Thank you very much for joining us today. I am Katsuya Yamamoto, CFO of Kawasaki Heavy Industries. Let me dive into the presentation on the financial results of the Q2 of fiscal 2020. Please turn to Page 3, where you see the summary of financial results of the Q2. Orders received and net sales are as shown on the slide.
Although the spread of COVID-nineteen has affected the financial results, the impact was on the declining trend during the period between July September. Regarding orders received, due to COVID-nineteen, the demand decreased in Aerospace Systems and Energy System and Plant Engineering segment was also affected by prolonged business negotiations and postponement of investment decision making, so the trend has not changed significantly from this Q1. In terms of net sales, the cumulative total for the first half of the year saw a significant decrease of 79,200,000,000 yen or 10.7% year on year, mainly due to the drop of 82,300,000,000 yen in aerospace systems. Sales of the Motorcycle and Engine segment also decreased by 7,400,000,000 yen but the rate of decrease in July through September was smaller than in the Q1. Operating income will be explained in detail on Page 5 by factor.
But in the first half, we saw a total decrease of 30,500,000,000 yen mainly due to the impact of the spread of COVID-nineteen. Operating income for July to September was minus 1,200,000,000 yen a significant improvement in the amount of loss compared to the Q1. Net income attributable to owners of parent decreased more than recurring income due to impairment loss charged for Sakaidi works and the partial withdrawal of deferred tax assets. Thus, following the Q1, both sales and income have fallen sharply year on year, But since we expect to see an improvement from the Q3 onward and we tend to have profit skewed in the second half, despite the continued impact of COVID-nineteen, we anticipate a slight surplus in the second half. We will continue to take various measures such as curbing capital investment and R and D expenses, partial return of executive compensation, which has already been implemented, as well as cutting travel and other expenses.
The weighted average exchange rate and net sales in foreign currencies are shown at the bottom of the page. As stated to the dollar and euro, the yen appreciated by about 3 yen and 1 yen respectively year on year. Page 4, please. The orders received net sales and operating income by segment are shown on this page. Details will be explained on the page of each segment.
Page 5 shows details of year on year change in operating profit and loss. Operating profit decreased by 30,500,000,000 yen year on year from 8,600,000,000 yen in the previous year to minus 21,800,000,000 yen Here is the result of our analysis of the factors behind the change. 1st, due to the impact of COVID-nineteen, profit of the entire company decreased by 35,100,000,000 yen of which the aerospace systems account for 65% and the motorcycle and engine 15%. Other segments that had impacts are the rolling stock, where we faced delivery interruptions and factory closures in New York area and precision machinery and robots in the descending order of impact. The impact of COVID-nineteen in July, September significantly shrank in segments other than Aerospace Systems compared to the Q1.
2nd, regarding effects of foreign exchange rates, as mentioned earlier, yen appreciated in terms of the weighted average rate from the year before against both the dollar and euro, resulting in a 3,000,000,000 yen decline in operating profit. 3rd, in terms of change in sales, sales related to large aircrafts for Japan Ministry of Defense, such as P1 and C2 in the Aerospace Systems segment, saw a temporary decrease in the Q2, leading to a JPY 4,700,000,000 drop in operating profit. 4th, as for changes in the product mix, there was a large impact on the aerospace systems due to deterioration of after sales profit for engines and suspensions of factory operations, while profitability has improved in the rolling stock segment and product mix improved due to increased sales of semiconductor manufacturing equipment in precision machinery and robots, hence an overall improvement of 4,400,000,000 yen SG and A expenses improved by 7,900,000,000 yen in total due to a decrease in advertising expenses for motorcycles and engines and a decrease in R and D expenses mainly related to hydrogen. Page 6, please. The factors behind the decrease in operating profit were as explained earlier.
Non operating income improved by 11,400,000,000 yen year on year to 3,500,000,000 yen. Main factors for the difference are twofold. The first factor is gain and loss on foreign exchange. Although the yen maintained its strengths against the dollar in the 2nd quarter due to gain on the payment in dollars and valuation gain on accounts receivable in other currencies against which the yen depreciated. The total gain amounted to 1,700,000,000 yen representing an improvement of 7,500,000,000 yen from a year before.
The second factor is payments for the in service issues of commercial aircraft jet engines. As a result of reviewing the share of payments amongst aging manufacturers, including our company, based on the progress of replacement work, a gain on reversal of such payments posted in or prior to the previous fiscal year was recorded. And since there is no new such payment incurred in the first half of this fiscal year, we saw an overall improvement of 4,100,000,000 yen Regarding extraordinary income and losses, a gain of 4,800,000,000 yen was recorded on the sale of company owned dormitories and houses, as well as shares of affiliated companies in the Q1. While the future profitability of the ship and offshore structure of Sakaidi Works was reviewed in the second quarter, which led to recognition of an impairment loss of 3,900,000,000 yen As a result, extraordinary income losses in the first half was almost unchanged year on year. Now Page 7, the results by segment.
Page 7 shows the results of the Aerospace Systems segment for the Q2 of fiscal 2020. Year on year results of orders received, net sales and profits are as shown on the page. The effects of COVID-nineteen were felt mostly in this segment. Regarding aircraft, sales units of component parts for commercial aircrafts in the first half decreased significantly, especially for Boeing 787, 777 and 777X due to the impact of the suspension of shipments resulting from the suspension of factory operations at Boeing and cut in our production. Business Ministry of Defense also fell significantly as more of them were postponed to the second half than in the previous year, hence a significant decline in sales and profit.
Sales of engines decreased by more than 50% year on year and sales for after sales services also shrunk, resulting in a large decrease in total sales for engines. On the other hand, in terms of profits, billing for replacement costs for spare parts that recorded sales in the Q4 of the previous fiscal year and progress in replacement of defective engines paid for by engine manufacturers were concentrated in the Q1 when we posted a significant amount of losses. But in the 3 term months of Q2, the monthly loss was less than half of the previous quarter, partly due to the reduced impact. As for fiscal 2024 year forecast, in the aircraft business, sales of the businesses for Ministry of Defense will recover from the second half, but the timing of pitching down to the monthly production of 6 aircrafts at Boeing has been moved up from what was announced last time. Therefore, we expect to see a slight drop in sales and profit from the announcement made last time.
In the engine business, sales in the second half are expected to increase by about 30% from the first half due to the recovery of passenger demand, leading to an improved profitability in the second half. However, the recovery of demand including that for after sales service is expected to be slightly delayed from the time of the previous announcement and therefore the forecast has been revised downward from then. Page 8 shows Energy System and Plant Engineering segment. As for the results for the Q2 of fiscal 2020, year on year results of orders received net sales and profits are as described here. The increase in sales of domestic projects offset the impact of COVID-nineteen and pushed up the total sales, while profit decreased slightly year on year due to operational losses caused by the pandemic.
For fiscal 2020 forecast, regarding orders, because it is expected that customers' investment decisions will be delayed and the number of projects will decrease due to the spread of COVID-nineteen, we have lowered our guidance. Sales are expected to be about the same as the previous fiscal year. Forecast for profit has been raised from the previous announcement due to the improvement in profitability of hydrogen related projects and the increased effect of cut in the periodic costs. Page 9 shows Precision Machinery and Robot segment. In terms of results for the Q2 of 2020, orders received, net sales and profits are as described.
The recovery in the demand in the Chinese construction machinery market was strong, making up for the weakness in the European and emerging markets. On the other hand, in the robot business, despite the strong sales for semiconductor manufacturing equipment, sales of after sales parts were sluggish due to the COVID-nineteen. Therefore, profit was at the same level as the previous year. As for fiscal 2020 forecast, sales of hydraulic components for the construction machinery in China are continuing to perform better than expected. Moreover, the impact of COVID-nineteen has been revisited, mainly for automobiles, resulting in the upward revision of our guidance for orders received, sales and profits this time.
Page 10 shows ship and offshore structure segment. As for the results of the Q2 of fiscal 2020, orders received and sales as compared to the previous fiscal year are as shown on the slide. Now although the forecast for orders received for fiscal 2020 has been revised down this time in light of the market environment, the previously announced forecast for sales will remain unchanged as we steadily engage in the construction of LPG carriers and submarines. In terms of profits, although there will be an impact from the decrease in construction work this fiscal year, the cost reduction of newly built ships has progressed. So our guidance has been raised at this time.
Page 11 shows the rolling stock segment and regarding the results of the Q2 of fiscal 2020, orders received and sales compared to a year before are as shown here. In terms of profits, an overall improvement of 4,200,000,000 yen was achieved due to an increase in profits based on increased sales in passenger cars for the domestic market and the improvement of the cost of North American projects, which recorded a loss in the previous fiscal year. Although there was a slight impact of COVID-nineteen in July September quarter, mainly in North America, our forecast for fiscal 2020 remains unchanged as the amount of impact was factored in at the time of the previous announcement. Page 12 shows Motorcycle and Engine segment. As for results of the Q2 of fiscal 2020, sales as compared to the previous fiscal year are as shown on the slide.
Although this is the segment that has been greatly affected by COVID-nineteen, sales to North America, mainly off road motorcycles and vehicles have exceeded the previous year's level and so have sales in Europe since June, thus making up for the downturn in the emerging countries. Operating income turned into a surplus of 800,000,000 yen in the 3 months from July to September and the amount of year on year decline in profit shrunk by 1,300,000,000 yen from the previous quarter to 1,800,000,000 yen The 2020 forecast for both sales and profits has been raised significantly this time, in line with the increase in retail sales of motorcycles and vehicles that exceeded expectations in North America and the recovery in sales for Europe. On the other hand, capital investment, R and D expenses and indirect costs, etcetera, will continue to be thoroughly reviewed to improve profitability, so we can record surplus in the next fiscal year. Please turn to Page 13, where you can see the summary of the balance sheet. Compared to the end of the previous fiscal year, total assets increased by 21,000,000,000 yen The main factors were an increase in cash on hand and in bags as we work to secure cash on hand and inventories increased because of a temporary suspension of production in the Aerospace Systems business, while progress was made in collecting accounts receivable amid the strong sales in motorcycles.
Total liabilities increased by 51,300,000,000 yen driven by an increase in borrowings associated with increased total assets. As a result, the net DE ratio was 135.4%, slightly worse than in the Q1. We will continue to focus on improving this to achieve the level of 70% to 80%, which has been our target for some time. Page 14 shows the summary of cash flows. Cash flows from operating activities improved by JPY 148,700,000,000 year on year as the previous fiscal year saw deterioration due to the absence of liquidation of receivables, which was implemented at the end of fiscal 2018 in the Aerospace Systems segment.
Other reasons include the brisk retail sales in motorcycles and engine segment, which facilitated the collection of accounts receivables in the Q2 this year and the decline in inventories. Cash flows from investment activities also improved by 19,300,000,000 yen year on year due to gain on sale of company owned dormitories and houses and of shares of affiliated companies. Consequently, free cash flow improved by 168,000,000,000 yen from a year before. From the second half of the year onward, we will focus on improving our financial position by enhancing profitability and funding efficiency and promoting cash received for sales in order to achieve a positive free cash flow at the earliest stage possible. Now let me discuss our forecast for fiscal 2020 consolidated operating performance on Page 15.
In terms of orders received, although the recovery from the effects of COVID-nineteen is expected to be fast, especially for motorcycles and precision machinery and robots, As a result of factoring in further reduction in the production by Boeing, delay in recovery of after sales service profits in component parts for commercial aircraft jet engines and the decrease in orders for ships, the forecast has been revised down from the time of the previous announcement. In terms of sales and profits, although we factored in a decrease in aerospace systems with an anticipation for an increase in motorcycle and engines and precision machinery and robots, we have made upward revision to the forecast and total net sales are now expected to be 1,500,000,000,000 yen up 40,000,000,000 yen and operating income to be minus 20,000,000,000 yen, an improvement of 10,000,000,000 yen as compared to the previously announced figures. In the second half, while incorporating the risk of COVID-nineteen, we expect the operating income to turn positive for the 6 months of October through March. We will continue to focus on reducing fixed costs in order to minimize the full year operating loss. In addition, in the Q2 of this fiscal year, at Sakaida Works, which is the base for the construction of commercial ships in the Ship and Offshore Structure segment, we posted impairment loss and partially withdrew deferred tax assets.
Based on these, we expect net income attributable to owners of the parent to be a loss of 27,000,000,000 yen and unfortunately, we have no choice but to pay no dividends this fiscal year. In the next fiscal year, we will work to steadily turn into profitability and start paying dividend again as soon as possible by proactively working on new businesses such as aircraft PCR test services and medical robots. Page 16 shows a table for results of fiscal 2019 and forecast for fiscal 2020 by segment for your reference. Page 17 shows the results of fiscal 2019 and forecast for fiscal 2020 in terms of before tax ROIC by segment, again, for your information. On Page 18 and 19, you can find historical data for R and D expenses, CapEx and number of employees as of the end of different fiscal years.
On Page 20 21, you can find market overviews as reference materials. That is all from me. Now on Monday, November 2, we are holding a briefing on our future business policies, including those for ship and offshore structure segment, where we posted an impairment loss in the Q2. You're welcome to attend the meeting either in person or remotely via the web. So I would urge you to join us using whichever means works for you.
Thank you for your attention.