom no vaccine is available. Japan has so far procured a vaccine from overseas manufacturers who are ahead of us in development, but this doesn't mean we will continue to receive priority supply in the future.
Since the fight against COVID is expected to continue for years to come, it's important that Japan secure domestic R&D and supply capability. We will make focused efforts to solve the major social issue of improving the effectiveness of infectious disease prevention throughout Japan. Next is initiatives from our existing businesses. First is human vaccine business. Sales of influenza vaccine is projected at the same level as in the previous year. We will try to offset the decline in COVID-19 contract and manufacturing revenues with increased sales of periodic vaccines and contract revenues from pre-pandemic vaccines during the second half. Profits, however, are expected to decrease due to higher administrative and other expenses and a deteriorating product mix. Next is the domestic pharmaceutical business. The key points of our strategy are as explained earlier. We expect both sales and profit to increase.
We plan to grow further, overcoming the decrease in COVID vaccine storage and delivery contract revenues, the impact of the NHI price revision, and so forth. The forecast includes the expected early approval of COVID-19 vaccine and other incremental revenues. We will continue to make steady progress in the development pipeline while promoting efficacy in sales, production, and other areas to promote business structure. Next is overseas pharma business. We expect the overall sales trend to remain upward, especially in the contract manufacturing business of Medreich in India. We have conservatively factored in the impact of soaring raw material prices, leading to a decline in profit expectation. Demand for low price drugs is increasing worldwide due to population growth in Asia and Africa. Medreich's contract manufacturing business is expanding production capacity to meet this demand.
Though it's not operational until March 2023, we will continue to aim for business growth. Next, I will discuss activities in new domains. As you can see, we launched various initiatives during FY 2021, all of which are co-creation with partners who possess expertise and technologies that we don't have and are peripheral to our core domains. In FY 2022, we will further advance these initiatives and search for more partners. So far, I've explained our business strategy. We are also strengthening the management foundation that supports the business strategy. First is human resources management. In April, we established the Group Human Capital Committee, which involves not only human resources, but also corporate planning and sustainability personnel.
Going forward, the committee and its subcommittees will play a central role in addressing issues such as securing and managing talent in line with the group's management strategy, fostering managerial talent and D&I or diversity and inclusion. We included the employee engagement score in Meiji ROESG benchmarks as one of the KPIs to work on with diversity and transformation as keywords. Next, governance. In January, the nomination and compensation committees nominated new chairs from external directors. Starting this fiscal year, we will have third-party evaluation of the board on a regular basis. In addition, as announced, we have decided to submit a proposal to AGM in June about one outside director at the upcoming AGM. The candidate, Mr. Pedersen from Denmark, has an extensive expertise and experiences working as a sustainability consultant.
He has deep insight into integration of sustainability with business strategy and development of next generation leaders on a global level. Thus, we try to promote realization of profitable growth and sustainability activities at the same time from a governance perspective. I would also like to explain about biodiversity initiatives which are attracting attention. Most recently, we announced our participation in two external initiatives. I hope you can see these as an indication that we are serious about becoming a top runner in sustainability. Our business activities are based on the rich blessings of nature, such as raw milk, cocoa, and lactic bacillus, and it's our responsibility to live within, live in harmony with nature. In order to achieve the ambitious goals set forth in our long-term environmental vision, we will actively participate in various frameworks, have discussions from a global perspectives, and speed up our internal efforts.
That's my explanation of our plans and the major initiatives for FY 2022. Next, I will explain our financial strategy and our shareholder returns. As I explained earlier, net income for FY 2022 is expected to decrease significantly due to the large extraordinary income posted in the previous fiscal year. As a result, we expect operating cash flow to be JPY 70 billion, ROE to be 9%, and the ROIC to be 8%. On the other hand, capital investment is planned at JPY 96.3 billion, including the delayed payment from the previous year. Investments are mainly for a new plant in China and a new annual plant for milk production. As a result, free cash flow is JPY -20 billion. In the 2023 Medium-Term Business Plan, our basic policy is to strike a balance between growth investment and the shareholder return.
In FY 2021, cash flow improved significantly due to business transfers and other factors, and we increased dividends and repurchased and retired treasury stocks. This is the eighth consecutive fiscal year of dividend increases. Although cash flow will be worse in FY 2022 than in FY 2021, our policy for emphasizing an appropriate balance between profit distribution and investment remains unchanged. Profit distribution will be considered in terms of both dividends and share buybacks. ROESG target for FY 2023 is 13 points. In FY 2020, it was nine points, and in FY 2021, it was 12.3 points, meaning we are making progress. In FY 2022, we will continue our efforts to implement ROESG management while responding to changes in the business environment, such as the prolonged impact of COVID-19, raw material price hikes, and exchange rates. This concludes my explanation. Thank you very much.