Thank you for attending our financial results briefing today. I would also like to take this opportunity to thank you for your continued support of our company. I will now explain our financial results for FY 2022, and our forecast for FY 2023. Please turn to slide four. Here are the key points of the financial results for FY 2022. One, we were able to receive continued high level of orders in Japan and abroad. Two, we achieved year-on-year increases in both sales and income in all segments. Both net sales and operating income increased for the fifth consecutive year. Please turn to slide five. Order intake was JPY 737.5 billion, up JPY 59.6 billion year-on-year, and a new record high. EPC orders for waste-to-energy plants in Japan and overseas made a significant contribution. Net sales increased in all segments, reaching JPY 492.6 billion, up JPY 50.9 billion year-on-year.
Operating income also improved in all segments, rising JPY 4.5 billion year-on-year to JPY 20 billion. However, due to cost of fixing defects at domestic plants, and also due to soaring material prices, we could not increase operating income commensurate with the sales, and the year-end figure was same as the beginning of the year forecast. As a result, operating income margin was 4.1%, lower than the initial forecast of 4.5%. Ordinary income increased JPY 6.1 billion to JPY 17.8 billion mainly due to an increase in operating income. After adjusting for extraordinary gains in income taxes, profit attributable to the shareholders increased by JPY 7.7 billion to JPY 15.5 billion. As a result, ROE was 11.5% as shown in the margin. I will omit the explanation of slides six and seven. I will explain the details on slide eight and onward. Here are the details of the environment business.
Please turn to slide eight. This is the environment business excluding Innova. Order intake increased by JPY 46.2 billion year-on-year due to our winning all five EPC projects that we were quoting on in Japan. AOM orders also increased by JPY 58.9 billion due to the receipt of orders for five retrofit works and four DBO projects for operations. EPC net sales were flat year-on-year. An increase in construction of waste-to-energy plants in Japan was offset by lower biomass-related projects. For AOM, sales increased by JPY 12.5 billion, mainly due to JPY 4.3 billion increase Environment AOM and Operations, JPY 3.3 billion increase in Electricity Sales Business, and a JPY 5.2 billion increase in Water Business.
Operating income worsened due to EPC expenses for additional measures against defects continuing on from the previous year at the biogas facility furnace and boiler in Kyoto, as well as inclusion of expenses to deal with failures and delivery delays at the biomass plant. On the other hand, improved earnings from other construction projects and at group companies offset these negatives, resulting in a JPY 900 million year-on-year decline in overall EPC earnings. In AOM business, electricity sales income declined JPY 700 million in the first half due to an increase in procurement costs from the market. In addition, AOM long-term operations and others saw a JPY 600 million drop in operating income. Meanwhile, water business income increased JPY 700 million due to profitable construction projects, and AOM income as a whole was down JPY 800 million year-on-year. Next is about Innova Group.
Order intake increased by JPY 46.9 billion in EPC due to three large construction projects in the U.K., an order for Steinmüller and others. AOM was down year-on-year because we had O&M projects in Dubai and Westfield the year before, but was well above the forecast made at the beginning of the fiscal year.
Net sales increased by JPY 17.7 billion in EPC due to the steady progress of each construction project. In AOM, sales increased by JPY 10 billion due to contributions from Steinmüller and other group companies. Operating income in EPC increased JPY 2.9 billion due to increased sales and improved operating margin, and in AOM, operating income increased JPY 1.4 billion due to increased income at Innova itself and Steinmüller turning a profit, and that contributed significantly to earnings. Steinmüller exceeded break even in fiscal 2022, and was able to achieve profitability one year ahead of schedule. Please take a look at slide nine, Machinery & Infrastructure Business. Order intake for press machines recovered to the pre-COVID level, but orders for other products declined due to the large order intake in the previous year and a decrease in semiconductor related orders in the second half of the fiscal year.
Net sales increased in press machines and in precision machinery. Sales of the materials business and the semiconductor related equipment business at group companies continue to grow. Operating income increased JPY 5 million in press machines, and also increased for V TEX Co, Ltd and IMEX, while infrastructure income fell. Overall operating income increased by JPY 1.2 billion. Turn to slide 10 please. Carbon neutral solution business order intake increased by JPY 33.2 billion due to recover in process equipment orders and an order for a large onshore wind EPC at Mutsu Ogawara in Aomori Prefecture. Net sales increased JPY 6.7 billion, mainly due to a JPY 1.7 billion increase in engines stemming from unit growth, and a JPY 5.4 billion increase in sales of processed equipment to Shell Canada Limited and others.
Operating income was down JPY 800 million in engines, mainly due to material price surge, but improved by JPY 1.1 billion in process equipment, leaving the total operating income unchanged. Slide 11. Order backlog at the end of March 2023 was JPY 1 , 317.7 billion. This was an increase of about JPY 300 billion from the end of the previous fiscal year. In terms of order backlog by sales recognition year, net sales for fiscal 2023 are fixed up to JPY 405.5 billion. Slide 12 shows the breakdown of changes in operating income from fiscal 2021. The breakdown of the changes are indicated in the boxes. As for others, there was an increase in income at logistics subsidiaries and a reduction in fixed costs for shared services. Innova Group operating income increased JPY 4.3 billion year-on-year, JPY 1.5 billion higher than the initial forecast.
If you go to the right a bit, the environment EPC excluding Innova was JPY -900 million, a deterioration of JPY 3.8 billion from the initial forecast. Although environment business excluding Innova was down, the Innova Group machinery and infrastructure and other businesses were up, resulting in our achieving the operating income forecast. Slide 13 shows non-operating income and loss and extraordinary profit and loss. In non-operating income and loss, foreign exchange gains and losses will be JPY -100 million, mainly due to a JPY- 200 million at Hitz and JPY 700 million improvement at Innova. Extraordinary profits come from the sale of fixed assets and the partial transfer of shares in a logistics subsidiary. Extraordinary loss is due to impairment loss at an Innova subsidiary and provision for litigation loss at an affiliated company. Slide 14 shows the consolidated balance sheet.
Total assets increased by JPY 18.5 billion from the end of the previous fiscal year to JPY 479.6 billion, mainly due to an increase in cash and deposits and an increase in operating assets resulting from business expansion, while tangible and intangible fixed assets decreased due to sales of fixed assets and partial transfer of shares of a logistics subsidiary. Total liabilities increased by JPY 10.1 billion to JPY 338.3 billion. Advances received and contract assets increased by JPY 13.7 billion due to strong orders, while bank borrowings fell by JPY 5.4 billion due to repayment of borrowings. Total net assets increased by JPY 8.4 billion from the end of the previous period to JPY 141.3 billion, mainly due to an increase in retained earnings.
Shareholders' equity ratio increased 0.6 percentage points to 29.1%. Net interest bearing debt was JPY 100 million as noted in the margin. Slide 15 shows the consolidated cash flows.
Cash flows from investing activities was negative JPY 2.5 billion due to proceeds from the partial sale of shares in a logistic subsidiary, purchase of tangible fixed assets and investment in ESD Industries. Cash flows from financing activities amounted to negative JPY 7.8 billion, mainly due to repayment of long-term debt and dividend payments. As a result, cash and cash equivalents at the end of the period increased by JPY 18.9 billion to JPY 84.8 billion. Slide 16 shows the forecast for fiscal 2023. Order intake JPY 530 billion, net sales JPY 520 billion, operating income JPY 22 billion, operating income margin 4.2%, ordinary income JPY 18 billion, profit attributable to shareholders JPY 12 billion. ROE is projected to be 8.3%. I will skip over slides 17 and 18. I will explain the business forecast from slide 19 onwards. Please turn to slide 19.
In the environment business, excluding Innova, order intake is expected to total JPY 199 billion. In fiscal 2023 for domestic EPC, we expect no large scale projects and three small scale DBO projects. Market orders for domestic waste incineration plants are also expected to be 2,800 tons per day, about 70% of the previous year's level. As for AOM, we expect about four retrofit works this fiscal year, down from five last year. In addition, four long-term operation projects are expected. Net sales will go up in EPC but go down in AOM, and so will be at the same level as the previous year. As for operating income, a provision for cost overruns in the previous year has already been made in EPC, but we will closely monitor the progress of construction. In EPC, we expect operating income increase of JPY 2.15 billion year-on-year.
In AOM, we expect a decrease in operating income due to a decline in profitable projects in the water business. For electricity sales, we expect to achieve break even due to our policy of selling electricity within the scope of procured power sources this fiscal year. Innova order intake is expected to fall by JPY 52.3 billion year-on-year to JPY 192 billion. For waste to energy, we will aim to win orders in business areas other than Europe, such as the Middle East and Australia. In renewable gas, we are also working to acquire specific projects outside Europe, such as in the U.S. and Canada. In AOM, we are aiming to win orders for large-scale projects in the U.K. We also have a 30-year O&M project in the Middle East.
Net sales are forecasted to grow by JPY 28.6 billion year-on-year to JPY 168 billion due to steady progress in projects.
Operating income is projected at JPY 9.2 billion, up JPY 2.2 billion year-on-year due to increased income from AOM. Slide 20 shows the machinery and infrastructure business. Order intake, net sales, and operating income for this segment are all expected to be lower than the year before. In particular, in precision machinery, orders for semiconductor-related business are expected to hit a trough in FY 2023, and operating income is also expected to decline due to lower sales and higher costs from persistently high raw material costs. However, demand for semiconductor related business is expected to increase again from FY 2024 onward. Please look at slide 21. This is the carbon neutral solution business. In this business, we have made organizational changes in line with the spin off of the engine business that is explained in the margins.
Orders are expected to go down by JPY 24.7 billion, a significant decrease from the previous year when we had onshore wind EPC order intake. Net sales are expected to increase by JPY 10.4 billion year-on-year, including JPY 8 billion in EPC sales for onshore wind power and other revenue increases. Operating income is expected to increase JPY 800 million, with JPY 200 million profit expected for engines. Slide 22 shows the breakdown of changes in operating income from FY 2022. The factors for the changes are shown in the boxes. The key point for FY 2023 is JPY 2.15 billion improvement in environment EPC excluding Innova. The decrease in others is mainly due to the logistics subsidiary, which is deconsolidated. Slide 23 shows financial results for FY 2020 through FY 2022 and the forecast for FY 2023.
While maintaining a sound financial position, we aim to expand and create growth businesses through business investments, which is our Forward 25 strategy. Total assets are expected to be JPY 500 billion, up 4.3% year-on-year, and shareholders equity is expected to be JPY 148.6 billion, up 6.4% year-on-year. As a result, shareholders equity ratio is forecasted to increase 0.6 percentage points year-on-year to 29.7%. Cash and deposits are expected to fall, and interest bearing debt is expected to grow due to aggressive business investment plans during this fiscal year. ROE is projected to be 8.3%. This concludes my explanation of financial information. We appreciate your continued support and guidance. Thank you very much. Next, President Mino will explain the management and business information.
This is Mino. First, I'd like to thank you for taking time out of your busy schedules today to attend our financial results briefing.
I would also like to take this opportunity to thank you for your continued interest in and support of our company. Thank you so much. I will now explain the management and business information of our group. First, I'd like to explain the orders received and the status of each business segment. Page 25 shows major orders received in Japan, and page 26 shows the same for overseas in the second half of FY 2022. First, please look at page 25. In FY 2022, there were more orders for new domestic waste incineration plants than in previous years. There was one order received in the first half of the year and four more orders for the construction of waste incineration plants in the second half, as shown here.
In addition, as shown in the bottom row, in March, we received an order for the construction of an onshore wind power generation plant in Mutsu Ogawara, Aomori Prefecture, which we have been collaborating on with ITOCHU Corporation. It was a very strong year. Please look at page 26. Overseas, Hitachi Zosen Innova and Hitachi Zosen Innova Steinmüller, which we acquired in February last year, steadily won contracts for construction of waste-to-energy plants and supply of major equipment. Innova was awarded three large-scale EPC projects in the U.K., including North London and Eden Hall, which were awarded in the first half of the year. Hitachi Zosen also received an order for supply of major equipment and dispatch of supervisors for a BOT waste-to-energy facility in Taiwan.
On pages 27 and 28, we show again the orders received for the first half of the fiscal year, which we presented at the time of the first half results briefing. Please look at page 29. These are major projects in the environment business, excluding Innova. There are some projects that experienced some delays in delivery due to the need to secure shipping containers for overseas procurement, but delays could be absorbed within the contract period and will not have a significant impact on our business performance. Overseas, two projects in India, Bidadi and Moshi. The construction of these two projects in India has been slightly delayed due to COVID and heavy rains, and we are reviewing the scheduled completion dates. Page 30 shows Innova's major projects. In fiscal 2022, construction work at Dubai and Slough and others progressed smoothly, contributing significantly to Innova's sales and profit.
On the other hand, the delivery of the Rockingham project in Australia is expected to be delayed by more than one year due to procurement and local construction delays caused by COVID. We are currently discussing extending the delivery date with customers and consortium partners. The impact of the Rockingham project on EPC's business performance has mostly been factored in.
Next, I will explain the status of each business. Page 31 shows our environment business, excluding Innova. In fiscal year 2022, the market order volume for waste treatment plants in Japan exceeded 4,000 tons per day, and we were able to capture a very high level of orders. On the other hand, in the highly profitable retrofit works, demand has run its course, and the number of projects is declining. In the water business, we received strong orders for new sludge reclamation treatment centers and were able to secure a 50% share of the market. In the future, we aim to increase orders for retrofit works in addition to these new projects. In the electricity sales business, earnings in the retail electricity business deteriorated in December due to soaring market procurement prices, but the deficit narrowed in the second half due partly to market prices coming down.
In fiscal year 2023, we expect to break even by securing necessary power sources while closely monitoring the supply-demand balance in each region. As for initiatives, as written here, we will strive to lower costs on new construction work orders, have inflation control, including revision of terms based on the slide clause, and reduce defect costs to improve the profit margin. Also, toward mid to long-term growth, we will promote DX technology development and expansion of business areas. Page 32 is the status of the Innova Group. Innova continues market leadership in EPC for waste treatment plants in the European and Middle Eastern markets. In fiscal year 2020 and 2021, Innova's share of orders in the European and Middle Eastern markets exceeded 50%. In fiscal year 2022, the Innova Group was able to secure EPC business orders of over JPY 200 billion, a record high for the Innova Group.
In addition, to build a stable profit structure, Innova is aiming to accumulate smaller projects such as equipment supply and operation and maintenance. In line with this strategy, Steinmüller, which we acquired February last year, has been receiving orders steadily in Scotland and Finland and has been able to achieve profitability in fiscal year 2022, one year ahead of the plan at the time of acquisition. In Europe, plans have been announced to significantly increase biogas production in response to the energy crisis triggered by the Russia-Ukraine issue. Due in part to this market environment, orders received in fiscal year 2022 related to the biogas business doubled from the previous fiscal year to approximately JPY 15 billion, and we are aiming for JPY 30 billion in orders this fiscal year. While paying attention to risk management, we will also expand our ownership and operation of biogas plant.
Page 33 is the machinery and infrastructure business. In press machines, order intake recovered through the pre-COVID level of JPY 20 billion as domestic automakers' capital investment recovered. In precision machinery, sales of semiconductor manufacturing related equipment such as vacuum valves and lapping plates were very strong. The semiconductor market has plateaued since the second half of 2022, but is expected to grow steadily again from 2024 onward. Regarding the infrastructure business, we expect market volumes for bridges to remain unchanged year- on- year. In water gates, we anticipate revitalization of redevelopment projects for existing dams, and in chimneys, we expect an increase in demolition work amid the trend toward decarbonization. As for initiatives, in the area of press machines, with rising diffusion of EVs, the challenge will be to respond in production for EV parts and lightweight materials.
In addition to metal materials such as aluminum alloys, we will work with automakers to handle carbon fiber and other new materials. In machinery, we will work to improve profitability through the development of standardized models. For water gates, we will actively work on overseas projects, particularly ODA projects. Page 34 explains the carbon neutral solution business. Hitachi Zosen Marine Engine, which was established by spinning off the engine business, started operations in April and is now collaborating with Imabari Shipbuilding. In the shipbuilding industry, developing zero emission ships towards carbon neutrality is an urgent issue, and fuel conversion is becoming an essential element. Through collaboration with Imabari Shipbuilding, we will accelerate the development of clean energy-compatible products, expand sales by securing sales volume, and reduce costs by leveraging our material procurement capabilities, thus creating synergies through collaboration and improved profitability.
In process equipment, capital investment in petrochemical plants has recovered to pre-COVID levels, and capital investment in LNG, hydrogen, and ammonia for decarbonization is also expected to increase. For nuclear power-related equipment, our business has been focused on the U.S., but we intend to strengthen our response to domestic demand as nuclear power plants are restarted. In October 2022, we established Tousou Mirai Technology Co Ltd to manufacture decommissioning-related products in Fukushima Prefecture. In the Decarbonization Systems, which was renamed from P2G in April this year, we are working on the practical application and early social implementation of hydrogen and methanation through demonstration projects using the Green Innovation Fund. In wind power, as I mentioned earlier, in March, we were awarded a construction contract for an onshore wind power generation project in Aomori Prefecture. We are also developing an offshore wind power generation project in Aomori Prefecture.
This area is currently designated as a promising area, and after receiving promotion area designation and bidding process, we will aim for closing. Next, I'd like to introduce some recent developments and company topics. Please turn to page 35. First, I will explain our onshore wind power generation project. This project involves the construction of a wind farm with an interconnection capacity of 57,000 kW in an area facing the Pacific Ocean in Yokohama Town, Kamikita District, Aomori Prefecture, and will be one of the largest onshore wind farms operated by an EPC firm in Japan. In December 2019, together with ITOCHU Corporation, we established Mutsu Ogawara Wind Power LLC and have been jointly making preparations. Recently, the LLC signed a loan agreement with MUFG Bank and the Development Bank of Japan Inc, and we were awarded the EPC contract.
We are working to develop wind power generation as one of our growth businesses to make it a pillar of our business in the future. In onshore wind power, we will differentiate ourselves by offering a full range of services, from project development to construction and operation. In offshore wind power generation, we will develop technologies for both bottom fixed and floating wind turbines and conduct demonstration tests aiming to become a top runner in offshore wind power foundation engineering. Page 36 explains our nuclear power spent fuel transportation and storage equipment business, which is conducted mainly by our U.S. subsidiary, NAC International. In January of this year, we acquired a North American company that comprehensively manages low level radioactive waste. Our group has supplied many casks and canisters, which are containers for spent fuel for nuclear power plants, mainly through NAC International.
This M&A allows us to expand the areas we cover. In the future, in cooperation with NAC International, we will aim to provide solutions for safe and secure transportation and storage of spent fuel in Japan as well, to become the number one supplier of storage containers and other products related to radioactive waste. Page 37 is a topic related to the growth of renewable gas business. Power-to-gas business that uses Innova Group company Schmack Biogas biomethanation reactors, has received an award from the Swiss Federal Office of Energy as an innovative Swiss company or an organization taking on the challenges of the energy future. The award was presented to the first commercial biomethanation plant in Europe that uses microorganisms to convert hydrogen and CO2 contained in digested sewage sludge into methane.
The methane produced by the project is carbon neutral and can be used as an alternative fuel to natural gas equivalent to demand of about 2,000 households, reducing CO2 emissions by about 5,000 tons per year. Our group will continue to promote technological development related to CO2 capture and reuse and contribute to the early realization of a carbon neutral society. From page 38, I will provide supplemental explanation of our medium-term management plan and long-term vision announced in March. Please look at page 38. In the new medium-term management plan, Forward 25, announced in March of this year, we have set a goal of 10% operating margin and approximately JPY 900 billion in business volume toward net sales of JPY 1 trillion. Let me explain our thinking on how we will build up sales and earnings towards that goal.
First, we aim to build up sales and profit, as shown here, by making domestic EPC profitable in existing businesses, growing AOM and overseas businesses, and working to create and expand growth businesses such as renewable gas, resource recycling, and carbon neutral solution businesses. In fiscal 2022, our net sales were just under JPY 500 billion, but by 2030, we plan to increase sales from existing businesses to JPY 570 billion, to which another JPY 330 billion will be added from growth businesses. Particularly large growth is expected in the field of resource recycling, including the expansion of Innova's biogas business and entry into the domestic industrial waste business. Wind power generation and P2G businesses are also expected to contribute to earnings from the latter half of the 2020s.
In the water business and nuclear power-related equipment business, we will strive to increase earnings by strengthening cooperation with overseas group companies. Please turn to page 39. In fiscal year 2022, as shown in this chart, AOM accounted for 42%, and overseas sales was 38% of net sales. As KPI for fiscal year 2025, we have set the share of 50% AOM and 40% overseas sales. As shown in the pie chart on the left, about 70% of AOM sales in fiscal year 2022 came from the environment business, excluding Innova. Which means that there is still much room for growth in other segments and overseas businesses, including Innova. In all of our businesses, we will promote various policies to expand AOM, since we can expect high profitability and stable sales.
In overseas operations, toward 50% share of sales and profits by overseas business, we will strengthen cooperation with group companies in each region, strengthen risk management and governance, create a global business strategy for the group and a structure to promote those initiatives with the aim of achieving 40% in 2025. Please continue to page 40. I'd like to explain the three-year investment plan of the Medium Term Plan Forward 25. Under Forward 25, we plan to invest JPY 140 billion over three years. The main part of the JPY 75 billion investment is expected to be in Waste-to-X related businesses such as biogas and recycling. In Europe and the U.S., demand for biogas plants is emerging, and we plan to take advantage of this opportunity to invest approximately JPY 40 billion, not only in EPC but also in projects that we own and operate.
In Japan, we intend to expand business in the recycling field, including industrial waste, and also invest in wind power projects as well. In addition, in the water business and the nuclear power-related equipment business toward global market expansion, we intend to actively consider any promising M&A projects. In terms of R&D, we will promote development utilizing funding like the Green Innovation Fund for next generation WTE, Waste-to-Energy technologies, including post combustion, cost reduction in offshore wind powers projects, and larger water electrolyzers. In addition, investment in information technology, which is a foundation of these businesses as a whole, is essential for adding value to our businesses and products. We intend to increase the amount of such investment in line with business expansion.
Although not shown on this slide, we will also aggressively invest in people to secure, train, and retain the human resources necessary to realize our growth strategy through business investment. Please turn to page 41. Finally, I'd like to talk about shareholder returns. To date, our basic policy has been to provide stable dividend shareholder returns. In the next three years, we plan to aggressively invest in growth to increase future shareholder value. Based on the thinking as described here, our basic shareholder return policy will be to continuously and stably distribute dividends while working to strengthen financial position and the management base through growth investment around the investment and capital investment in order to enhance the long-term shareholders value.
As for the dividend amount, since the business results for fiscal year 2022 greatly exceeded the forecast at the beginning of the fiscal year, we have decided to increase the dividend by JPY 3 from JPY 15 per share to JPY 18 per share. We will propose this at the general meeting of shareholders. We also forecast a dividend of JPY 18 per share for the current fiscal year. I will take the lead in implementing the measures described so that we can continue to meet the expectations of our shareholders. This concludes my explanation. We will continue to strive to meet your expectations, and I would like to ask for your continued support. Thank you.
Thank you. We will now begin the question and answer session. The first question is from Mr. Ito from Mizuho Securities.
This is Ito of Mizuho Securities. Can you hear? Yes, we can. Please. Thank you. I have two questions. First, I would like to confirm past business results. That will be page eight in your presentation material. It is about the result of the environment business. Forecast for the operating income of new EPC business for the second quarter was a negative JPY 1.5 billion, but I think it has landed at negative JPY 3.8 billion. I think you mentioned several items, but could you please explain what was the biggest factor? Let me confirm that the impact of the negative factors has basically been contained in the current fiscal year. That's the first question.
Kimura will respond.
First, regarding the change in the domestic EPC results from the third to the fourth quarter, the biggest factor is the defect and the delay in delivery at two domestic plans. We have explained these problems at the third quarter earnings call. However, the defect response made in the third quarter were not fully effective, and it was decided continued response is necessary for Kyoto, so we are continuing such efforts in the fourth quarter. Also, the biomass related business is a large scale plant that incorporates overseas equipment. We had some issues in handling such first time equipment, and we are continuing our response to the situation from the third quarter to the fourth quarter. As a result, the delivery date has been delayed, and for these two projects, we have made provisions for the expenses that we currently can foresee in the current fiscal year.
We will continue to check the effectiveness of the measures we have taken during this fiscal year. That is all for myself.
Thank you. A follow-up if I may. When are these two projects scheduled to be completed?
For Kyoto, the response will mainly be during fiscal 2023, but part of the work will take place in fiscal 2024 as well. So mainly 2023 and a little spillover to 2024. The biogas project, I think we can get confirmation about the completion time around the first or second quarter of fiscal 2023.
Understood. Thank you very much. My second question is: could you tell your views on the profitability of products in the new fields? I want to ask mainly two points. One is your foundations for offshore and onshore wind power. What is the current profitability of these foundations that you supply? Since the price of steel has been rising, I would like to know if there are any concerns about profitability in the short term.
Another thing, I think you mentioned renewable gas. Please tell us a little bit more about the medium to long-term contribution of earnings from these business. For example, can we assume that this business will basically come with O&M as in the waste treatment business? Or can you expect very high profitability at the time of doing this as EPC business? Also, you talked about the possibility of investing and operating yourself. Is that feasible as a business? Sorry for the long question, but I was wondering if you could tell us more about that.
About the foundations for wind power, I think we are talking about 2025 and beyond. We expect revenue that will be sufficient to achieve our target margin of 10%. For renewable gas, that is methane fermentation, we are already working on various projects in Europe. This is less EPC and more operation type of business. Of course, we will deliver our facilities in EPC, but it is a business that encompasses the operation business. In Europe, the introduction of renewable gas is being promoted rapidly, and we are expecting a very high rate of return on our investment. Does that answer the question?
When you say high rate of return, do you mean the level you are aiming for in the wind power business?
No, we think we can aim a little higher.5
I understand. Thank you very much. That is all from me.
Thank you very much. The next question is from Mr. Taninaka of SMBC Nikko Securities.
This is Taninaka from SMBC Nikko Securities. Can you hear?
Yes, we hear you. Please.
Thank you. I have two questions. First, when I look at the breakdown of changes in operating income for the new fiscal year, in the environment business, for example, there is no mention of increased revenue due to new waste incineration plants being completed like last year. Order intake for the fiscal year just ended was very strong, so I wonder how that will affect FY 2023. Is it that demand for new construction or an increase in completed projects will not have much of an effect this fiscal year?
For example, page 29 shows the status of projects in Japan excluding Innova. As you can see, the projects for which orders were received last fiscal year are those in Kuki, Hiroshima, Tsurumi, Osaka, Higashi-Osaka, and Hashima, Gifu. They are projects with very long lead times. So it will be 2025, 2026 when we will start to see sales posted from these projects.
Thank you. Can we not expect to see an increase in completed construction projects and some kind of reserve fund carryback in FY 2023?
We plan to complete three projects in FY 2023. Nagaoka, Greater Uki, and East Saga.
I see. If the completed projects go well, the extra construction costs that you conservatively estimated and not used should be carried back. Have you not factored in such carrybacks?
We have not factored that into the current budget. But that is something that we can expect for each project.
I see. Thank you. Also, if you look at the order intake for the previous and the current fiscal years, there is a large drop, and it is at JPY 530 billion. Could you explain the demand environment separately for waste incineration plants in Japan and for Innova? I get the sense that demand has run its course, but can you explain the extent of this decrease?
Yes, Kimura will explain.
First, there were five EPC projects in Japan. These were referred to within our budget as backup projects, meaning we judged the likelihood of being awarded these projects were low. It turned out we won all five, so that is why we had such large order intake in FY 2022. Also, we received orders for five large retrofit projects. This term, although there are some DBO projects, the scale of orders is much smaller than in the previous fiscal year, so we expect a decline of several tens of billions of JPY in EPC projects and another JPY 10 billion for retrofit. For Innova, project size has become quite large.
Since there is always competition for orders, we assume that if we win all the projects, the level will be close to last year's level. But as I said, this is a matter of orders, so please understand that we are taking a rather conservative view of our overseas business.
Thank you. That is all from myself.
Yes, thank you very much. Mr. Nakamura of Nikkei, thank you for your waiting. Nakamura from Nikkei. Thank you. Please.
This is somewhat similar to a previous question, but the forecast for order intake for the current fiscal year is to drop quite significantly. I guess it is because last year was extremely good, but it seems lower than the year before last as well. You explained earlier that there were no large projects, but is it correct to assume that there happened to be no large projects by chance, and that it is not that the business environment has deteriorated? This is my first question.
Yes, that is correct. The environment for orders is not in any way deteriorating. The year before last, orders were at the high level of more than JPY 600 billion.
But that was because we had large-scale, long-term projects such as the 35-year project in Dubai and the 25-year project in Westfield. Such operation business offers amounted to JPY 150 billion, and that is why the figure for fiscal year 2021 was high. In fiscal year 2022, as we have already explained, in the domestic environment business, we were able to win all five projects we bid for. At Innova, we were able to get three large orders in the U.K. So that led to the very large number last year. This year, we have budgeted JPY 530 billion. As Kimura explained earlier, since it is a bidding process, we assume we will fail to win some orders. Also the large projects at Innova, we may lose out or the project may be delayed to fiscal year 2024.
So we apply a certain probability factor and come up with the forecast order value.
Thank you. Second question. From a long-term perspective, you are focusing on new projects such as wind power, but how do you plan to develop further the current mainstay business of waste incineration plants? I think the focus may be Waste-to-X, as you explained, but could you reiterate how you plan to grow the main business of waste incineration plants?
Yes. As you mentioned, in terms of general waste incineration plants in Japan, necessary plants have already been built. Certainly, we will be handling renewal projects for these facilities. In addition to expand the area of operations, we are considering entering into the industrial waste field. In addition, we are conducting development in post combustion for Waste-to-X.
Currently, we are recovering heat and electricity from waste, but we are also looking to recover some other resources or to recover gas through pyrolysis and make effective use of that gas. So until now it was WTE for waste to energy, but we are now trying to change the business to WTX or Waste-to-X. Overseas markets are expanding in Southeast Asia, India, and the Middle East. So in those markets, we would like to work with Innova to expand the scale of our business in these areas. In Europe, mainly through Innova, we will expand from our waste incineration plant EPC business to after-sale service and maintenance business, and the renewable gas business I mentioned earlier, methane gas recovery from waste materials. Does that answer the question?
Thank you.
Thank you very much. Next, Ms. Okawa from Nikkan Kogyo Shimbun, please.
This is Okawa from Nikkan Kogyo Shimbun. Can you hear me?
Yes, we can.
I have a question regarding the Innova Group. On page 32, you indicate that the biogas facility business doubled to JPY 15 billion in fiscal year 2022 from the previous year, and you are expecting JPY 30 billion in fiscal year 2023. Could you elaborate on the business environment and your concrete strategy in this field?
As for the business environment, repeating what I said earlier, due to the Russia/Ukraine situation, there is a policy in Europe to focus on the recovery of biogas from waste under the REPowerEU plan. In line with this development, countries have begun to implement various initiatives, including subsidies. Hitachi Zosen Innova is taking advantage of this trend to develop the business of renewable gas from waste by utilizing the technology we had of dry methane fermentation Kompogas system, together with the wet methane fermentation system of Schmack Biogas, which we acquired recently. We have already started one project in Enköping, Sweden, and we are planning to expand such business in Italy, in Switzerland in the future.
Thank you. In the area of waste incineration facilities, you mentioned that the market is expanding not only in Europe but also in places like India and the Middle East. In expanding your business to India and the Middle East, do you have any plans for investment in facilities or any particular area you would like to focus on?
We are working on the Middle East currently, mainly through Innova. But in Dubai, for example, Hitachi Zosen itself is going to participate with Innova and work on certain areas such as boiler and turbine systems, working together with Innova. In India, we have already established an engineering center in Hyderabad, which is the center of our order-taking activities. For Southeast Asia, instead of approaching from Japan, we'd like to supply equipment from India, for example, and reduce costs. So we have Hitachi Zosen Innova in Switzerland, Hitachi Zosen in Japan, the engineering center in Hyderabad, India, and Hitachi Zosen Vietnam, a design company in Vietnam. So these entities will work together to supply waste treatment facilities globally.
Thank you very much. I think you mentioned India and Vietnam earlier, and I was wondering if there are any plans to beef up your personnel or make any other changes to your organizational structure in these areas.
At present, there is no particular change in our planned structure. We will consider the changes depending on the projects we are awarded.
I understand. Thank you.
Thank you very much. Since there seem to be no more questions, although we have a little time left, we will conclude the Q&A session. Finally, a few words from the President, Mr. Mino.
Thank you very much for taking the time out of your busy schedule today to participate in the presentation of our fiscal year 2022 financial results. We will steadily implement our plans, including the improvement of EPC performance in the domestic environment business, which you have pointed out and asked about, as well as the development of our overseas business initiatives toward Waste-to-X, carbon neutrality, and a circular economy. We will continue to work diligently to meet your expectations.
We will first strive to achieve our budget for this fiscal year, then achieve the goals of the Forward 25 medium-term management plan and expand existing businesses and grow new businesses to realize our 2030 vision. I ask for your continued support. Thank you very much for your kind attention today.