Good afternoon, everyone. I would like to express our sincere gratitude to our shareholders and investors for your continued support and advice regarding the business activities of the ENEOS Group. I would like to take this opportunity to thank you. I would like to explain the financial results for the Q2 of fiscal 2023 according to the materials. Please see page 4, highlights of the first half results. Last year, there was an inventory impact due to the rise in crude oil prices, but this was significantly reduced, and operating income decreased by JPY 103.3 billion to JPY 291.5 billion. Regarding operating income, excluding inventory valuation, the oil and natural gas E&P and metal segments saw a decline in profit year-on-year due to a decline in resource prices and demand for semiconductors and ICT materials.
Now, while the energy segment saw a significant increase in profit, as a result, group consolidated profits increased by JPY 152.5 billion. The energy segment improved due to a positive time lag, improved margins, including chemicals, and improved selling prices in the electricity business. Another factor, which I'll explain more in detail later, was an improvement of approximately JPY 23 billion compared to the previous year through troubleshooting. Please see page 5. In order to reflect the effects of current resource prices in the weaker yen, we have forecasted an inventory impact of JPY 50 billion, which was not included in the May forecast, and revised operating income for the full year upward by JPY 80 billion to JPY 420 billion. Operating income, excluding inventory valuation, is expected to be JPY 370 billion, up by JPY 30 billion.
This is mainly due to the improvement in the oil and natural gas E&P segment, which takes into account factors such as the yen depreciation and cost reductions. In addition, net income is expected to be JPY 200 billion, an upward revision of JPY 20 billion. The first half result was JPY 269.1 billion, and the second half is expected to drop to JPY 100.9 billion. This is due to the fact that the positive time lag of roughly JPY 50 billion in the first half will turn negative, and that expenses, such as fixed asset taxes, will increase in the second half. From page 6, I will explain the progress of the third medium-term management plan. Please turn to page 7. At Q1 results announcement in August, we explained our initiatives aimed at enhancing corporate value.
Specifically, we will improve ROE and achieve a positive equity spread, and accelerate efforts towards achieving energy transition, and continue to produce these results to increase accuracy towards the goals, gaining trust and expectations from the market, and that will allow us to accomplish a price-to-book of more than 1 time. The graph reflects the recent data in the materials released in August. We believe that price-to-book is improving along with ROE improvement. The third mid-term management plan consists of 3 pillars: in addition to accelerating efforts towards achieving energy transition, establishing a solid earnings base, and enhancing the management base, which will lead to improved ROE. Therefore, we'll also report on the progress of the third mid-term management plan, as well as the progress of our initiatives aimed at enhancing corporate value. Please see page 8.
First, I would like to explain UCL and planned capacity loss out of refineries. In our company-wide project to reduce problems, we have categorized the identified problems into four factors and have taken appropriate countermeasures for each. Currently, we are steadily seeing results towards our 2025 target of 3%, and our UCL performance for the first half for the year was 8%, an improvement of 3% from the previous year. Let me explain the progress by cause of the problem. First is facility maintenance, which had the biggest impact last year. By prioritizing equipment that has a large impact on operations and taking risk countermeasures, we were able to make significant improvements. There was a slight increase in inspection-related troubles, but this was partly due to an increase in the number of defects discovered by expanding the scope and expediting inspections.
We are also improving construction quality by sharing knowledge with partner companies.... On the other hand, this time, the problem that emerged was related to operations. Although improvements were seen by increasing workforce and strengthening the education structures in Q2, problems occurred during non-routine work during the startup of regular repairs, which accounted for the majority of UCL. Since we already identified what the problem was, we are taking measures to prevent similar problems from occurring, such as identifying risks, deploying them horizontally, and dedicating experienced engineers to troubleshooting. A drastic repair of risk areas is limited to periodic maintenance every two to four years. Although this will be a long-term project, we'll continue to work steadily towards establishing a solid earnings base, and we hope to report on this to everyone as it progresses. Please turn to page nine.
The top of the slide explains the progress of business process reengineering. We are promoting business process reengineering to improve profitability, reduce costs, and improve asset efficiency throughout the supply chain of existing businesses. From the start of the initiatives to the first half of FY 2023, we were able to generate a cumulative effect of over JPY 20 billion. In addition, we are contributing to improved capital efficiency through measures such as stricter screening of investments that are not directly reflected into P&L. Furthermore, as a result of regular surveys, we found that employee awareness towards changes is fostered and improved through business process reengineering initiatives. Along with reducing refinery troubles, business process reengineering is a key measure to establish a solid earnings base in the energy business.
We believe that it is necessary to launch this activity as soon as possible, so we started in the second half of 2022, before the start of the midterm management plan, and the amount shown on the slide is a cumulative total from the start. First, we'll improve profits by a cumulative JPY 100 billion over the 3-year midterm management plan, compared to before the business process reengineering , and then accumulate improvement measures to a cumulative JPY 100 billion compared to FY 2022, with the aim of improving profits by JPY 100 billion in a single year in the future. The bottom half, oil and natural gas, E&P. We have begun shipping LNG from the 3rd train liquefaction facility, which was added in October of this year, in the Tangguh LNG expansion project, which we have been promoting in Indonesia for some time.
This project is expected to increase production by 8,000 barrels per day in fiscal 2024 on an interest-holding basis. Please see page 10. Let me touch on the progress of second pillar of the third midterm management plan, initiatives for realization of energy transition. The contents of the slides are the compilation of press releases and others that have been published so far, so please read them for details. The third and fourth midterm management plans are positioned as a period of careful preparation and development. With regard to renewable energy, SAF, hydrogen, low-carbon liquid fuels, CCS, and forest absorption, we'll utilize government support and also work with leading domestic and overseas partner companies to carefully select those that can secure profits and steadily move forward, and we are taking necessary steps to prepare. Please turn to page 11.
Now, let me move on to the progress of the three pillars of the third midterm management plan, enhancing the management base. Today, we announced the ENEOS Group management structure from April 2024 onwards. ENEOS Materials for the high-performance material business, ENEOS Power for the electricity and city gas business, and ENEOS Renewable Energy for the renewable energy business are all directly owned subsidiaries of ENEOS Holdings and are positioned as the major businesses, same as ENEOS, JX Nippon Oil & Gas Exploration, and JX Metals. And we'll proceed with a significant transfer of authority based on the management policy established by the company. We are making steady progress in establishing a system for autonomous management, in which each operating company secures competitiveness in its respective industry and pursues growth strategies and capital efficiency. And next, the right-hand side, it talks about group human resource strategy.
In order to enable diverse human resources to fully demonstrate their abilities, in order to achieve the third midterm management plan and long-term vision, we are promoting skill development and reskilling support for business portfolio transformation, promoting the active participation of women, and a dynamic human resource shift. We are working to secure and develop human resources who can break away from the traditional seniority environment and contribute to improving corporate value in a merit-based manner. In addition to these initiatives, we are increasing opportunities to communicate with employees through messages from the management and town hall meetings, aiming to improve engagement and increase the driving force in realizing the group philosophy and fulfilling our company's mission. Our non-financial targets are also progressing smoothly, so please take a look at them later. Now, I covered the highlights of the financial results and the progress of the third midterm management plan.
Next, I'll pass over to Managing Director Tanaka for the details of the financial results and outlook. This is Tanaka. I would like to explain the financial results for fiscal 2023, Q2 , and fiscal 2023 business forecast. Please turn to page 13. The Dubai crude oil price, with the red line, started at $84 at the beginning of the year and rose to $96 at the end of the year. The half-year average is $82, down $20 from the previous year. Yellow LME copper prices started at 405 cents per pound and fell to 373 cents per pound at the end of the period, affected by concerns about a global economic slowdown and slow economic recovery in China.
The average exchange rate for the half year was JPY 7 lower than the previous year to JPY 141, due to the widening interest rate differential between Japan and the U.S. Next, please look at page 14. The light crude oil margin index remains steady, including the positive time lag caused by rising crude oil prices, improving by about 2-3 yen year-on-year. The paraxylene margin index has been improving year-on-year as the impact of COVID-19 has eased. Pages 16 and 17 provide an overview of financial results and operating income by segment, but I will explain the details using the waterfall chart starting on page 18. On page 18, operating income in the energy business, excluding inventory valuation, was JPY 136.4 billion, an increase of JPY 185.4 billion year-on-year.
Sales of petroleum products increased by JPY 181 billion year-on-year. This was mainly due to JPY 190.4 billion in margins and expenses, but this includes JPY 38 billion from the positive time lag of light crude oil and exports, JPY 86.1 billion from the real margin improvement, including chemicals, and other margin effects of JPY 57 billion. Additionally, due to the reduction in troubles, the total impact on volume and margin improved by JPY 23 billion. Sales of high-performance materials decreased by JPY 10.9 billion year-on-year. This was primarily due to a reversal of one-time gains from the previous year. Electricity improved by JPY 8 billion, mainly due to improved selling prices.
In renewable energy, profits increased by JPY 7.3 billion due to an increase in power generation capacity, in addition to temporary factors such as a reversal of the payment losses from last year and forex gains from asset sales this fiscal year. Next, please look at page 19. Operating income in the oil and natural gas E&P business decreased by JPY 8.7 billion from the previous year to JPY 51.7 billion, mainly due to a decline in resource prices. The positive JPY 8.1 billion in foreign exchange and expenses includes the impact of weaker yen, as well as the impact of one-off accounting treatment associated with the conversion of Japan Drilling into a subsidiary in Q1. Please see slide 20. Operating income for the metals business was JPY 72.1 billion, down JPY 8.9 billion from the previous year.
Sales of semiconductor materials and ICT materials decreased, mainly due to inventory adjustment due to a decline in IT demand and profits decreased compared to the previous year. Metals and recycling increased by JPY 19.3 billion due to an accounting valuation gain by forex fluctuations associated with the sales of the Caserones copper mine. This valuation gain is expected to ultimately result in a profit of roughly JPY 10 billion upon completion of the liquidation of the affiliated company, but this has already been factored into the forecast announced in May. I will explain the balance sheet and cash flow on page 21. First is the cash flow on the right. Please take a look at the numbers, excluding the impact of lease accounting in a dotted line. Operating cash inflow for the first half was JPY 472.2 billion.
While working capital increased due to the weaker yen and higher crude oil prices, JPY 200 billion of taxes paid in 2022 was refunded in the Q2 , so other turned positive. Investing cash outflow was JPY 145.5 billion, and as a result, free cash flow was JPY 326.7 billion. And in real terms, excluding the tax refund mentioned earlier, there was a cash inflow of JPY 80.2 billion. Net cash flow, including dividend payout, was a cash inflow of JPY 255.2 billion.
Reflecting this, as shown in the balance sheet on the left, net interest-bearing debt, excluding cash on hand, was JPY 2,489.7 billion, a decrease of JPY 270.4 billion from the end of the previous year, and the net debt-to-equity ratio was 0.21. Next, let me go over our full-year forecast. Please turn to page 23. Regarding major indices for the second half, we have revised the Dubai crude oil price to $85 and exchange rate to 140 JPY. The full-year operating profit forecast based on these indices have been revised to JPY 420 billion, an increase of JPY 80 billion from the previous forecast.
Operating income, excluding inventory valuation, is expected to increase by JPY 30 billion to JPY 370 billion, and net income attributable to owners of the parent company, excluding inventory valuation, will go up by JPY 20 billion to JPY 200 billion. For example, the exchange rate assumption is currently around 150 yen to a dollar, but please refer to sensitivity on page 30 for the impact of these differences on profits and losses. Let me skip page 24 because it overlaps with the waterfall chart from the next page. Please refer to page 25. Operating income for the energy business, excluding inventory valuation, is expected to be JPY 170 billion, up by JPY 10 billion from the previous forecast.
Petroleum products takes into account the decrease in export volume in the first half, positive time lag, improvement in real margin to go up by JPY 13 billion, and high-performance materials down by JPY 5 billion, and renewable energy takes into account the first half results to go up by JPY 2 billion. Please turn to page 26. Operating income for the oil and natural gas E&P business is expected to be JPY 80 billion, an increase of JPY 30 billion from the May forecast due to the effects of weaker yen, lower expenses, and the acquisition of Japan Offshore Drilling as a subsidiary. Next, please turn to page 27.
Operating income for the metals business is expected to be JPY 85 billion, down JPY 5 billion from the previous forecast, mainly due to lower sales of semiconductor and ICT materials, although there will be an improvement in each segment due to the weaker yen. That's all for the explanation. From page 28 onwards, we have provided reference information regarding assumptions, sensitivities, and efforts to realize energy transition. So please refer to them later. Thank you for your attention.