I would like to express our sincere gratitude to our shareholders and investors for their continued support and advice on the business activities of the ENEOS Group. Let me start my presentation based on the handout materials, starting with page three, Highlights of the Financial Results. For Q3 FY 2021, operating income and net income significantly increased year-on-year, mainly due to favorable inventory effects supported by rising crude oil prices. Operating income, excluding inventory valuation, was JPY 273.3 billion, an increase of JPY 112.4 billion year-on-year. By segment, energy is down JPY 72.5 billion due to the deterioration in domestic petroleum and export margins, as well as refinery troubles during the first half of the year.
On the other hand, Oil & Natural Gas E&P posted a substantial profit growth of JPY 65 billion due to the rise in oil and natural gas prices. The metals segment also showed a major increase in profit of JPY 128.1 billion, helped by the absence of impairment losses they had last year at the Caserones copper mine, higher copper prices, and increased sales of advanced materials. As a result, total operating income is up JPY 112.4 billion. As shown in the lower panel, the full year forecast was kept unchanged from the November announcement.
Despite the achievement of almost all targets announced in November, as shown here, there are some downside risk factors, such as resource price fluctuations, partly due to geopolitical factors, one-time restructuring costs of the Wakayama and the Chita refineries to be incurred for the fourth quarter, lump sum recognition of property taxes, and a reduced revenue following the divestiture of the upstream business in the U.K. In light of this, the company has decided to maintain the full year forecast unchanged. Page five, please. For the third quarter major topics, starting with the energy business.
We've been rebuilding our petroleum production and supply system in Japan, as shown here, including closure of the manufacturing function of the Chita Refinery in October last year, planned termination of part of production of the Negishi Refinery in October this year, and a planned termination of production at the Wakayama Refinery by around October 2023, as announced on January 25th. After the termination of the Wakayama, our crude oil processing capacity should be reduced to 1.62 million barrels, a decrease of 310,000 barrels per day from April 2017 when JX and TonenGeneral were merged. As domestic demand is expected to decrease in the future due to structural reasons, we will continue to optimize our production and supply system along with changes in the business environment. Next is our upstream business, oil and natural gas development, shown in the lower panel.
In November last year, we decided to divest the U.K. business as part of our portfolio strategy. Going forward, we intend to leverage our CCS and CCUS technologies to lead the way in a sustainable society, while developing new businesses in Southeast Asia and Oceania. Moving on to the metals business on page six. Demand for advanced materials is expanding significantly as the trend towards DX and decarbonization accelerates. We've been gradually strengthening our production capacity for semiconductor targets and the rolled copper foil, and they have recently decided to invest a total of JPY 48 billion in capacity expansion, including the startup of two new plants in Hitachi City, Ibaraki Prefecture, in order to respond more flexibly to rapidly growing demand.
The investment should grow the production capacity for semiconductor targets to 2.4x by FY 2025, and that for rolled copper foil to 1.6x by FY 2024, compared to the levels in FY 2017. Next, as shown in the lower panel, for privatization of our listed subsidiary, NIPPO, a tender offer by Roadmap Holdings, a special purpose company, has been completed in December last year. After the approval at the extraordinary shareholders meeting at NIPPO on February 25th this year, we will consolidate shares, privatize NIPPO, and try to enhance its enterprise value together with our co-partner, Goldman Sachs, with a view to relisting the company stock in the future. Next, page seven is a list of major decisions made and actions taken since October.
The base business took measures to rationalize the production and supply systems, as mentioned earlier, while the materials business focused on the expansion of technology-based businesses, for example, by investing in the capacity expansion of advanced materials, as mentioned earlier. The next generation energy supply invested in natural gas power plant in Ohio, United States, which was put into operation on schedule in October last year. The environmentally conscious business has completed the share purchase of Japan Renewable Energy in January, while the hydrogen supply chain has conducted a demonstration as part of technological development, and started discussions with local governments for possible collaboration. On page nine, there is no change in our approach to shareholder returns.
We plan to maintain a total payout ratio of 50% or higher of net income, excluding inventory effects, over the three-year midterm plan period, and a dividend payout of 22 JPY or higher, regardless of actual profits. On the following pages, I will take you through the details of FY 2021 Q3 results. Please refer to page 11. First, let's take a look at key metrics. Dubai crude oil remained on an upward trend, reflecting expectations for economic recovery, helped by progressing vaccination. Compared to $62 at the beginning of the year, the price rose to $77 per barrel at the end of December. The average price was $72, up $33 from the same period last year.
The copper price started the year at $4.01, and reached a record high in May due to the economic recovery supported by economic stimulus packages by each country, and expected increase in demand in China. After that, the price temporarily declined due to concerns about price control measures and economic conditions in China, but reached $4.40 at the end of December, and has remained steady since then. Please refer to page 12. Although the impact of COVID-19 is still felt and domestic demand has been recovering completely, the petroleum product margin index has remained firm since the first half of this year. The processing margin index has fallen rapidly since November due to the rise in crude oil prices, and has remained low since then. Pages 14 and 15 show the financial summary and operating income by segment.
The explanation will be omitted as it overlaps with the financial highlights at the beginning of my presentation, as well as the variance analysis on the next page. Please refer to page 16 for the energy segment. Excluding inventory valuation, operating income was JPY 43.9 billion, down JPY 72.5 billion year-over-year. From the left, petroleum products is down JPY 72 billion year-over-year. Sales volume is up JPY 2.7 billion due to an increase in exports, despite a slight decrease in domestic sales, mainly due to a decrease in kerosene sales amid the warm temperatures in early spring and autumn. Margin and expenses were a negative JPY 74.7 billion, mainly due to contraction of margins on domestic petroleum products and exports, and the impact of troubles at several refineries in the first half of this year.
Despite the positive JPY 27.9 billion due to the absence of one-time losses incurred in the previous year for refineries restructuring, petrochemical is up JPY 13.9 billion. As the impact of COVID-19 eased slightly, sales volume was positive JPY 1.6 billion. Margins and expenses was positive JPY 12.3 billion due to an improvement in benzene margins, although, as mentioned earlier, paraxylene margins were on a decline. Electric power is down JPY 13.8 billion, mainly due to higher costs resulting from the rise in the JEPX wholesale market price. The figures include the impact of JPY 9 billion in internal transactions associated with transfer pricing of refinery power supply linked to JEPX wholesale price index, without which electric power would have been down only JPY 5 billion.
Materials is down JPY 0.6 billion due to a temporary deterioration in the lubricant margins, mainly due to time lag. Please turn to page 17 for Oil & natural Gas E&P. Operating income was JPY 71.6 billion, an increase of JPY 65 billion compared with the same period last year. Crude oil price was JPY +38.7 billion due to higher oil and gas prices. Gains and losses related to sale of businesses in the U.K. through the third quarter were JPY +31.4 billion. The sale price is calculated based on a reference date of March 31st, 2021. The sale has not been completed, and the final gain and loss will be determined when the sale is completed in the fourth quarter. Please refer to page 18.
Operating income in the Metal Products. It was JPY 122.7 billion, a JPY 128.1 billion increase from the same period last year. Functional Materials and Thin Film Materials was JPY 13.7 billion, mainly due to an increase in sales volume of advanced materials accompanying an increase in demand for data communications. Mineral Resources was up JPY 93.3 billion, despite a decrease in production volume caused partly by the labor strike at the Caserones copper mine. The recovery from the impairment loss recorded in the previous fiscal year and the sharp rise in prices of copper and other resources contributed. Smelting and Recycling recorded an increase of JPY 13.9 billion, mainly due to higher metal prices and the prices of sulfuric acid as byproduct. On page 19, I will now explain the balance sheet and the cash flow.
Starting with cash flow on the right-hand side, in the dotted line, the rightmost column shows numbers without the impact of lease accounting. For the first nine months, with operating income excluding inventory valuation of JPY 273.3 billion, depreciation, amortization, and JPY 188.7 billion, and the working capital and other of JPY -544.4 billion due to higher resource prices and inventory volumes, cash flow from operating activities was an outflow of JPY 82.4 billion. Cash flow from investing activities was an outflow of JPY 252.3 billion, resulting in a free cash flow of JPY -334.7 billion. A net cash flow, including dividend payments, is an outflow of JPY 395 billion. Next is the balance sheet. Please take a look at table on the left.
Net interest-bearing debt as of the end of December, which is interest-bearing debt minus cash on hand, reflects the negative cash flow of JPY 395 billion explained earlier and is down JPY 397.8 billion from the end of the previous year to JPY 2,015.7 billion. As a result, net D/E ratio is up from 0.59x at the end of the previous fiscal year to 0.68x . Net debt equity ratio, including the equity nature of the hybrid bonds issued in June last year, is 0.6 x. Equity ratio attributable to owners of the parent is 28.4%. Please refer later to page 20 onwards for assumptions, sensitivities, and major topics announced in November. This concludes my presentation. Thank you very much for your kind attention.