I am Takeshi Horikoshi, the CFO. I will now explain FY 2022 Q3 results. On page 4, I will explain the highlights for Q3 fiscal 2022. The exchange rates were JPY 143.6 to the U.S. dollar, JPY 144 to the euro, and JPY 93.8 to the Australian dollar. Compared to the same period of the previous year, the yen depreciated against the U.S. dollar, the euro and the Australian dollar. Consolidated net sales for fiscal 2022 Q3 increased by 27.3% year-on-year to JPY 920.5 billion. Operating income increased by 54.3% year-on-year, reaching JPY 135 billion. The operating income ratio increased by 2.6 percentage points to 14.7%.
Consolidated net sales and operating income increased respectively due to the positive impact of FX, increased sales volume and improved selling prices. Regarding other income and expenses increased by JPY 23.2 billion, mainly due to an increase in FX losses due to the stronger yen and an increase in interest expenses. Net income increased by 11.2% to JPY 69.3 billion. Consolidated net sales and operating income both reached record highs following the Q2. On page five, I'll explain sales and profits by segment. Sales in construction, mining, and utility equipment increased 30.8% year-on-year to JPY 863.4 billion. Segment profit increased 66.6% year-on-year to JPY 122 billion.
Both net sales and profits increased due to the positive impact of FX, an increase in sales volume and improved selling prices. Retail finance sales increased 25.4% year-on-year to JPY 22.1 billion. Segment profit increased 17.5% year-on-year to JPY 6.4 billion. Sales and profit increased due mainly to the positive impact of FX. Sales of industrial machinery and others declined 14% year-on-year to JPY 43.1 billion. Segment profit decreased 28% to JPY 4.7 billion. Regarding business with the automobile industry, net sales and profit decreased mainly due to a decline in sales of large presses and machine tools. On the other hand, sales and profits from the semiconductor industry increased mainly due to strong excimer laser related sales. Page six shows sales by region for the construction, mining, and utility equipment segment.
Sales of construction, mining, and utility equipment increased 30.6% year-over-year to JPY 860.7 billion. Sales increased in all regions except CIS and Japan. There were large increases, especially in North America, Latin America, and Asia. Traditional markets accounted for 46% and strategic markets 54%. On page seven, I will explain highlights for FY 2022 Q3 on a nine-month basis. The exchange rates were JPY 135.6 to the dollar, JPY 140 to the euro, and JPY 93.2 to the Australian dollar. Compared to the same period of the previous year, the yen depreciated against the US dollar, the euro, and the Australian dollar.
Consolidated net sales increased 26% year-on-year to JPY 2,539.2 billion, and operating income increased 54.9% to JPY 346.6 billion. The operating income ratio was 13.6%, up 2.5 points. Consolidated net sales and operating income increased due to the positive impact of FX, an increase in sales volume and improved selling prices. Net income increased 49.1% to JPY 231.9 billion. Consolidated net sales, operating income, and net income all reached record highs in Q3 on a cumulative basis. Page 8 explains net sales and profits of each segment. Sales in construction, mining, and utility equipment increased by 28.4% year-on-year to JPY 2,369.6 billion.
Segment profit increased by 61.3% year-on-year to 309.5 billion JPY. Retail finance net sales increased 16.5% year-on-year to 63.6 billion JPY, and segment profit increased 59.9% year-on-year to 21.2 billion JPY. Sales of industrial machinery and others declined 3.8% year-on-year to 126.9 billion JPY, while segment profit increased 3.8% to 15.6 billion JPY. A cost analysis for each segment will be explained later.
Page nine shows the construction, mining, and utility equipment sales by region. Its sales increased by 28.4% year-on-year to JPY 2,363.2 billion. Sales increased in all regions except for CIS and China. In particular, sales in North America, Asia, and Latin America expanded sharply. Sales in traditional markets accounted for 44%, and those in strategic markets were 56% of total sales. Page 10 shows a close difference in sales and the segment profit in construction, mining, and utility equipment. As for the segment profit, cost price, which has been previously included in the volume product mix, et cetera, is shown separately from this time. Sales increased by JPY 524.1 billion year-on-year, mainly due to the positive effect of foreign exchange rates, increased volume, and improved selling prices.
Segment profit increased by JPY 117.7 billion year-on-year, mainly due to the positive effects of foreign exchange rates and selling prices. Segment profit ratio was 13.1%, up 2.7 points year-on-year. Page 11 shows retail finance. Assets increased JPY 84.4 billion year-on-year, mainly affected by foreign exchange rates and an increase of new contracts. New contracts increased by JPY 156.2 billion year-on-year, affected by foreign exchange rates and an increase of sales in construction, mining, and utility equipment business. Revenues increased by JPY 9 billion year-on-year due to an increase in new contract and the positive effects of foreign exchange rate, despite the impact of selling cost lease equipment as used equipment in the corresponding period at a year ago.
Segment profit increased by JPY 8 billion year-on-year, mainly due to the decreased allowance for doubtful accounts and the positive effects of foreign exchange rates. Page 12 shows the sales and the segment profit of industrial machinery and others. Sales of industrial machinery and others decreased by 3.8% year-on-year to JPY 126.9 billion. Segment profit increased by 3.8% year-on-year to JPY 15.6 billion, and the segment profit ratio improved to 0.9 points to 12.3%. Both sales and profit decreased for automobile industry, mainly due to the reduced sales of large presses. Both sales and profit increased for semiconductor industry, supported by brisk sales at the excimer laser-related business. Let me explain the orders and sales of industrial machinery on page 33 in appendix.
Page 33 shows the book-to-bill ratio for industry machinery. Chart shows the index of orders received for 6 months divided by the sales for the same six months. Komatsu Industries engaged in the sales and the services of press and the sheet metal machinery. As the orders for large press have been picking up recently, the index has been over 100%. Komatsu NTC is engaged in design, manufacturing, and the sales of machine tools, including transfer machine, machining center, and the crankshaft processing machinery. Orders in transfer machine for automobile industry have been solid, and the index has been over 100%. On page 13, I will explain consolidated balance sheet. Total assets increased by JPY 436.1 billion year-on-year to JPY 4,783.6 billion, mainly due to an increase of inventories and effects of foreign exchange rates.
Inventories increased JPY 256 billion to JPY 1,244 billion due to foreign exchange rates and supply chain disruptions. Shareholders' equity ratio was 50.3%, down 1.1 points, and net debt to equity ratio was 0.34. This concludes my presentation.
Morishita from the Business Coordination Department will talk about the outlook of FY 2022 business results.
I'm Masatoshi Morishita, General Manager of the Business Coordination Department. I'll now explain the projection for fiscal 2022 and main market conditions. Page 15 is an outline of the forecast for fiscal 2022. From left to right are fiscal 2021 results, the October projection for fiscal 2022, and the April forecast. Year-on-year changes compare the fiscal 2022 October forecast against fiscal 2021 results. In fiscal 2022 Q3, despite the impact of supply chain disruptions and increases in material prices and logistic costs, both net sales and operating income reached record highs due to increased sales of new equipment, parts and services, improved selling prices, and a weaker yen. Net sales and operating income are both trending steadily, and order backlog has been building up across the world.
As the yen appreciates more than expected, the outlook for construction equipment demand is becoming increasingly uncertain in Europe and the U.S. The company has not made any changes to the full-year guidance from the October forecast. The following pages will explain demand trends and projections for the seven major products. From page 16, I'll explain the demand trends and outlook for the seven major products. This chart shows the demand trends for the seven major products, including mining equipment. Total global demand in fiscal 22 Q3 was apparently down by 6% year-on-year. When excluding China, demand apparently decreased by 5% year-on-year. China's market conditions are sluggish, and demand continues to decline.
In other regions other than China, demand increased in North America and Europe, but decreased in Japan, Southeast Asia, and other regions. Fiscal 2022, we expect overall demand to remain flat year-on-year, while demand in regions other than China is expected to be 0% to +5%, unchanged from the April forecast. The projection for each region has been partially changed in light of current conditions and other factors. The following pages will explain the conditions in major markets. Page 17 shows the conditions in Japan. Demand in fiscal 2022 Q3 apparently decreased by 9% year-on-year. Due to ongoing impact from supply chain disruptions, demand was sluggish because supply had not kept pace. The fiscal 2022 demand forecast remains unchanged from the April forecast at 0% to +5% year-on-year.
Delays in supply are improving. We expect for the full year that demand will be broadly flat year-on-year. Monthly average operating hours for KOMTRAX in December was -4% year-on-year. On page 18, I'll explain the demand trends in North America. Demand in fiscal 2022 Q3 appears to have increased by 1% year-on-year. Demand for infrastructure and rental increased. Business with energy customers were firm. However, demand in residential and non-residential construction declined, resulting in overall demand remaining at the same level as the same period last year. Fiscal 2022 demand forecast has been unchanged from April at 0% to +5% year-on-year. We expect demand to continue to trend at high levels. We will continue to monitor future trends closely as residential and non-residential demand has begun to decline.
The monthly average operating hours for KOMTRAX was minus 6% in December year-on-year. Hours decreased in residential and non-residential, et cetera. Page 19 shows the situation in Europe. Demand in fiscal 2022 Q3 appears to have increased by 1% year-on-year. There was impact from inflation and the surge in energy prices, supply chain disruptions eased, leading to demand reaching about the same level as the previous year. For FY 2022, we expect demand to be 0% to -5% year-on-year, unchanged from our October forecast. Supply delays due to supply chain disruptions are expected to continue to improve, due to inflation and the surge in energy prices, retail orders have been dropping in Germany and France, et cetera. We will continue to monitor this trend closely.
The monthly average operating hours for KOMTRAX were -7% in December year-on-year. On page 20, I'll explain the demand trends in China. This page shows demand for hydraulic excavators, excluding mini excavators. Total demand, including machines made by Chinese manufacturers, are shown here as well for reference. Demand growth rates represents the number of foreign manufacturers. Demand in fiscal 2022 Q3 appears to have decreased by 11% year-on-year. Total demand including Chinese manufacturers appears to have declined -28% year-on-year. Although the degree of decline contracted temporarily due to inventory adjustments by companies in response to emissions regulations due to stagnant economic activity and the impact of the spread of COVID-19, demand declined. In light of these circumstances, we have revised our demand forecast for fiscal 2022 from the April forecast to -40% to -50% year-on-year.
Also for total demand, including Chinese manufacturers, our assumptions are -30% to -40% year-on-year. Monthly average operating hours for KOMTRAX were -14% in December year-on-year. Operating rates remain low due to the impact from the spread of COVID-19.
On page 21, I'll explain the demand dynamics in Southeast Asia. In the 3rd quarter FY2022, demand decreased by 7% year-on-year, with demand slowdown in Thailand. Demand in the largest market, Indonesia, was almost sustained flat year-on-year, where demand for mining equipment has been firm for coals. That for construction equipment declined with weakened customers' investment appetite due to the material and fuel cost surge and interest rate hikes. The full year demand forecast for the entire Southeast Asia in FY2022 was revised from projection in October to increase between +10% and +15%. Mining equipment will continue to be robust, but demand growth will slow down in Indonesia for construction equipment and it will decrease in Thailand. As for the KOMTRAX in Indonesia, its average operation hours per month was +12% year-on-year in December.
Operating hours in all segments of construction, agriculture, and forestry were sustained at high level. On page 22, I will explain the demand dynamics of mining equipment. In the Q3 FY2022, global demand for mining equipment increased by 9% year-on-year. Demand declined in CIS while it expanded substantially in Asia, including Indonesia, and it also increased in North America as coal price has been sustained high. Demand forecast was revised from the projection in October to the increase between ±0% and +10% year-on-year. Demand in CIS is expected to decrease. The demand mainly in Asia, including Indonesia, will grow. Let me explain the orders and sales of mining equipment on page 31 and 32 in appendix. Page 31 shows the book-to-bill ratio for mining equipment. Chart shows the index of orders for six months divided by sales for the same six months.
Komatsu America manufactures and sells ultra-large dump truck. Orders almost remained unchanged, but with the sales progress, latest index was on 90% level. Komatsu Germany manufactures and sells ultra-large hydraulic excavators. In addition to the low orders in the latest few months, with the progress of sales, latest index was on 100% level. As for Komatsu Limited, orders have been firm for Asia and Middle East, and the latest index was on 100% level. Page 32 shows the book-to-bill ratio of KMC mining equipment. Orders of both surface and underground have been firm, and the index has been on 100% level. Coming back to page 23, I'll explain the sales of mining equipment. In the Q3 FY 2022, sales increased by 36% year-on-year to JPY 372.9 billion. Excluding the foreign exchange impact, sales grew 10%.
Sales in CIS decreased while they increased in Asia and North America. Full year sales for FY 2022 are expected to increase by 26% to JPY 1,361.3 billion, kept unchanged from the projection in October. I'll explain the sales of parts on page 24. In the Q3 FY 2022, sales increased by 33% year-on-year to JPY 223.4 billion. Excluding the foreign exchange impact, sales grew 9%. Sales increased except for a part of regions including China and CIS. Full year sales for FY 2022 are expected to increase by 30% to JPY 846 billion, kept unchanged from the projection in October. On page 34 and onward, I'll explain the major topics. Komatsu has entered into the agreement to acquire GHH Group GmbH, a manufacturer of underground mining equipment.
With the completion of all the necessary procedures for closing, we'll complete the acquisition by the end of June 2023. Its impact on our consolidated business result is minor. In mining industry, global resources demand is increasing. The shift from surface to underground mining method for deeper mining is observed. In particular, with the increased awareness for climate change, Komatsu is strengthening its product development for underground hard rock mining as it anticipates growing demand in the mining segment. GHH offers a wide range of underground mining equipment focused on LHD load haul dumps designed for use in narrow veins and articulated dump trucks. It has extensive dealers networks for global customers for distribution and services, production bases in Europe and South Africa, and excellent human resources with product development know-hows and expertise. Page 35.
In December last year, Komatsu launched the FE25G-2 and FE30G-2 models equipped with large capacity lithium-ion batteries in the FE series of 2.5 ton and 3.0 ton plus electric forklift to contribute to CO2 emission reduction to achieve carbon neutrality. The quick charging system shortens charging time and allows for additional charging, enabling their continuous operation even at sites that requires long hours operation or high load work where the use of electric forklifts has been deemed almost impossible. Through the model expansion of FE series, we expand the operational sites of electric forklift to contribute to reduce environmental impact and realize carbon neutrality. Page 36. Komatsu was selected as a component of the Dow Jones Sustainability World Index, one of the world's leading corporate social responsibility indices, and it has been selected continuously since 2006.
The CDP, a not-for-profit global charity, identified Komatsu as a climate change and water security A list company again in 2022. This concludes my presentation. We'd like to take questions.
We will now move on to Q&A. The first question is from Mr. Sasaki of Mitsubishi UFJ Morgan Stanley Securities.
Hello, this is Sasaki from Mitsubishi UFJ. I have two questions. It would be great if you can answer them one by one. The first one is on about the causes of difference in sales and segment profit. I'm always asking you this question. Please give us a more detailed breakdown of the difference in volume, product mix, et cetera. Also, based off the results, especially regarding unrealized inventory, may I ask how much of an impact that the increase in inventory has? I would also appreciate it if you could tell me about your thoughts on pricing considering the surge in costs. Thank you.
Yes, this is Horikoshi. I think you're talking about page 10. We were a little more helpful this time around by separating out the cost price impact.
Yes, thank you very much. It was very helpful. The impact from volume, product mix, et cetera, was JPY 57.4 billion. The pure volume impact was JPY 37.3 billion. In terms of the impact from regions and product mix, sales of parts were better in the Q3, which resulted in an impact of JPY 10.1 billion. The rest is JPY 10.1 billion. This mainly is a gain on distribution of indirect costs due to an increase in inventories. Regarding cost price and selling price, cost price includes the price increase for containerships, which we have been talking about. JPY 4 billion is included in the -JPY 95 billion.
Looking at the Q3 on a cumulative basis, selling price impact was +JPY 81.3 billion, the cost price impact was JPY 95 billion, resulting in a net negative. Looking back at the H1 on a cumulative basis, selling price impact was JPY 52.1 billion, the cost price impact was JPY 69.2 billion. The impact from cost was considerably larger. However, when you look at Q3 on a standalone basis, selling price was +JPY 29.2 billion and cost price -JPY 25.9 billion, resulting in a net positive difference of JPY 3 billion, with selling prices having a greater impact.
As I explained at the time of interim results at the end of October, I said that from the Q3 onwards, the effect of higher selling prices will probably exceed the cost impact. That is what exactly happened. That's all from me.
Thank you. My second question is about what you have just talked about, price. Just the other day, I believe you announced additional pricing for your main products in Japan. With inflation likely to linger in the world, can you tell us about your company's pricing strategy? How you plan to go about in each of your major regions? Can you break it down into construction and mining equipment?
Even with additional price increases announced in January, there's still quite a bit of room for price increases. I was wondering if you will start reaping the rewards going forward as price increases will rather catch up to inflation. I'd appreciate it if you could share your thoughts about future price hikes and how your company is considering pricing policies. Thank you.
Thank you. This is Horikoshi again. As you're aware, for example, in Japan, we have announced that we will raise the list price by 10%, starting from February orders. Regarding pricing, as I explained earlier, the cost price impact was greater as of Q2 on a cumulative basis than the selling price impact. The increase in selling prices was happening in a belated way.
Next FY in 2023, the increase in material prices and containerships may moderate, but we may be affected by wage hikes as well as other factors. Therefore, we plan to continue to raise prices in the next FY as well. We are currently preparing our business plan, and we expect full year contribution from pricing that took place this year. We will also account for further pricing to take place next FY. As for the forecast for this FY, in terms of original equipment and parts, the degree of price increases for original equipment is a little greater than that for parts for this FY. In terms of magnitude, the price increase for construction equipment is slightly greater in volume than that for mining.
As we have always said about mining, pricing is determined by a formula that is linked to cost increases, especially for mining majors and global contracts. This formula is likely to gradually kick in.Well understood.
Thank you very much.
Thank you very much for your question. The next question is from Mr. Sano of JP Morgan Securities. Please go ahead.
Yes, this is Sano from JP Morgan. Thank you for taking my question. First, regarding the operating income for Q3, I was hoping that it would exceed JPY 130 billion, and the results came in strong. What is your view on sales and operating income compared to your internal plan? You did not change the full year guidance this time around, and you also mentioned some weakness in construction equipment. Can you give some explanation about this?
Are we supposed to expect Q4 profits to decrease significantly from Q3? It would be great if you can provide more flavor on this.
Yes, this is Horikoshi. As you know, at the end of October, when we announced our annual forecast, we set the foreign exchange rate assumptions for the H2 of the year at JPY 140. Looking only at the Q3, the average exchange rate was JPY 140, so the yen was still weak. The consolidated financial results are based on the average exchange rate at the beginning of each month. For example, at the beginning of December, the yen was still weak, so that is why the exchange rates were like that compared to the October outlook.
Looking at Q3 results, as well as the expectations we have now, first of all, in the Q3, sales volume was a little lower than expected. This is not about demand. It's more about the supply chain, which had an impact, especially in North America, Japan and KMC. KMC was mainly affected by a delay in the recognition of the period. Volume was lower than expected, especially for original equipment. In terms of sales volume, we underperformed, but FX gains helped and part sales overachieved, meaning that there was a product mix gain. Although this is not something that's great, inventory was slightly higher than expected, so there was a gain on the allocation of overhead costs. These are the reasons why both sales and profits in Q3 alone were greater than the October forecast.
As for Q4, as I mentioned earlier in the presentation, in terms of sales volume, Japan, for example, has suffered a great deal in Q3 due to production restrictions in the supply chain. In the Q4, with the issues resolving somewhat, we expect a significant increase in Q4. We also expect positive impact from the oceanic regions in South Africa with a recovery from supply chain issues. Looking at the overall picture, I said that sales volume was below expectations in Q3 and we are not sure if we will be able to completely recover that. Since the exchange rate is now at around JPY 130, there will be a loss from the difference between JPY 140 and JPY 130.
In Q4 we will start to reduce inventories, so there will also be a loss from overhead costs. Basically, the overachievement in Q3 is expected to be offset by the underperformance in Q4, ultimately leading to somewhere near the October forecast for the full year. Thank you, Mr. Horikoshi.
The second question I'd like to ask you is about mining equipment, mainly services. You exceeded JPY 100 billion in Q3, and of course, you need to take the FX into account, but it seems that mining services is growing more than 50%. I would like to know what's behind this strength. I guess going forward, the impact from GHH is still yet to materialize, and we will probably have to wait until June or beyond.
At this phase, although the impact on performance may be small over the short term, can you share your thoughts about strategies and how this is going to affect your services business and sort things out for us? Thank you.
Yes, thank you for your question. This is Morishita speaking. I explained the status of mining equipment on page 23. As you rightly said, conditions are not bad regarding the progress we are making, but it is not just services, et cetera, but also parts that are included in these trends. Basically, trends are doing well because operating rates are good. Demand is very strong and prices remain high, especially for coal mining, and customers are continuing to operate their mining equipment at high levels. Simply put, that is the backdrop.
As for GHH, it will still be a little while, before we start to see any real material impact. As I explained earlier, there is a great deal of synergy expected between this company and KMC in terms of complementary products. Also, from a regional perspective, I believe that the scale of our underground business is highly complementary. Regarding its financial impact, please give us a little more time. That is all for me.
Yes, thank you. Incidentally, Mr. Horikoshi mentioned earlier about the composition of parts. Is it correct to think that if services increase, the profit margin will improve in the same way as for original equipment, like parts? Yes, you can think of it that way.
In the case of mining equipment, especially when it comes to service, a large part of this is based off contracts, which involves long-term contracts with customers to maintain their fleet. This is a long-term contract, to a certain extent, we do have visibility. In this sense, of course, maintenance parts are used in the process of providing services, and labor costs incurred as compensation for these services are also recognized as sales. Basically, if the composition of parts and services increases, this will contribute positively to the profit margin.
Thank you very much for the detailed explanation. That's all from me.
Thank you very much. Next question is from Mr. Tsuge from the Nikkei. Please go ahead with your question.
I am Tsuge from the Nikkei. Thank you for taking my question.
Thank you.
I also have two questions. The first one is about demand for construction equipment. It seems to be declining in Southeast Asia as well as in North America and Latin America. It seems that there is rising uncertainty around demand for construction equipment. There was a slight slowdown in Q3. Is this a temporary factor, or should we expect a lull in the next FY as demand matures? Can you give us your perspective on this?
Thank you. This is Morishita. Yes. In the market outlook part, first, for Southeast Asia, we have slightly lowered our expectations on a year-over-year basis. In retrospect, this region had been revised upward in the October announcement, Now it has been lowered back again. We may have been a little too bullish. I am not too worried about mining equipment in Asia as a whole. In construction equipment, especially in Thailand and Indonesia, the market has been weakening a little. As I explained earlier, the background to this is greater costs, like fuel and rising interest rates, as well as inflation, which we believe have weighed on purchasing power. In Thailand, public investment and construction projects have been slowing down, which is a negative factor for demand.
As for North America, to be frank with you, we are not very optimistic about the next FY. In North America, we do not expect any material negative factor, but housing and non-housing demand have been declining, and how they can be offset by energy and other demand. That is what we are examining in making the business plan for FY 2023. We are now in the process of making the plan for 2023. Simply put, we assume that the mining equipment will be solid, but for the construction equipment, we cannot have an optimistic view.
Thank you. As for North America, in the Q2 results meeting, I think the president said that the infrastructure related demand would underpin the business. Compared with three months ago, have you turned more cautious for construction equipment, or do you think the situation has not changed much? Which is the case?
Compared with the situation of three months ago, our view has not changed much. At the end of 2021, substantial budget bill for infrastructure development has passed. I think they are beginning to be executed now. When we hear the customer's voice in the market, they are not in negative conditions. As I might have commented three months ago, with high volume of construction work at hand, customers started 2023. On the other hand, the supply chain condition in North America and Europe worsen the visibility. We have high level of order backlog, which would be same for other peers as well. Orders will be realized in demand in 2023 and onward. Our overall perspective remains unchanged. For example, housing starts is one of the things that we are going to monitor more closely to find out how much negative impact will be conferred by them.
Thank you. One more question. In Russia, I think you continue to offer services now. In future, given some auto manufacturers are beginning to leave, would you comment on your management decision that you may need to make in this FY or early next year, which might have financial impact, if any?
As for Russia, for this FY, as mentioned in October meeting, we keep our stance unchanged from April. As for Russia and Belarus, our sales are based on the local inventory at the end of March and shipment in April. In the surrounding CIS, changing commercial routes slightly, we sustain business. Currently in Russia, we are paying 100% of salary to employees and continuing the operation. As for parts, of course, fully complying with the regulation, we are supplying the necessary parts.
With that level of sales, if we ask that local entity incurs major losses or not, as of today, no, it is not the case. At present, we have not made a decision to withdraw from Russian operation. Don't you have to consider impairment or downsizing of business?
In the forecast for this FY, impact of suspended parts export from other local entities to Russia or impairment caused by the long-term parts impact were already incorporated. Concerning operation in Russia, we do not see any needs for large impairment as of today, and we do not foresee material losses regarding this.
We understood. Thank you.
Thank you. Next question is from Mr. Maekawa of Nomura Securities. This is Maekawa of Nomura Securities. Thank you for your presentation. I have two brief questions. First, let me confirm the increase in selling prices. When the construction equipment volume will be challenging the next FY, I think you will strive to offset that either with a change in mix, including parts and services, or with the selling price increase. Considering cost, including logistics in the Q3, selling price benefit more than offset the cost. I think your price hike was slightly over 4%. Are you going to accelerate the price increase, or can you continue with the price hike of 4%-5% in the next FY? Would you share with you your thought on price increase as far as you can? This is my first question.
This is Horikoshi. As I said in October, when we refer to our competitor, Caterpillar, their price increase from April to October was 13%, and our price hike in the H1 was about 4.4%. It possibly indicates that we have still room for further price increase. In the case of Caterpillar, North and the Latin America combined account for 58% of the total sales, while it is 42% in our case. Caterpillar has wider area where price increase is easier.
The price increase for the full year expected for this year is about 3.6%. For the next year, we have to increase price by similar margin as this year. If the cost increase, for example, 100, and if we increase the selling price by the same margin, profitability will go down. If the cost increase seven, unless we increase the price by 10, profitability will decrease, and we prioritize profitability. Next year, cost increase will be more moderate than this year. Considering the shortfall of this year, we need to take some price increase. As we are making the plan for the next year, and we are telling the local entities to take substantial price increase. Currently, we are finalizing the plan.
Thank you very much. Very clear. Second question is about mining. I think mainly coal operation has been very robust. After winter, will the operation condition change? While recently, the copper price has been picking up, and I think in the last few months, environment for mining began to change slightly. I think basically, the mining operation will continue to be at high level. If there is any change in your prospect by mineral or by region, please let us know.
This is Morishita. Compared with three months ago, there is no major change in our perspective. Coal operation is still at very high level, especially thermal coal price is now higher than the coking coal. That still continues. As for the development in the last few months, China's relationship with Australia began to improve. Whether that is reflected in the export-import data is not clearly shown yet. Such move is observed. How that will affect the 2023 result is not known now. Coal, especially in Indonesia, continues to be very robust. We often explain about idle rate. The idle rate of 100 ton class dump truck in Indonesia fell farther down to 1%+, showing extremely busy operation now. This indicates very stable production and solid operation equipment. Copper price is also very strong. Our demand forecast for mining FY 2022 was relatively strong.
This strength is supported not only by the conventional major mining markets, but also by Africa and the Middle East, especially for large equipment, where large project were launched. Reflecting this, now we are making the demand forecast and the business plan for 2023. Understood.
Thank you.
Thank you. As we are running out of time, let us take the last question. Mr. Ouchi, SMBC Nikko Securities.
This is Ouchi. Do you hear me?
Yes.
Firstly. Sorry, I was not able to follow you thoroughly. You said that inventory increased and profit increased. I think it is more likely to work adversely due to the impact of unrealized inventory gain. Would you explain more in detail, please?
Unrealized gain is about the intermediate stock. When Komatsu Ltd. sells to other company, the local company, profit booked on Komatsu Ltd. is included in the intermediate stock profit. That unrealized gain will lead to reduced profit. When work in progress in Komatsu Ltd. or local company increased, the indirect cost will be allocated to that work in progress goods.
When inventory increases, the allocation will increase, and that will reduce cost and that benefit the profit. Including them all, this time you had a positive impact. Is that right?
Yes.
The second question is about cash flow. At the H1 results meeting, you said cash flow would be about JPY 130 billion plus. Can you comment quantitatively how will that be for the full year now? Inventory at the end of the FY will be higher by JPY 60 billion or JPY 70 billion than the projection in October. In October, we said that the free cash flow will be about JPY 130 billion. Sorry to say, it will be lower by JPY 60 billion-JPY 70 billion in our present forecast. Thank you. This is my last question. As for mining equipment, my impression was that there will be no major bad news in the next FY. Do you think that we don't have to worry about the production capacity of your company or the group companies as a bottleneck risk for the next FY?
This is Morishita. We do not see major bottleneck in production now. Current market condition is very good. As you know, about 10 years ago, demand was even higher than now by 40%-50% back then, and of course we'll not be able to adjust our capacity in line with them. In mining, especially large customers tend to place orders for equipment in line with their mid to long term mining plans well in advance. Rather than having the abrupt large orders, we tend to receive delivery request with their schedule. Therefore, it is relatively easy for us to make production plan.
Thank you very much.
Thank you.
With this, we'd like to conclude the Q&A session and close our business results meeting. Thank you very much for joining us today.