Thank you very much for waiting. We will now start the presentation of Nippon Yusen Kabushiki Kaisha, or NYK Line's financial results for the fiscal year ending March 31, 2022. Let me begin by introducing today's speakers. Mr. Nagasawa, President, Representative Director, and Chief Executive Officer. I am Nagasawa. Next, Mr. Harada, Representative Director and Senior Managing Executive Officer. I am Harada. Lastly, Mr. Soga, Senior Managing Executive Officer and CFO. I am Soga. Today, President Nagasawa will explain our full year financial results for the fiscal year ending March 31, 2022. This will be followed by a Q&A session, which is scheduled to end at around 4:00 P.M. We have posted today's presentation materials on our website. Would appreciate if you could refer to the presentation materials. Now, we would like to start the presentation. Mr. Nagasawa, please.
Yes. Again, hello, everyone.
I am Nagasawa, President of NYK Line. First of all, I would like to express my appreciation for your constant support of our NYK Group's businesses. I will now explain the financial results for the fiscal year 2021, ending March 31, 2022. I will explain in about 20 minutes, including the forecast for the next fiscal year, and then I would like to take your questions. This is the overview of the financial results for the fiscal year ending March 31, 2022, FY 2021. The revenue increased by JPY 670 billion to reach a total of nearly JPY 2.3 trillion. This is due to the increase in dry bulk and recovery in car transportation volume, as well as the increase in revenues from logistics business and NCA. Increase in revenue from these areas all contributed.
In our group, there are some areas where sales are hidden, such as ONE and other businesses we have as equity affiliates, especially LNG or in offshore businesses. For example, ONE's sales for FY 2021 was $30 billion, of which we have 38% stake. If we take that portion of sales into account, our revenue will increase by about JPY 1.4 trillion. When the revenue of other affiliates under the equity method are taken into account, we estimate that the total revenue of our group as a whole was just under JPY 4 trillion in FY 2021. As a result, the recurring profit amounted to approximately JPY 1,003.1 billion, which is an outstanding profit. This is an increase of approximately JPY 800 billion year-on-year compared to FY 2020.
As you all know, this was driven by the liner and logistics business, including liner trade business, air cargo transportation business, and the logistics business, contributing to an increase in profit of about JPY 670 billion. In addition to all of that, the dry bulk market recovered. There is also an impact of structural reform. Further, thanks to the recovery of car transportation volume, the bulk shipping business increased its profit by JPY 120 billion, resulting in a total profit increase of approximately JPY 800 billion. Net income from the period also exceeded JPY 1 trillion, directly reflecting the strong performance of recurring profit.
With regards to the dividend, we had a number of internal discussions during the term, and as a result, based on our basic policy of targeting a consolidated dividend payout ratio of 25%, we have decided to increase the year-end dividend by 250 JPY from 1,000 JPY to 1,250 JPY. Adding the interim dividend of 200 JPY, we would like to propose a dividend of 1,450 JPY per share for the full year to the general meeting of shareholders. These are the results by segment. As I have already explained repeatedly, with the liner trade business, we regret that we have caused a lot of inconveniences and concern to some of our customers. Amidst such circumstances, the demand for transportation was strong.
On the supply side, however, disruptions at ports and inland transportation remained unresolved, and the supply and demand environment remained extremely tight. As a result, freight rates remained high during the year. In the air cargo transportation business, there were some confusions around the end of the fiscal year due to the lockdown in Shanghai and the situation in Russia and Ukraine. In general, I think we can say that the business has been favorable. The tightness of spaces in container shipping has resulted in a shift of ocean freight to air freight, which is something that would not normally happen. In the logistics business, our ocean and air freight forwarding businesses basically performed well, reflecting the extremely strong performance of the carriers.
In addition, the contract logistics business, which had been in a very difficult business environment, has also returned to profitability as a result of the review of logistics by the users that led to the review of contracts and cost reduction. As a result, the logistics business profit increased by JPY 30 billion. As for the bulk shipping business, regarding the car carriers, the number of cars transported in FY2020 was 3.56 million, and in FY2021, the number recovered to 4.15 million, resulting in an increase in profit. The dry bulk business division benefited from the impact of structural reform and the market recovery. In terms of BDI, the Baltic Dry Index, during FY2020, the index was 1,341. However, in FY2021, there was a significant improvement, and it surged to 3,005.
We have achieved a significant increase in profit, including the effect of structural reform. In the energy business division, the VLCC market was in a historic slump. However, based on the medium to long-term plan of the LNG carriers and offshore business, we achieved stable performance, resulting in a profit of JPY 140 billion for the bulk shipping business as a whole. This is a very large increase at JPY 120 billion increase compared to FY2020. This is the quarterly PNL results for FY2021. I will not go into the details since it is the same as what I have just explained. Next, this is the comparison by segment.
As you can see, in FY2021, of the total of JPY 1,003.1 billion, the liner and logistics business accounted for JPY 867 billion, and the bulk shipping business accounted for JPY 139.1 billion. Almost 90% was from liner and logistics business. Within that, the liner trade business, mainly ONE, generated JPY 734.2 billion, meaning that approximately 70% of the JPY 1 trillion profit was from this segment. This is the remarkable part of this year's financial results. This waterfall chart shows what I have just mentioned, so I will skip this slide. I would now like to talk about our forecast for the current fiscal year ending March 31, 2023, or FY2022. First of all, the revenues are largely unchanged at JPY 2.3 trillion.
In the liner and logistics business, we expect a slight decline in revenues due to some slowdown. In the bulk shipping business, we expect an increase in revenues of approximately JPY 100 billion due to the recovery in the number of automobiles transported by car carriers and the depreciation of the yen. In total, we expect revenues to be about the same level as in FY2021. As for recurring profit in the liner and logistics business, we expect the market to soften slightly due to the normalization in the post-COVID period, and to a certain extent, the supply and demand will be balanced. We are forecasting a decrease in profit of about JPY 220 billion for the whole liner and logistics business. As for bulk shipping business, we lowered the assumption for dry bulk market compared to the last fiscal year's results.
We are forecasting the profit to decline by about JPY 25 billion. The financial results for FY2021 were in some ways extraordinary. Despite we are forecasting a JPY 240 billion decline in profit, we expect strong results to continue in FY2022. As for the net income for the period, in line with the decrease in recurring profit, we expect a decrease of just under JPY 300 billion. As for the dividend, we plan to pay dividends according to our target consolidated dividend payout ratio of 25% in line with the level of profit. We are forecasting an interim dividend of JPY 650, a year-end dividend of JPY 400, and a full-year dividend of JPY 1,050.
As for the forecast by segment, I'm sure there will be questions later, but let me begin with the liner business, and there are two to three points that I would like to highlight. The first, as you can see here, is the lockdown in China and the impact of the situation in Russia and Ukraine. Another factor, although it is not written here, is the tapering in the United States to reverse the quantitative easing policy, which may cause a slight negative impact on liftings and freight rates. A factor that could potentially cause disruption would be the labor negotiations in the West Coast of North America, and we need to keep a close eye on the future developments.
On the other hand, last year, due to the renewal of long-term contracts, the one-year contracts, against the backdrop of rising short-term rates, we have been able to raise our freight rates quite significantly. To comment on how things unfold in the end, at this point, we believe the weakening factors will outweigh the positive elements. Therefore, we project that recurring profit of this segment will decrease by JPY 180 billion to JPY 550 billion. With respect to air cargo transportation business, as you can see in the second bullet point here, long-term contracts that had not existed before, such as one-year, two-year, or three-year contracts, have become available.
Because of the confusion in logistics that we have seen during the last 2 years, in addition to the freight level, there has been a strong demand on the part of customers to secure cargo space, which is reflected in the performance of this business. Because of the impact of the emergence of long-term contracts for air cargo, although we will not be able to avoid a slight decrease overall, we believe we can still secure a considerably large number for the air cargo recurring profit, which is estimated to be JPY 62 billion, taking into consideration the underpinning effect of the long-term contracts. Logistics business is projected to weaken slightly. The handling volume for both ocean and air freight is expected to remain flat or increase slightly over the previous year. However, the profit margin is projected to decline slightly.
For contract logistics business, in light of the increase in personnel costs and other factors, the outlook is tougher this year compared to last year, and recurring profit of this segment is estimated to be JPY 38 billion. For bulk shipping business, recurring profit is expected to decline by JPY 25 billion to JPY 114 billion. With respect to car carriers, while there are concerns about the impact from the shortage of semiconductor supply, at this point, compared to actual transfer volume of 4.15 billion units for the last fiscal year, we believe we can expect an increase to approximately 4.36 billion units this year. Accordingly, we set a relatively strong forecast for car carrier this year.
For energy business division, while the market recovery for VLCC will likely take some time, we expect to see solid performance underpinned by LNG carrier and offshore businesses via mid to long-term contracts. Why are we projecting a large year-on-year profit decrease of JPY 25 billion in bulk shipping business? This is because of the market assumption we employed for dry bulk. On a BDI basis, compared to 3,000 for last year, we lowered the number to 2,000 this year. In terms of the amount per day, from Capesize all the way to Handysize, we expect a decline in each category of $10,000 per day. Therefore, the decline in dry bulk business division is expected to negatively impact the overall bulk shipping business.
However, when we look at the FFA, they are trending at higher levels compared to our projections, so we will not rule out the possibility of dry bulk performance coming in higher than the forecast. This slide provides a summary. What I just explained are expressed here in numbers. Revenue is estimated to be JPY 2.3 trillion, operating profit JPY 187 billion, recurring profit JPY 760 billion, and net income attributable to owners of the parent company, JPY 720 billion. As I said earlier, for fiscal year 2022, i.e., the year ending March 2023, we once again developed a very favorable forecast. As for the exchange rate, last year, the average rate was 112 yen to the dollar.
This year, however, in view of the prevailing circumstances, we adopted an average rate of 120 yen to the dollar. Moving on to the forecast by segment. Again, what I just mentioned is translated into numbers here. While the overall performance is expected to weaken just slightly, the liner, air cargo, and logistics businesses will continue to be the driver of our financial results. These three businesses combined are projected to deliver JPY 650 billion in recurring profit. Bulk shipping business is expected to soften slightly, but still projected to deliver a favorable recurring profit level of over JPY 100 billion. There's one point that I want to highlight here.
I'm sure there will be a question about this later, but in the liner trade business, the recurring profit forecast for the first half is JPY 350 billion, and the number for the second half is JPY 200 billion. From the second half, particularly from the fourth quarter onwards, we believe the market environment will become significantly tougher. That is the reason why we are projecting this large gap between the first and second half of the year. From here, I will talk about the medium-term management plan. This year marks the last year of the medium-term management plan, which we developed in 2018. In the far left columns, you can find the targets for fiscal year 2022. As you can see, in fiscal year 2020, 2021, and 2022, i.e.
The last three years of the medium-term plan, we have been able to deliver results by far exceeding our initial targets set forth in the plan. For more details, such as performance of the stable freight rate business and other business, please see the figures in the bottom part of this slide. As I mentioned repeatedly, this year is the last year of the medium-term management plan. Therefore, we will start developing our new medium-term management plan going forward. I will not go into the details pertaining to our approach for the development of the new medium-term management plan, but we basically keep these points in mind as we draft our plan over the coming one-year period. This new medium-term management plan will carry great significance.
As you can see here, based on the roadmap developed with an ultra long-term perspective, with an eye on the NYK Group ESG Story 2022 that envisages the year 2050, we plan to develop concrete strategies and action plans for each business, including new businesses. Specifically, BS Management as well as specific capital policy, a concrete policy including shareholder returns, are planned to be presented. In addition, plans to reduce greenhouse gas will also be included. As we are making investments in new fuels and other initiatives, we plan to present the concrete steps to reduce greenhouse gas, including their projected effects. We will also unveil our strategy for human resources, an indispensable piece for the execution of business strategies in our new medium-term management plan.
The content of the NYK Group ESG Story 2022 has already been shared and explained in other sessions, so allow me to skip this slide. The next page is our vision, our path toward 2050. From where we are today, 2022, in the period up to 2030, the concrete plans and actions that we will implement will be shown to a certain extent in the new medium-term management plan. That's all from myself. In the last page, the progress of our financial performance is provided.
As I alluded to earlier, as a result of the performance of fiscal years 2020 and 2021, and in view of this year's forecast, our shareholders' equity is expected to reach over JPY 2.1 trillion at the end of this fiscal year, from around JPY 460 billion in fiscal year 2019. Accordingly, the shareholders' equity ratio will increase from previously 24% to 63% as at the end of this fiscal year. DER is also projected to come down from previously 2.27 to 0.33. Our financial position will become extremely robust, as you can see from these numbers. We need to present our capital policy as we improve our financial foundation in this way. We consider the formulation of capital policy a very important challenge for us to address.
This concludes my presentation, and I am pleased to entertain your questions from now. Now we would like to begin the Q&A session. Let me read out the question given in the chat box.
This is a question regarding the dividends for this fiscal year. What is the rationale behind setting a higher dividend level for the interim dividend over the year-end dividend? Thank you for the question. As I mentioned during my explanation, in the current medium-term management plan period, meaning up to this fiscal year, we set a target for consolidated dividend payout ratio of around 25%. In our results forecast that we presented this time around, we project to achieve a higher performance in the first half compared to the second half for the current fiscal year.
That is why the dividend commensurate with the 25% payout ratio is planned to be paid in these amounts. Thank you for the question. That was the answer for the question regarding dividends.
We will move on to the next part. The first is about shareholder return in the previous fiscal year. Share buybacks were also considered originally, but it was changed to dividends only. I would like to know the background of the change, including what kind of discussions took place, if you don't mind me asking. This is the first point. The second point is regarding the long-term contracts for container shipping you have mentioned. I previously heard that the ratio of long-term contracts in North America routes was 65%, and Europe was 50%. I would like to ask if there is any change in this or if there is an increase. Regarding the level of fares, I would like to get an idea of the percentage of long-term contracts in which the fares were raised.
Also, the third point, regarding the profit plan for the logistics business, you mentioned that you are expecting a decline in margin. I see that from the fourth quarter, the recurring profit margin started to decline. I believe that would be the case. I would appreciate if you can explain the background of this, and whether it means that it is becoming more difficult to pass on the purchase cost. Thank you very much. There were three questions. One is about the background and thinking behind the shareholder return policy of the previous fiscal year. Another is about long-term contracts or freight levels for container ships. The third is about the background of the decrease in profit in the logistics business this fiscal year. I would like to answer the first question myself and ask Senior Managing Executive Officer, Mr. Harada, to answer the second and third.
First of all, as you pointed out, in the previous fiscal year, during the process of closing the books or in the course of executing the business operations, we recognized that we can expect an extremely high financial results. We had several discussions at management meetings on the executive side and at board of directors meetings about how to return profit to shareholders. We discussed whether it is appropriate or not to discuss shareholder return in isolation while we have not been able to present a clear capital policy as a whole, and how to maintain consistency with the 25% consolidated dividend payout ratio that we have already presented in the medium-term management plan. In the discussion, we concluded that during the period of the medium-term management plan, the 25% consolidated dividend payout ratio indicated in the plan shall be used as the guideline.
Now let me hand over to Mr. Harada to talk about containers and logistics.
Thank you for your question. I will now answer your second and third points. First of all, you asked whether there has been any change in the long-term contract ratios for container shipping, 65% for Transpacific, North America, and 50% for Asia/Europe. These are almost the same. There is a slight increase from this 65% and 50%, but the big picture remains the same in terms of the percentage of long-term contracts. As for freight rates, as reported in today's trade paper, there is a freight rate increase of 2-3 times in SC in North America for May. The results of ONE's contracts show a similar level of freight rate increase about 2.5 times per 40 feet, driven by the high and stable spot rate.
In Europe, most contracts start in January or April. In addition, the annual contract value in Europe was low. In terms of the rate of increase, the annual contracts have risen more in Europe than in North America. The third question is about the forecast for the logistics business for FY 2022 on factors such as margin decline in the fourth quarter, profit margin decline as a percentage of sales, leading to a rather stricter view and conservative forecast. Let me explain the current situation of international freight forwarder business such as AFF and OFF. First of all, as for OFF, especially we can observe in companies like Maersk, there is a movement to directly deal with genuine shippers instead of using forwarders. Therefore, in some areas, it is not easy to secure spaces.
Due to these reasons, the cost of procurement sometimes turned out to be at levels which are difficult to be passed on to selling prices. Please note that these numbers do incorporate these factors. The situation is similar for AFF. As President Nagasawa explained earlier, AFF is gradually shifting from short-term consolidation contracts to block space agreements of one to three years, the medium to long-term contracts. In this context, it has become more difficult to secure spaces at a competitive fare level. The budget figures take these factors into consideration. This concludes my explanation.
I will read out the questions that we have received in chat. This is about container shipping and air cargo. Could you please elaborate a little more on your assumptions for spot market with respect to the container shipping business?
I believe the reason for this question is to ask what is the assumption of level of the market in the fourth quarter of this fiscal year compared to the past? This is the first point. The second point is about long-term contracts for air cargo and container shipping. We understand that some European container routes can be canceled before expiration. Do the multi-year contracts signed this time have a clause in the contract that allows for early cancellation? That was the question.
Thank you very much. Now, Senior Managing Executive Officer, Mr. Harada, will answer these two questions.
Let me answer the questions on the assumptions on the container shipping spot market and the long-term contracts for air cargo and container shipping. First of all, regarding the spot market, as I briefly mentioned earlier, the spot market has been staying at a high level.
There are various factors affecting gradually, such as normalization from the impact of COVID-19, or the impact of the lockdown in Shanghai to materialize, or the demand trend itself, and other various factors such as inflation and tapering likely to settle down gradually. We are looking at spot freight rates while monitoring these factors, as well as supply and demand. We believe that spot freight rates, which are currently at a high level, will gradually soften. In the first half of the current fiscal year, we expect it to be maintained to some extent, but from the second half of the year, the rates will gradually soften or normalize, would be the correct description. Due to these factors, initially, only the spot freight rates will be affected, but somewhere down the road, depending on how spot freight rates fall, long-term contracts will also be affected.
That is how it works in the container shipping business. This will begin in the fall, specifically around November to December, and as a result, fourth quarter fares will be revised from January onward, as well as long-term contracts, including European contracts that begin in January. That is our view reflected in the current numbers. As President Nagasawa mentioned earlier on the comparative results of the first and second half results of the liner trade business, we do expect further normalization, mainly in the fourth quarter as a result. As for the second point, long-term contracts for air cargo and container shipping, as I briefly mentioned earlier, for long-term contracts for container shipping in the U.S., there are service contracts. Based on the committed minimum quantity, the space is provided, and the customers will ship their cargo. That is the basis of the contracts.
If it's within this range, contracted freight will be honored. However, in Europe, there is no such system. If spot freight rates drop significantly, there is a possibility that freight rates for European container ships will be scrapped in various ways, even in the case of long-term contracts. Taking these factors into consideration, in our forecast, we assume that long-term freight rates will be affected to some extent. That is the practice in the world of container shipping. Though the contract is not cancelable to begin with, there's no guarantee that the rates are honored at all times. In Europe, it is quite common to be renegotiated or to be sent through forwarders.
On the other hand, in the area of air cargo, as President Nagasawa mentioned earlier, this occurs at NCA, contrary to the view on YLK, but NCA has been quite successful this time in converting the usual six-month consolidation contract into BSA contracts, block space agreements of one year or longer. A significant portion of the space from Japan is contracted in the form of block space agreements. Once contracts are signed for one year to three years, they are honored. This allows us to forecast freight rates from this point onward. We believe this will be effective in stabilizing freight rates for NCA and contributes to its P&L going forward. This concludes my explanation.
Thank you for your questions. Now, please let me move on to the next question. My questions are regarding the logistics and air cargo in particular.
They are sort of follow-up questions to the previous ones. I do understand that the peak out will start from the second half. On the other hand, how about passing on the prices to customers? For example, in the case of air cargo, there will be a progress in the shift to block space agreements. But from the logistics standpoint, the procurement price of space will rise. I would like to confirm whether you are able to pass on the increased space purchase price to the customers. The flip side of this is the air cargo. The freight rates for block space will go up, and according to the explanation, this trend will likely continue for a while. Going forward, the international passenger flights will come back, but the block space has been secured to some extent.
Because of that, the profit from air cargo will not decline in a major way, and it will take longer to normalize compared to the logistics. I would like to confirm if this is correct. This is my first point. The second point is on container shipping. As far as I've heard, I think the container shipping business will remain at a fairly high level, and I think you will be able to keep it at that level. The key here, it may be a somewhat sensitive topic, but there is the labor management negotiations in North America. Once those are over, it will peak out as well. I think it is difficult to understand because of the combination of various conditions, but would it be correct to say that gradually, not rapidly, it will decline depending on the conditions? These are my two questions. Thank you for your questions.
Your questions are on logistics and air cargo and on the container shipping business. Mr. Harada, could you please reply?
Thank you for your questions. The first question is on AFF and air cargo. Let me touch upon NCA first, which is asset type. I'd like to repeat the previous explanation. What makes NCA relatively successful this time is related to the block space agreement. In the case of consolidation, the freight is charged when the cargo is loaded. On the other hand, in the case of block space agreements, the space itself is sold in advance. In addition, the length of contracts are six months for consolidation, while it's one, two, or three years for block space agreements. Of course, there are some differences in unit prices, but I think we can say that contracts with customers have progressed towards stabilization.
This part of the business will not be directly affected by the normalization after COVID-19 and other changes. Of course, there is still the issue of what will happen if the market moves significantly. Basically, the current situation of air cargo is that we have secured a reasonable volume of business that generates stable earnings. Of course, when passenger flights recover in stages, the belly spaces will also recover. The freight rates of belly spaces are quoted based on a completely different cost structure compared to so-called dedicated cargo aircraft. For example, if we look at the transpacific routes, NCA's main battleground, if we include the use of passenger flights for cargo, there is already more capacity between Asia and North America than before COVID-19.
Looking only at the transpacific routes, it is difficult to believe that the return of passenger flights will lead to a significant increase in space. This is our view on the supply and demand in this main battlefield. From such perspective, we expect that the situation will stabilize to a certain extent. Based on such background, whether YLK is able to pass on the cost to customers, for example, in the area of AFF, we believe that we are currently able to pass on the cost to customers to some extent, although it is not easy to do so. However, depending on how we secure space or depending on the price, we think that there will be times when we will face difficulties since YLK has not necessarily succeeded in securing spaces long term. These are also factored into the current budget.
Next, on the container shipping, you are correct in pointing out that we are of the view that the level will remain high. To use a very simple example, the results for FY 2021 and the budget for FY 2022 of ONE, when we compare the revenue and expenditure from April to December up to the third quarter, they are not very different for the nine-month period. This is because the spot rates will drop, but the long-term contracts will make up for it. However, from the end of the third quarter, or rather the middle of the third quarter, we expect the situation to gradually change, and the fourth quarter will be very different. In the fourth quarter, we expect a major decline towards normalization.
If we compare by calendar year or by fiscal year, the gap of January to March period in the year 2022 and 2023 will be very large. That is the content of the budget this time. This concludes my explanation.
Thank you for the questions. We will move on to the next question. I have two questions. My first question is about the approach you used in developing the container forecast.
Certainly, it is very difficult to make a prediction for the second half, but according to your forecast for the first half, you are projecting JPY 350 billion in recurring profit. I believe this could come in higher. For example, in the January to March quarter for the year that just ended, you generated a good profit level of JPY 230 billion. In the April to June quarter, while there has been a slight decrease, the rates in North America did not decline that much. Further, from May onwards, the impact of the two to three times higher annual contracts will kick in. Therefore, while this may be extreme, doubling the JPY 230 billion for the January to March quarter of last fiscal year, I anticipated a level of around mid-400 billion yen for the first half.
What do you think about my calculation? That's my first question. My second question, I'm sorry, is about the new medium-term management plan to start next year. In developing your capital policy and shareholder return policy, what do you think would be the key points? Is it a simple matter of how to fix your profit and cash flow projections, or do you plan to revisit the very basic principle of how to return profits to shareholders? I just wanted to confirm these points.
Thank you very much. The question about potential upsides for the container forecast, the first question, will be answered by Mr. Harada, and the question regarding our capital policy will be answered by Mr. Soga.
Thank you. I will answer the first question regarding the forecast for container shipping division. I would like to give you some details behind how we developed the forecast.
After April, the impact of the long-term contracts for Europe first began to manifest, and from May, the renewal for SC for North America will kick in. These impacts will surely be reflected, but on the other hand, the spot rates. When we started the year in April, partly because of the impact of Russia-Ukraine situation, certain routes started from below the forecasted rates from the beginning of the fiscal year. In addition, the most significant impact in the recent months was the lockdown in Shanghai, which has caused vessel congestion. On the other hand, the cargo that has been put on hold can be loaded, but in the case where no more cargoes are left to load, of course, we can secure freight to some extent at other ports.
When we look at the utilization, as a result of the lockdown in Shanghai, we have seen vessels with very low utilization. The momentum that was observed in the January to March period is no longer visible in the monthly data for April. Accordingly, we believe the numbers projected for the first half are not conservative in our view, and they are not optimistic either. We believe we developed a reasonable forecast for the first half. Of course, there could potentially be upsides or downsides to these numbers. For example, with respect to the lockdown in Shanghai, hypothetically, if China lifts the lockdown and things start to move in full throttle now, we believe it will take four to five weeks to recover to the normal state.
Some predict that the number of cargoes will surge immediately in reaction, but this is something we need to keep a close eye on, so please understand that we do not think the current forecast for the first half is conservative in our view. That's all for my explanation.
Thank you for the question. I construed your question was about the things we attach importance to when we formulate our capital policy. I believe there are both quantitative and qualitative aspects to this question. Our financial position has improved significantly on the back of the very favorable performance in fiscal year 2021. How to use the accumulated shareholders' equity in an efficient and appropriate manner is the most important point in our view.
As it was mentioned during the presentation by President Nagasawa earlier, we have developed a rough investment plan based on how the company should ideally look like in the year 2050. A significant portion of investment will be allocated for ESG, and we will earmark a large amount for environment investments. Over the next 30 years until 2050, we have set a ballpark target to invest a total of JPY 4.8 trillion. This is a target we set for ourselves. A portion of this will be used for environment investments, which include the transition of existing vessels to those that use new types of fuel, i.e., the investments that are more like renewal investments.
On the other hand, we will also develop completely new businesses to respond to environmental requirements, which include offshore wind power generation or the transition to new fuel and energy, such as hydrogen, including the transportation of such new energy as freight. Because we now have a certain degree of visibility pertaining to the size of these investments, in the new medium-term management plan, the content and size of the individual pieces of ESG investments out of the total JPY 4.8 trillion will be presented. We would like to first develop a solid plan for these elements. Naturally, at the same time, providing returns to shareholders is equally important. We will examine whether the dividend payout ratio of 25% declared under the existing medium-term management plan is truly appropriate or not. Share buyback could be another approach to provide returns to shareholders.
We will look into multiple options. There could be KPIs other than the payout ratio. We will compare them all and consider what will be necessary for us to provide shareholder returns in a concrete and better way than before. We will thoroughly consider this. That is my second point. The third point, which also relates to growth investments, is about how to make up for or strengthen the weak points of our group. As investments for this purpose, we need to explore potential M&As. For shareholders' equity that we have accumulated thus far, we will take into consideration all the points that I just explained. This will look like a composite puzzle. We will review this comprehensively and develop a story and translate them into action plans, which will be properly reflected in the new medium-term management plan and present them to you. This concludes my explanation.
Thank you for the questions. We will move on to the next question. I have two questions. My first question relates to how to look at the adjustments to the spot rate for containers. I believe the rates in Europe and South America have decreased recently. What are your views on this, and how are these reflected in your plan? I just wanted to confirm these points. My second question is about your plans for the use of cash. This is a question for President Nagasawa. You have reiterated the importance of shareholder returns in the medium-term management plan, but I believe there's a basic assumption that the profits generated from ONE are only short-lived and are projected to come down. Therefore, even if you provide returns amid a downtrend of profit, the pie will only shrink.
Unless you successfully use the profit you accumulated and your solid balance sheet to generate new sources of profit, you will not be highly evaluated due to a lack of sustainability. I wanted to know how you perceive this issue, i.e., the potential of generating new business and profit from the money you have accumulated.
Thank you. The question regarding a spot rate for container shipping will be answered by Mr. Harada.
Thank you for the question. As you know very well, when we started the year in April, the spot rates for certain routes, such as Europe and South America, and to a smaller degree, Africa, were indeed declining. Consequently, compared to the rates contemplated by ONE and the rates we received and used as our forecast assumptions, the actual rates for these routes in April were unfortunately faring lower.
It is true that these trends were witnessed in the routes that I just mentioned. For Europe, the Russia-Ukraine situation has caused a significant impact, and the downtrend began sometime after the invasion started. We have not seen a constant decline in the rates ever since. The decline in the spot rates was not so significant to impact the long-term contract rates that we have newly signed. We have seen a slight decrease from the unusually high spot rate level, and this decrease was larger than our earlier projections. We believe there will come a time when we will be able to raise the spot rates again. At this point of time, in some routes, including South America, the spot rates are trending lower than our assumption, but the current price movements are not causing a serious concern at this point of time.
Once the market starts moving, I believe ONE will endeavor to raise the rate as quickly as possible.
Thank you. Regarding the second question, the use of money, this will truly be the major highlight or the key challenge of the new medium-term management plan. We must present our future plans, though I'm not sure whether it will be for the next three years or five years. We need to show our profit plan, investment plans, and capital policy. To be honest with you, we had never anticipated that our balance sheet would improve this much. Leveraging the improved balance sheet, we must consider which avenue to follow. What is most significant here is our growth strategy. We must clearly show our path toward growth.
In addition to the renewal of our existing facilities, which include the deployment of new vessels that uses new types of fuel, we must cultivate new businesses such as offshore wind power business. We must create new businesses that can generate cash for the next generation. Also, as Mr. Soga mentioned earlier, in the logistics business, we have requested YLK to actively explore M&A opportunities. If we are able to clearly present this picture, we believe we can present the cash generation plan for the future, as well as how to provide returns to shareholders. In any event, unless we are able to provide a clear direction, we fully understand that our shareholders will demand to return the accumulated shareholders' equity to their hands. We therefore intend to develop a solid business plan and growth strategy that are aligned with our ESG policy. I will pledge to provide them.
It takes a considerable amount of time to develop these, so please give us another one year or so to complete this. Thank you.
Thank you. The next will be the last question. I just briefly wanted to confirm two points. There is a concern that we may see a slowdown in the macro environment. Looking at your recent performance or in your future outlook, are you seeing any changes to the demand for both ocean and air freight? Has the demand remained strong or becoming even stronger? Can you give us an indication concerning the strength or weakness of demand? Please also comment on the outlook of the tight supply and demand for space for this fiscal year compared to last year.
All right, I would like to ask Mr. Harada to answer the question.
Thank you for the question.
The question was about the recent status of demand for containers and air cargo, the NCA business, and the supply-demand outlook for the future. Regarding the container vessels, the Pacific routes, which have traditionally been the driver of growth, when we look at the consumer behavior in North America, there are various sources of concern, such as tapering and inflation. At this point of time, looking at the order volume from the consignee side in the US, the KPIs do not pose any significant concerns on us at the moment in our current assessment. However, if inflation makes further progress down the line, the demand will gradually stabilize, and we always keep that possibility in mind.
As for the recent developments, because of the problem that freights are not transported out from China, in terms of supply and demand, sometimes it is very hard to fill a vessel, but this has not immediately resulted in a significant reduction of spot rates, especially in the North America route. We are not so worried. Because of these issues on the China side, we have actually seen troubles of freight not being shipped out of China while there are actual orders. On the other hand, for air cargo, we explained to you earlier about the cases of customers switching from short-term consolidated cargo contracts to long-term BSA. In many cases, customers predict that the demand will remain strong over the medium term, and they are willing to secure space because of this.
What we are concerned most is that considerable amount of ocean cargo have shifted to air freight, so the trend of this shift may have an impact on air cargo, depending on the situation of ocean cargo. So long as customers secure air cargo space with BSA, stable revenue generation can be secured to some extent. Again, when we look at customer behavior, we expect to see continued heightened demand for air cargo for the near term. That is my answer.
Thank you. With this, we would like to conclude the financial results presentation for the fiscal year ended March 31, 2022. Thank you very much for attending today.