Thank you very much for your patience. Thank you very much for attending this presentation meeting despite your very busy schedule. This is NYK Line presentation meeting of the financial results for fiscal 2022, second quarter. My name is Shuichiro Shimomura, the Head of IR Group. I'd like to serve as the facilitator today. I'd like to introduce today's presenters. First of all, Representative Director and President Nagasawa. President Nagasawa.
This is Nagasawa. Hello to all of you.
Then a Senior Managing Executive Officer, Mr. Harada.
Hello, this is Harada.
The Senior Managing Executive Officer and the CFO, Soga.
My name is Soga.
Today President Nagasawa and Mr. Soga will give you the overview of the results of the second quarter fiscal 2022, and the full-year forecast.
We are going to have some time for Q&A before we close at around 4:00 P.M. Japan time. Materials are available from our website. Questions, you can use the chat box or you can ask orally. When we reach the Q&A session, we will explain how to ask a question. Including the Q&A session, this meeting will be recorded, and it will be streamed later on and made available online. President Nagasawa, over to you.
Once again, thank you very much for your participation. This is the presentation meeting of the financial results for NYK Line's second quarter fiscal 2022. Thank you for your attendance today.
I would like to take this opportunity to express my deep gratitude for your support and cooperation to NYK Line. First of all, second quarter and the results overview, as well as the 2022 full-year forecast. I will talk a little bit about the new midterm plan or rather the progress against the current midterm plan. Then Mr. Soga will explain the details about the results of the second quarter. Please go to page three. Second quarter results are outlined here. Exchange rate last year in the second quarter compared to last year second quarter, about JPY 110-JPY 132. Largely, the yen got weaker, and that was the tailwind for our business.
When it comes to revenue and recurring profit and net income, the profits and the revenue increased. First of all, revenue, JPY 1,365.8 billion, about JPY 300 billion increase year-on-year. In the Bulk Shipping business, there was an increase in the Automotive Transportation and also the significant increase in the revenue by the Logistics. About JPY 300 billion increase year-on-year. When it comes to recurring profit, JPY 765.3 billion. Once again, increase by JPY 368 billion year-on-year.
This year, once again, Liner and Logistics business, which includes liner trade, ONE, Air Cargo transportation, and logistics, NYK, all these businesses have been brisk, and we were able to maintain high level of profitability. Out of JPY 368 billion, less than JPY 300 billion are because of this Liner and Logistics business. When it comes to Bulk Shipping business, Dry Bulk, in the area, we were able to acquire the transportation contracts which are favorable. We were able to flexibly respond to the changes in the transport demand in automotive transportation. We achieved about JPY 70 billion increase. As for the exchange rate impacts, the exchange rate impact I mentioned earlier.
As a result, net income was JPY 706 billion. Once again, this resulted in the increase of the net income by JPY 300 billion. The dividend, as I mentioned repeatedly, well, our policy is the consolidated dividend payout ratio of 25%. The interim dividend we announced, JPY 1,000 per share, but it was increased up to JPY 1,050 per share. That was the interim dividend. Well, the base date is the 30th of September, the record date. That is about the stock split, and this is the dividend to be paid before, based upon the number of shares before the stock split.
Please, jump to page nine. This is about the full- year performance. Continuously, at the time of the first quarter, when we announced the first quarter, this shows how this performs against what we announced in September. As for revenue, the JPY 2.7 trillion, the upward revision of JPY 200 billion. The recurring profit, JPY 1.11 trillion, up JPY 70 billion. Net income, JPY 1.03 trillion, up JPY 70 billion from the previous revision. JPY 112 to JPY 137 . That is the major change in exchange rate we applied, significant weakening of the yen. That was taken into consideration for this upward revision.
For the second half of the year last year, Liner and Logistics business, second half of the performance was JPY 515 billion. This year it is the JPY 891.8 billion. This year, JPY 630.6 billion yen. Whereas on the it was JPY 91.3 billion yen is another business. In terms of the recurring profit, despite of the weakening of the yen compared to last year, year-on-year, well, the profit is down in the second half. This is because of the slowing down and the lower level of freight rate.
Looking at these numbers, on the second half last year and this year, half year, that was the peak time of our performance. Since then, gradually, it is coming down. It is partly because of the normalization of the logistics and the transportation. But in terms of the revenue, it is on the decreasing trend, which I cannot decline. JPY 1,050 for the interim dividend, the before stock split, that was what we announced. For the year-end dividend, JPY 160 per share after stock split. Our basic policy of shareholder return is the payout ratio of 25%.
Based upon this percentage, JPY 145-JPY 160, we increased the year-end dividend up to JPY 160 per share. This is the overview of the financial results, but the details will be given by Takaya Soga, CFO. Before that, lastly, I'd like to mention about the new midterm plan. Page 18, please. We made the current midterm plan in year 2018. This year is the last year of the current midterm plan, as you see at the top of this page. When we started, our target back then was, because of the favorable market condition, we were able to achieve the actual accomplishment, which is far higher than the targets.
Based upon that, currently we are preparing and working on the preparation of the new midterm plan. To the shareholders, institutional investors, well, probably capital policy is what you are interested in. Once again, I'd like to reiterate on this point, capital policy. ESG management is what we would like to promote. From an investment point of view, of course, environmental investment plays an important role. In upcoming midterm plans, our viewpoint or the visibility is towards 2030, how much environmental investment will be needed? That's what we are looking at. Also to continue the business. For business continuity, what kind of capital is needed? As the equity, how much do we need to keep our net equity?
Based upon this, we are going to talk about and think about the DOE introduction, and the dividend payout ratio. We need to have a good discussion all these topics, so that we can invest and incorporate the good capital policy into our new midterm plan. Also our capital, how partially are we going to achieve the return to the shareholders. That's what we like to look into closely. Well, probably the new midterm plan will be announced probably March next year, and we'd like to make a good preparation for that. So much for my opening remarks and the summary, and then I will ask CFO Soga to give you further details. Soga-san, over to you.
Thank you very much.
This is Soga, CFO of the company. Thank you very much that you attended this meeting despite your very busy schedule. Today, based upon the materials at your hand, please refer to that, or we are going to show the slides on the screen as well. Based upon that, first of all, I will give you the overview of financial results for second quarter fiscal 2022, and then I will talk about the revision of the full-year forecast. Partly, well, the President Nagasawa already talked about these points and some of my explanation may be the repetition of what he mentioned, but please bear with me. This year is the last year of the midterm plan.
I would like to talk a little bit about the progress so far. Then after that, we'd like to have a time for Q&A. Now, please, refer to the material at hand or look at the screen. This is the overview of the second quarter fiscal 2022. This is on page six of the material. On the right-hand side, you see blue columns. In the first quarter, second quarter, and the first half cumulative, the revenue is JPY 1,365.8 billion. Operating profit, JPY 163.3 billion. Recurring profit, JPY 765.3 billion. And net income is JPY 706 billion. All these numbers are higher year-on-year at all these levels.
When it comes to revenue, the Bulk Shipping business, which includes Automotive Transportation, which increased, and also, we acquired the transportation contract for the Dry Bulk under the very favorable condition. Logistics Business, the freight rate improved. As a result, Bulk Shipping revenue was JPY 1,365.8 billion, up JPY 314.4 billion year-on-year. As for recurring profit, as I mentioned, Automotive Transportation, Dry Bulk, as well as the Liner and Logistics business, which consists of the container shipping, the air freight and Air Cargo, and the logistics business, the movement of the cargos slowed down.
However, we were able to maintain the high profit level, and the recurring profit was JPY 765.3 billion, up JPY 368 billion year-on-year. As was mentioned by President Nagasawa, there was an impact of a weaker yen that contributed. About JPY 66.7 billion of the positive effect of a weaker yen is included. Then, considering the extraordinary loss items as well as the corporate income tax, net income was up JPY 294.7 billion year-on-year, up to JPY 706 billion. All these numbers and explanations are written on page three. Now, let us move on to the breakdown of recurring profit by segment.
I'd like to give you further details. Please refer to page seven. First of all, Liner Trade. On the right-hand side, there is a blue column, and please take note of the lower part of the first half. The Liner Trade, the recurring profit was JPY 567 billion, up JPY 276.6 billion year-on-year. It is because of the container, the liner business of the container shipping of ONE, which is the equity method company. Mainly in Europe and the U.S., there was an inventory accumulation of consumer goods and inflation, and that resulted in slowing down of the transportation demand and the declining trend of the spot rate.
However, despite of that, ONE has been able to maintain high level of profitability and the good business results. Next, Air Cargo Transportation. Recurring profit, JPY 44 billion, which is up JPY 11 billion year-on-year. Once again, there was a zero-COVID lockdown in China, slowing down of the world economy, as well as, the weakening switchover from ocean freight to air freight. There was a weakening of such a trend, and that resulted in the slower cargo movement. However, at the same time, there was a brisk demand for the shipment of the semiconductors, and also business was supported by long-term contracts, so freight rate remained high as well. Next, Logistics Business. Recurring profit, JPY 37.1 billion, up JPY 8.7 billion year-on-year.
Within the forwarding division, air freight handling as well as the profit level of that segment decreased because of the slower business related to automotive transportation. As for the ocean freight, the volume declined year-on-year because of the slower cargo movement. However, we made efforts to expand the sales of ancillary services like customs clearance to maintain the profitability. In the contract logistics segment, there is the increase in the personnel cost as well as the utility expenses. However, mainly in North America, the general consumer goods movement was very active, and the segment remained strong. Next, Bulk Shipping. Recurring profit, JPY 119.4 billion, up JPY 71.7 billion year-on-year.
As for Automotive transportation, because of the shortage of the semiconductors and expansion of the pandemic, there is a concern over the Automotive production volume reduction. We try to optimize the vessel deployment and the shipping schedule, and we responded to customer needs flexibly. We made efforts to collect alternative cargos in order to increase the utilization of the vessels. We have been able to acquire the transportation volume, which was higher than last year. As for Dry Bulk business, the market boomed in the out-of-season in the first quarter. However, since the start of the second quarter, the global growth slowing down of the business became evident.
The capesize as well as the other vessel types, the market declined. However, we were able to obtain the transportation contract at very good timings under the favorable market condition in the past, and also we made the efforts for the cost reduction, so we were able to maintain the good results. As for energy business, the market, it remained stagnant around the July. However, there was a rebounding of the business in the VLCC. Because of the Russia/Ukraine situation, the shipping ports changed and that resulted in longer transportation distance. Also the VLCC demand became tighter. Also the LNG and the oil tanker businesses were supported by the longer the contract.
The energy business also remained robust and strong, including LNG and the offshore business. There was another on the portion of this table titled Others, and it is related to real estate, which experienced the reduction in both revenue and profit. It is because of the partial transfer of subsidiary shares. The real estate business size itself became smaller, and that is the reason. What I have just mentioned so far is written on page four and page five of the material. Please take a look at these pages later on. Next, let me move on to page eight of the material. This is the summary. The results of the second quarter fiscal 2022 are shown on the right-hand side in the graph.
Both revenue and profit increased year-on-year in all the key segments. On the left-hand side, you see analysis by factor. Out of the total increase in the profit of JPY 368 billion, JPY 66.7 billion is because of the exchange rate or the weaker yen. The summary is the summary of the results of second quarter 2022. Next, I would like to talk about the full-year forecast for full-year or fiscal year 2022. Please go to page 12. On the right-hand side, there is the part which is written in blue. This is for full- year basis.
As for full-year forecast, back in August, we announced the last revision, and it was also revised once again upward for revenue, operating profit, recurring profit and net income. All these numbers were revised upward. Full-year revenue increased by JPY 200 billion, up to JPY 2.7 trillion. Operating profit, JPY 270 billion, up JPY 20 billion from the previous forecast. Recurring profit, JPY 1.11 trillion, up JPY 70 billion from the previous forecast. Net income, JPY 1.03 trillion, up JPY 70 billion from the previous forecast. Looking at the second half, recurring profit increased by JPY 24.7 billion from the previous number of JPY 320 billion.
Now it is JPY 344 billion, and the net income increased from the previous forecast about JPY 290 billion by JPY 34 billion. Now it is JPY 324 billion. All these numbers were revised upward since August. Comparing these numbers with the figures of the first half, these numbers are about JPY 300 billion lower than the first half. It is due to the forecast of the container shipping business of ONE, largely. Back in May and August, already we included this in our forecast, meaning that the second half is lower than the first half. This is not a surprise.
For the second half, since in and after the third quarter of the business, there are many factors that are uncertain, including the policy rates by various governments and when the disruption of the supply chain will be alleviated, when and to what extent the container freight rate will be lower. These are the factors that are quite difficult to forecast. All these and the full-year forecast are not excessively conservative. This is the revision of the full-year forecast, taking all these factors into consideration. Please regard this as a very solid forecast.
Now, as for the exchange rate assumptions, back in August, the full-year rate, it was JPY 127.62 to the dollar, but we changed this to JPY 137.28 to the dollar. The bunker prices, we changed from $838.24 to $101.85 per metric ton. We changed these number a little bit. These are the changes of the assumption.
Next, I will explain the full-year forecast for each business segment in terms of recurring profit. Please refer to page 13. Please look at the full-year column figures in blue on the right. The lower part is recurring profit. First, in the liner trade segment, we forecast recurring profit of JPY 815 billion, an increase of JPY 80.8 billion from the previous forecast. In the container business, we expect the supply-demand balance to normalize as a result of the easing of port congestion and the decline in transportation demand due to global inflation and the buildup of inventories of consumer goods in the US. We expect the spot freight rate adjustment that began around August to continue in the second half.
Therefore, although we expect a decrease in profit in the second half compared to the first half, due to the first half performance supported by high freight rates and the foreign exchange impact of yen depreciation, we expect full-year results to exceed our previous forecast in August. In the Air Cargo business, we expect recurring profit of JPY 73 billion, down JPY 4 billion from the previous forecast. Due to the global economic slowdown, we expect the slowdown in air cargo movement to continue. Although freight rates are expected to soften compared to the first half of the fiscal year due to the easing of supply-demand balance for transportation space, we anticipate that the amount of profit decline will be somewhat contained by the supportive effects of multi-year contracts and other factors.
In the logistics segment, we forecast recurring profit of JPY 52 billion, up JPY 4 billion from the previous forecast. In the Ocean Freight forwarding business, we expect a decline in profit level due to the current downward trend in the market, but we expect to maintain a high profit level for the full-year due to the strong first half of the fiscal year. In the Air Freight business, profit level is expected to decline to a certain degree due to a slowdown in cargo movement. In the Contract Logistics business, despite the impact of further increases in labor costs and utility costs, we will work to stabilize earnings by revising contracts, including the price revisions and other measures that we have been pursuing, as well as through cost-cutting efforts.
Lastly, in the Bulk Shipping segment, we forecast a recurring profit of JPY 180 billion, an increase of JPY 26 billion from the previous forecast. In the Automotive Transportation business, the impact of production cutbacks in completed cars due to the shortage of semiconductors and parts is gradually dissipating, and we expect to maintain firm transport planning by capturing export demand for back orders from automakers, as well as transport demand for construction machinery and used cars. In the Dry Bulk carrier business, market conditions are expected to weaken in the second half for all sizes of vessels, but favorable market conditions in the first half, especially in the first quarter for small and mid-sized vessels, are expected to contribute to stronger full-year results.
In the energy business, we expect the VLCC market, which has recovered sharply from the previous fiscal year, and the VLGC market to continue to be strong. We also expect the LNG carrier and offshore business to continue to perform well, supported by stable medium and longer term contracts. Please refer to pages 9-11 of the presentation for further details of what I just said. Finally, I would like to explain the dividend forecast. Mr. Nagasawa explained about it. Please refer to page nine.
As you can see, in accordance with basic shareholders' return policy, which aims for a consolidated dividend payout ratio of 25%, we have increased our interim dividend by JPY 50 to JPY 1,050 per share, and year-end dividend by JPY 15 to JPY 160 per share, based on the results for the first half of FY 2022, and the upward revision of net income for the second half of the year. As you know, a 3-for-1 stock split was implemented with September 30th as the record date and October 1st as the effective date. On a pre-split basis, the year-end dividend to be JPY 480 per share, or JPY 1,530 per share for the full-year.
This is an overview of the financial results for the second quarter of fiscal year 2022, and the revision of the full-year earnings forecast. Next, as the last item on my agenda, I would like to briefly explain the progress of the current Medium-Term Management Plan, which is now in its final year. Please refer to page 16 of the document. The goal of the current Medium-Term Management Plan is to strengthen resistance to volatility, business growth, and improved profitability. We have established the following three pillars as the necessary actions to achieve this goal. First, number one, establishment of a business portfolio with high resistance to market conditions through a fundamental review of the Dry Bulk business and the success of the integrated container ship business company. Number two, establishment of a stable profit structure by building up businesses with stable freight rates.
Number three, improvement of efficiency and creation of new value through digitalization and green initiatives. We have been engaged in specific actions. The progress on the above one and two is briefly shown on page 16. In terms of building up stable freight rate business, as shown in the bottom left chart, the logistics business has steadily expanded and strengthened since 2020. The logistics is shown in light blue since 2020. It's expanding very steadily. The automobile transportation business has steadily secured transportation volume through flexibility and ingenuity, even in the situation of reduced production of finished cars due to the expansion of the pandemic and chip shortage. The energy business has steadily built up its LNG carriers business, a priority investment area. On the top part, it says energy.
When we developed the current midterm plan, we had 71 LNG carriers, or that is end of the year 2017, and as of the end of 2020, 86 LNG carriers. Including all the data contracts, 111 vessels. As shown in the bottom right chart, in businesses other than stable freight rate business, we have improved the profitability of dry bulk business through structural reforms, such as early return of vessels with high charter rates, and have reduced the impact of market fluctuations through more stringent exposure management. ONE, our integrated container shipping company, has emerged from its initial struggles and is now a highly successful company. NCA, our airline business, which had been suffering from losses for many years, has also become a significant contributor to consolidated earnings.
Of course, we cannot deny that the change in logistics structure due to the spread of COVID is a major factor. However, I'm proud to say that this is the result of the wisdom and ingenuity of each of our business decisions to ride the wave of change and do what needs to be done with a sense of mission to never stop logistics for the sake of the lives and happiness of people around the world. As for the third pillar, page 17 shows an example of how we are steadily advancing our efforts to achieve net zero emissions by 2050, promoting ESG management.
In the field of fuel conversion for ships, we are working on the implementation and commercialization of ammonia fuel, which is considered a promising next-generation zero-emission fuel, as well as various offshore projects related to offshore wind power, which is considered promising as alternative energy source in Japan. We newly opened Akita branch to support such projects through smooth cooperation with the local community, making steady progress in tangible ways. Finally, please refer to page 18 for the quantitative targets and progress of the current Medium-Term Management Plan. We have already achieved the targets for each of the financial indicators in FY 2021. Based on the above, we are currently preparing a new Medium-Term Management Plan, as Mr. Nagasawa explained. This plan will start in the next fiscal year.
This plan is based on a roadmap from an ultra-long-term perspective, looking ahead to 2050, and will cover the period up to 2030. The most important parts of this plan are how we will pursue capital policies based on the financial structure that has improved significantly over the past few years, how we will systematically further advance our decarbonization efforts in terms of environmental responsiveness, and how we will develop human resource strategies to promote ESG management in the future. Of course, this is not all, but we would like to present to you a new medium-term business plan that incorporates all of these things. The announcement is scheduled for around March of next year. That concludes my presentation. Thank you.
Now, we'd like to open the floor for Q&A session.
Thank you very much. Liner and Logistics business, I have three questions there.
Container shipping, first of all, GRI and long-term contract. These are what I'd like to ask you. Currently. Well, in the first quarter, whether it is possible to increase the rate and the freight rate on the long-term contract. Are there any customers who are moving away from the long-term contract and they try to choose a spot transaction? The next is about the dividend from ONE. Will the JPY 31 billion be received on the 15th of November, and that is from the equity income in the second half. Do you have a clear policy regarding ONE and ESG? ONE, rather. Also, the air cargo. Will the
How many, the contracts are for the multiple years? Are there any risk for the early termination of the contract? These are the three questions I'd like to ask you. Thank you very much.
Thank you for the questions. For these three questions, Mr. Harada, in charge of the business, please respond to those questions.
Thank you for the questions. The three questions are related to L&L, so one by one I'd like to respond. First question, GRI related to container shipping and the whether it is possible to raise the freight rate under the current condition, how about its impact and the on the current status? Are there any switchover from a spot on the rating to long-term contract? GRI, first of all, you mentioned. The spot price may go up, and the spot rate restoration is what you mean by that.
It is written in the industry magazine, but on some of the route and services, it is starting to some extent in South America, for example. It is reversing to the previous conditions, so it is not unstable. Also service on the route to Middle East. The rate restoration there is emerging to some extent, but the Trans-Pacific is the biggest area, particularly the West Coast of the U.S. is the major market. We expected some movement in November, however, demand, supply-demand condition is not the tailwind for that. There isn't much demand and so because of that, well, in November, rate restoration is going to happen or not, I have a question mark about that.
When we only look at the supply aspect, three major alliances and as well as the single service providers, including them, structural VMS, we call them structural VMS, but they are ten loops. They are stopped after the national holiday. Of course it depends upon the demand situation. The spot rate may increase from time to time, so that is what the ONE is thinking about. Whether there is a switchover back to the long-term contract, early August we announced make some announcement.
The numbers of the ONE was not announced, but based upon the information from ONE, three shareholders, the position regarding its impact on the long-term contract, I think its impact is limited. If the price differential becomes larger and if the time it gets longer in time, then customers may start talking about it. The ONE, the revision and review of the business, I believe that it's already incorporated into their view. In other words, right at this moment in front of us, well, it is a limited trend to switch from spot to the contract-based rate.
If the spot rate comes down significantly and it takes a longer time, then it may have a certain impact on the contract, and that has already been taken into consideration in our projection. Second question is about the dividend from ONE, about JPY 310 billion to be paid on the fifteenth of November. How about the future policy or how you regard the dividend from ONE? The ONE achieved record profit in the previous six months period, so it was agreed upon to pay this much amount of dividend. However, there is a consensus between ONE and the certain shareholders.
On the long-term perspective and what shall be the long-term capital policy for ONE, well, it is difficult to forecast the market in the 2023 demand as well as the supply, the availability of the vessels. We have to pay close attention to that and continue discussing. Right now, dividend level by ONE, there is nothing that has been determined from a long-term perspective. Lastly, Air Cargo was another question. Are there any multiple year contracts and the or is the current status? The specific numbers, sorry, we are not able to give you specific numbers. NCA, main market of NCA is between Japan to North America, so that is the major market for the company.
Looking at that service, there are certain contracts that go beyond one year. The space from Japan to North America, and to some extent about 20-25% of that, are covered mostly by a contract more than one year. There are several contracts that go beyond one year. The total space has been sold- off and taken up. That is a portion that is not subjected to the fluctuation in the market. Did I answer your questions?
Yes, it was clear. Thank you very much.
Next question, please.
I have the questions. The container spot rate related questions. First, the previous person, they just asked similar question. For the next quarter, the demand supply, they will be better balanced. I read about it in the industry newspaper. What is the reason, and what will be the timing, the timing of demand and the supply, to be well-balanced? That's my first question. The second question, based on the spot rates, where will come the breakeven point? It is less than $2,000 in the West Coast and on the East Coast of America. It seems that the slowdown is accelerated. The charter cost and the labor cost are on the rise. Breakeven point, where are you positioning the breakeven point? Thank you.
Harada-san is going to answer those questions.
Thank you for the questions. Two questions. First one is that ONE, the CEO, Jeremy, said that in the next quarter, the demand and the supply will be at a better balanced. What is the background of that comment? On that point, I'm sorry, I have not talked about it with Jeremy on the specific terms. As I mentioned earlier, especially for the North America structure of VMS, in other words, there are about 10 loops gone from the market for various reasons. For one thing, the spot-focused companies, the current spot rates, of course it depends on the size of vessels. They are using spot rates without long-term contract, so the situation is becoming very difficult for those players.
Of course, chartered vessels, their own vessels, situations could be different. Calculation will be different. When the supply gets tighter and for the demand side, North America, there's labor union, the negotiation, and Christmas is coming up. The stock has been built up and the impact is now being felt. In North America, to what extent the American consumers will purchase things. Once those stocked portion is consumed, there will be new demands. Based on that, the balance there will be better, especially for North American route. As to the breakeven point, the second question, that's difficult to answer that question. There's one thing that I can say, namely, the very limited spot-focused players that probably they're paying very high chartered fees.
Setting aside those players, the three major alliances members with the current spot rate, the profit will increase when the space is occupied, that is the assumption. It's not that the spot rate will reduce the profit level, but it's difficult to say whether they have completed their calculations completely. The current spot rate will not bring the business to breakeven. That argument could be valid. The longer term contract players, at least for them, I think we can say that. Thank you. As to supply side thinking, right after the COVID emerged, there were the cargo movements, they were deeply affected.
Currently, spot rates are coming down, but there will be some profit, probably 4%, the level of the decrease in the flights. I mean, the vessels or the shipping trades. Currently, the gap is so huge between the American spot rate and the contract rate. When the freight goes down further, that will worsen the overall results. That argument is completely valid, so rather than the occupying, refilling the next space, you might want to stop the buying the space. Thank you. Thank you for the questions.
Thank you very much.
First question is about the air transport and the logistics, Air Cargo and logistics. Air Cargo, the spot rate came down in October.
The plan that you can generate this much profit.
Despite of the reduction of the spot rate and also compared to the first half, well, you mentioned that the second quarter the business may decline in the Air Cargo and the logistics, but that was not the case. Could you please clarify? The second point, well, how about the financial discipline that you'd like to maintain in the midterm plan and excess capital? What is your idea about excess capital? Once the policy is established, please let us know. Are you conducting a good discussion for that point? I would like to hear your view on that point. Third question is also related to next midterm management plan.
To use some more leverages. The profit. They have to create their own business. That is one important point. As a target or as a result of the investment, by when, how much the profit can be generated. You can set such target. Do you have a strong intention to clarify that and also make such plan for the future?
Thank you very much for your questions.
First of all, the first question was about the Air Cargo and logistics. Mr. Harada, please respond to that. Second question, third question are related to midterm plan. Mr. Soga, and also I will respond. Mr. Harada, please.
Thank you for the question.
First question was about Air Cargo and Forwarding- related business. First of all, Air Cargo spot rate is coming down and is it fully reflected in the projection of the business that we announced at this time? Yes. Most recently, particularly Shanghai, Hong Kong, for North America, the spot rate decreased. You're right in mentioning that. At the last minute, we already incorporated that into our plan. So, the spot rate reduction is already included in our forecast as well as the plan for this year. Forwarding related point and the logistics, this is about Yusen Logistics. The numbers may be too conservative, so that's probably what you're referring to. Contract logistics is very stable, so setting that aside.
For the AFF and OFF, one concern is that the volume of the cargo is not coming up and it is not increasing so much. The growth, it is not that the gross margin will go down, but the volume of the cargo is not sufficient. Certain space has to be returned, and that is what is happening in forwarding. We already included that in our view. As for OFF, in forwarding, there is some time difference always. The contract with the customers and the utilization is very high, but the company was not able to secure the space. If we buy the space from the ship owner, well, it will affect the profit.
It will not continue. Once the contract expires, then the contract rate in the next time around will go down. This because of the time differential. It was also taken into consideration, but we were somewhat conservative in this point. There may be some upside. That's how I view it. That's my response to your question.
Then second question about the midterm plan, the adequate capital policy. What is the idea about? Mr. Soga, please.
Thank you very much for your question. First point, the financial discipline, and the second point, excessive capital. Relationship between these two are very close. They are inseparable from our viewpoint. First of all, the financial discipline. Well, we have so much the net worth and the equity.
It is not that we can invest in anything. How to introduce the discipline and how, of course, we are discussing on this point. One major point is that so far, within NYK, TIR or AIR, so these are what we focused upon so far when we decide upon and evaluate the investment. However, that's not sufficient. Also, how much return shall be generated and how in each project the return is earned and generated by each project. We need to keep track of each project every year, and IRR is not sufficient to do so. To monitor these factors, ROIC and other indicators are available. Which indicators are the best for us, which allows us to take the immediate action. That is the viewpoint.
We are studying various alternatives. Also, net worth or the shareholders' equity is coming up so much. That means the WACC is very high, WACC. If investment is done based upon WACC, it is quite difficult to make the adequate decision. We may miss the opportunity. If that is the case, then the action to lower the WACC may be needed. In other words, right now, the equity ratio has come up to very high level. DER is very low. What is the adequate level for them in order to rectify the positioning of the or the level of WACC? That's part of the discussion as well.
The amount of the net worth and the shareholders' equity and how to optimize that. To raise the DER, maybe we should use more leverage. What shall we do to raise the lever or the leverage as we consider the investment. That is also related to the financial discipline as well as the excessive capital actions. These are what we are focusing upon now. The financial discipline, the capital policy, as well as the excessive capital that has been built up. What is the most adequate action? That's what we are focusing upon and studying right now.
As for your third point, the purpose and the target of the investment, naturally, well, we need to raise our profitability. That is a part of the target. When it comes to the investment target, well, where to put the new criteria, new indicator to make that decision, that's what we have to understand. ESG, the environment-related investment particularly, it is not that we can see the results immediately. After many years, we may be able to see the actual results and return of that investment when it comes to ESG investment. Internal carbon pricing, of course, we have that. Also we have to think about the other factors as well related to environmental investment, and we don't have any clear answer to that question.
It is now within the agenda for our discussion. Additionally, well, we didn't have a sufficient capital level, so there were certain investments that were outside of the balance sheet, off balance sheet. To raise the ratio of our own vessels, for example, these are the specific actions that our business units have already started on the studying. These are the answers to your three questions.
I would like to make some additional comments. The adequate level of capital, and that is also the relevant to the shareholder return. There are many factors to be considered, as Mr. Soga mentioned.
When we make new investment for the environment or the offshore wind, there are such new investment opportunities as well. At the same time, as we lost our financial health in the past, there were certain things that we were not able to do. For example, the deterioration of the lineup of the vessels. We also have to look at that as we consider investment policy. Profitability is important. Looking towards 2030, of course there may be some aberrations or the tolerance to be considered, but how much cash we can generate, how much profit we can achieve by 2030, we have to make simulation. What is the adequate level of capital with 2030 in mind? That's what we'd like to consider.
That's how we would like to approach to this question. What concerns me, as Mr. Soga mentioned, right now is environmental investment. As was indicated on the slide, the ammonia-based ships or the LNG-based vessels, the return from customers is difficult to expect. Justification of the investment projects, how to justify those investment, and we have to clearly indicate that to the investors. Otherwise, our decision will not be accepted, and the investment shall generate return sufficiently. We have to introduce ways to show the roadmap. For example, the internal carbon pricing may be utilized for the explanation. The CO2 is going to be a cost in the future. Then that means the collection of the investment because of that.
It may take time to reach to that stage. We have accountability, responsibility to explain clearly, so we have to be ready to do that. That is all for my response. Thank you very much.
Next question, please. This is going to be the last question.
I have three questions. First, container shipping business. The current spot, the rate, that will bring some profit, I understand. But when the demand goes down further going forward, because you can reduce the number of the routes of trades, and by doing so, either you can cope with that or there will be some services, which will go into the red. My second question is air freight, NCA and Yusen logistics. I think, the focus of your company between the two is somewhat different. Is there any other difference in the way of thinking about NCA and Yusen Logistics?
As to Dry Bulk, for the second quarter, you said that, yeah, you acquired some contracts at a good timing. How long do you think that the tailwind will continue? Thank you for those questions. I'll let the staff here answer your questions.
Thank you for the questions. About the other container at the spot freight rate level, when the rate goes down, any services which will go into the red. Well, by route, it's not that we are seeing any services which are in the red. Or going forward compared to when the COVID started or compared to 10 years ago, depending on route, it could happen that there are some services which will go into the red.
The question is, how long will that last? Watching that closely, we'll make decisions. It will be meaningless to just transport air, nothing. In other words, that would be meaningless. Of course, there are regulators among different countries. The shipping companies and the specific alliance, specific decisions are made amongst the other alliances, so we need to be prudent. We do not assume that we can continue the services in the red for a prolonged time period. It could happen temporarily, though. As to air freight, in our case, this is about NCA, asset-type business, and Yusen Logistics, forwarding business. Maybe there are some differences between the two, but the big difference between the two is that, as follows.
They are dealing with different sectors, industries as customers. The shipping volume of these different industries could be very different. They are formulating their numbers and assumptions, talking with their customers, especially for the other semi, the chip-related, the business. NCA is engaged in the semiconductor, but not so much for NYK. They might have different perspective for demands. In the case of NYK, cross-trade included, they are engaged in the wider scope, and NCA is mainly Asia-America routes. I said the business and the forwarding business, that the perspectives for demand could be different. Thank you.
As to Dry Bulk, as we showed in the presentation in the second half, for the Bulk Shipping as a whole, JPY 120 billion in the first half and JPY 60 billion in the second half. It is getting very tough for Dry Bulk. Index, there's 120 or so for the second half. Especially for the capesize, the second half will be tough. In 2020, we executed structural reform. The costly vessels are now gone, and index-linked and other market-resistant vessels are more in use. In the current market conditions, there is some level of resistance. In the first half, it was robust, but in the second half, we cannot deny that we might struggle to some extent. Thank you.
We have passed the scheduled time. I'm sorry about that. With that, we would like to conclude the announcement of results for the second quarter of fiscal 2022. Thank you.