Since we are at the scheduled time for the event, we will now start the presentation for the financial results for the year ending December 31st, 2022. First of all, I would like to introduce the attendees for today's meeting. The table in the front row on the right-hand side is Nippon Express Holdings President, CEO, and Representative Director, Mr. Saito. Mr. Saito's left is the President and CEO and Representative Director of Nippon Express Company, Mr. Horikiri. The right side of the back row is Nippon Express Holdings Executive Vice President in charge of Corporate Management Division, Risk Management Division, and IT Digital Solutions Division, Mr. Kondo. Mr. Kondo's left is also a Senior Managing Executive Officer in charge of Global Business Division, Mr. Nagashima. Mr. Nagashima's left is the Managing Executive Officer and in charge of Corporate Strategy Division, Mr. Takezoe.
Next, we have the Executive Officer in charge of the Financial Planning Department, Mr. Matsumoto. The secretariat is headed by Mr. Akaishi, Executive Officer in charge of Corporate Planning Department, Mr. Suzuki, Director of Financial Planning Department. The moderator is myself, Tsumori of the IR Promotion Office of Corporate Planning Department. Today's schedule is as follows: Mr. Saito, the President of the company, will spend about 20 minutes on the presentation with an overview of the financial results. Next, Mr. Nagashima will spend about six minutes on the update of the status of forwarding business initiatives. Mr. Horikiri will give a seven-minute presentation on the strategy to strengthen the Japanese business and the status of effort on the structural reform of the Japanese business. In total, we will spend about 30 minutes.
A question- and- answer session will follow, and the briefing session will end with the close of the question-and-answer session. We have up to 6:00 P.M. There are three types of materials to be used today: PowerPoint presentation materials, financial results, and financial results presentation memorandum. Please use these materials which are available on the company's website. As you have been informed, for the purpose of promoting global management through the unification of group accounting standards and improving comparability of the financial information in the capital markets, we will begin the voluntary application of International Financial Reporting Standards in addition to Japanese GAAP accounting standard. Today's presentation will be based on Japanese GAAP, and we hope to present figures for and focus based on IFRS standards again when we release our annual security report, which is scheduled for March 30th of this year.
The main theme of today's presentation will be the business performance and the progress of the management. On the topics of sustainability, governance, risk management, we would like to take sufficient time to promote dialogue at events such as IR Day. Mr. Saito will now explain the financial results for the fiscal year ending December 31st, 2022. Mr. President, please.
My name is Saito. Thank you very much for taking time out of your very busy schedule to attend our financial results presentation today. We would also like to thank you for your continued patronage. Today, I would like to begin by providing an overview of our financial results for the fiscal year ending December 31st, 2022, our full-year earnings forecast, the progress of our management plan, and shareholder returns. First, I will provide an overview of the financial results. Please turn to page five of your briefing material. The consolidated financial results for the fiscal year ending December 31st, 2022 are as shown in this document. In the forwarding business, the supply-demand balance has been easing since August, September of last year due to a decline in demand and other factors.
Amid this trend, the fourth quarter saw a reactionary decline in the overseas and international logistics business, which had been the driving force behind our business performance. Domestic logistics remained sluggish, partly due to poor harvest and automobile production cutbacks. Some industries recovered from the pandemic leading up to September, and there was a rush of demand due to a series of price hikes in October. The fourth quarter suffered from their absence. Under these circumstances, both revenues and profits declined in the fourth quarter. However, due to the increase in revenues and profits through the third quarter, our consolidated results for the full year show that year-on-year increase in revenues and an increase in operating income and all the other lines below. The increase in profit is mainly due to the gain on sale of a former Shiodome head office building.
Also, the extraordinary losses reported last month on the New International Air Cargo Enterprise System, as well as pharmaceutical business among other factors contributing to numbers lower than the forecast announced on the 9th of November . As a major extraordinary loss, we have decided to discontinue the development of a New International Air Cargo Enterprise System due to expected increase in cost and extension of our development period compared to the initial plan. Impairment loss of JPY 15.4 billion was posted as a result of this decision. We are currently examining in detail the sequence of events leading up to the discontinuation of the development from the planning to the discontinuation of the development, and are taking steps to fundamentally prevent recurrence.
In addition, the IT Digital Solutions headquarters, which was newly established in January for this year, will evaluate the appropriateness of future large-scale development projects in light of this incident to strengthen governance. In addition, in the pharmaceutical business, we had to revise the initial plan due to delays in bidding projects and GDP legislation related to the prolonged impact of the pandemic and other factors. As a result, an impairment loss of JPY 15.7 billion was recorded. However, the high potential of the pharmaceutical business remains unchanged, and we will continue to focus on it as a priority industry with GDP legislation in mind. Next, we compare these figures to the forecast announced on the 9th of November . Revenues and operating income and each of the following income and profit items fell short of forecasts.
This was mainly due to the lower-than-expected international logistics during the peak season due to the inventory buildup, as well as weak domestic logistics due to a reactionary drop from the price hike rush I mentioned earlier. The large amount of unachievement in profit is due to the recording of impairment losses and other factors, as I mentioned before. This is explanation about each region. All overseas regions reported an increase in both revenue and income for the full year. On the other hand, in the fourth quarter, both East Asia and the South Asia & Oceania regions posted declines in both the revenue and income. This was mainly due to the easing of supply-demand balance in the international forwarding business and the significant impact of reactionary decline in airport handling from prior year. Sales and profits increased in the Americas and Europe.
In the Americas, unit freight rates remained high in both air and ocean forwarding. While port congestion began to dissipate, demand for forwarding continued due to congestion in inland rail transportation. In Europe, as in the Americas, unit freight rates in the forwarding business maintained high levels, and new warehousing and other businesses contributed to results. In Japan, both revenue and income increased for the full year, but in the fourth quarter, both revenue and income declined. This was due to factors such as decrease in air forwarding unit freight rates, which were higher than the previous year, but there was a decrease in margins due to decline in volume and cost increase due to price hikes. As for domestic logistics, as mentioned before, recovery was seen in some industries, but the overall situation remained sluggish. This is an overview of financial results.
Page eight and nine provide a breakdown of changes in revenues and operating income taken into account the variable factors. Details for each segment are also provided on pages 10 through 17. Please refer as needed. Next, I will explain our consolidated earnings forecast for the fiscal year ending December 31st, 2023. As explained by the moderator, we will be changing our accounting standards to IFRS starting this fiscal year. But today, I will explain our earnings forecast based on Japanese GAAP. Please turn to page 18. In the current fiscal year, the business environment expected to be difficult as the supply/demand balance in the forwarding business is expected to ease and the reactionary decline from the positive impact of pandemic is expected to occur, while the global economic growth outlook is expected to slow down.
As a result of calculations based on comprehensive consideration of these conditions and prospects, we expect a decrease in revenues and a decrease in operating income under the following lines compared to the previous year. Even under these circumstances, the basis of management remains the same, to promote the growth strategy of the core business and the strategies to strengthen resilience of Japanese business while taking long-term perspective. It was foreseeable that there would eventually be a reactionary decline from the positive impact of the pandemic, and we have been making preparations for this, the details of which we would like to report during today's briefing. Next, I would like to explain the status of our management plan initiative executions. Please turn to page 29.
First, regarding the growth strategy for core businesses, the results of our priority Industries are shown in this document. Revenues in 2022 was driven by sales expansion in the forwarding business, among other factors, and all industries outperformed the previous year except domestic automotive, apparel, and pharmaceutical industries, which fell short of their 2022 targets.
As for the automotive industry, the shortage of semiconductors and the spread of COVID-19 in China weakened our performance due to production cuts and sluggish sales. We expect to catch up in the future due to the resolution of semiconductor shortage. In the apparel industry, the timing of a switchover to customer facilities in the warehousing business for major customers was a negative factor. New logistics and other operations have been launched, and volume is expanding. As I explained earlier, we will continue to focus on domestic pharmaceuticals as the impact of pandemic subsides. In the semiconductor industry, as well as other industries, we are promoting initiatives tailored to the characteristics of each industry, and after accumulating a track record, we would like to explain our initiatives in the next stage. Next, as for the forwarding business, Marine & Air forwarding volume handled are shown on the document.
While marine transportation increased from the previous year, air transportation fell short of the previous year's levels due to the impact of stagnant production caused by the semiconductor shortages and, in particular, the significant impact of production cutbacks in the automobile industry, which is a large proportion of our business, and both businesses did not achieve the target. As for marine transportations, as cargo movements slowed down and supply/demand balance eased due to the situation in Ukraine, the lockdown in China, and inflation and other factors, the container market plunged, especially in fourth quarter. Spot freight rates seem to have bottomed, but it remains to be seen at what level they will settle down due to their uncertain outlook.
Under these circumstances, we expect the current decline in demand to continue for at least through the first half of 2023, with a recovery expected in the second half of 2023 or later. Next, on air transportation, the IATA reports that international air cargo handling in 2022 will be - 7.8% year-on-year, and the forecast for 2023 is also - 4.3% year-on-year, continuing the negative growth outlook from 2022. In addition, space supplied continues to increase as passenger demand recovers and freight rate levels, while still maintaining high compared to pre-COVID levels, are on a downward trend. Some airlines are planning to take delivery of new freight aircraft in the future, which is expected to further increase supply and ease the supply/demand balance.
Under these circumstances, the key point for the Marine & Air forwarding business is to increase handling and reduce forwarding costs, the details of which will be explained later by Mr. Nagashima, the director in charge. Next, regarding the strategy for strengthening Japanese business, please refer to page 31 of the presentation for Sales and Overview by Business Segment for Nippon Express on a nonconsolidated basis. Please refer to page 32. With regard to the strategy to strengthen the Japanese business, we see positive results being achieved in reduction of indirect cost and subcontracting cost. In addition, as I mentioned that we have been preparing for the reactionary declines from the positive impact of COVID, we have been taking measures to address low-profit sections, reorganizing offices, and streamlining administrative organizations.
In addition, as costs continue to rise, we consider it an important issue for business continuity to take into account the cost increases of subcontractors and suppliers and reflect them in the rates we charge to our customers. We are proceeding with intensive effort to revise rates and review contracts. These efforts has been effective, and we believe that we can further expand the effects of these efforts in the future. The detail will be explained later by Mr. Horikiri, President of Nippon Express. Please turn to page 38. Next, regarding our effort to realize a long-term vision based on the M&A strategy, we will work to accelerate the transformation under the holding structure and continue to the reorganization toward a structure that can achieve global growth and robust group management.
As for the business portfolio review, we will look into organizing and integrating overlapping business and functions within the group, as well as restructuring of Japanese business as a larger theme. Last year, we decided to reorganize our Logistics, Finance and Real Estate business, and we are now considering our options, and we will implement them as they become ready. As for strengthening our specialized businesses, we spun off our Security Transportation Business and transferred it to NX Cash Logistics Co., Ltd. starting from this year. We are also examining the ideal forms of our other specialized businesses with the aim of strengthening them in light of changes in the business environment, and we will report on the direction of these efforts in timely manner. Furthermore, with regard to the restructuring of our Japanese operations, we are currently studying this issue as part of a business restructuring p roject.
In terms of direction, we see the theme as starting with expanding our business globally while concentrating management resources in Tokyo, Nagoya, Osaka area. We will rebuild our structure to match the characteristics of the area and, at the same time, consider to strengthen and design the functions of domestic network products, such as automobiles and coastal shipping. In addition, in July last year, we reorganized the Global Business Headquarters or GBHQ for the purpose of accelerating the implementation of a global business strategy, and we will further strengthen its functions to expand our business. We hope to complete the structural reform of our Japanese business and strengthen our global business structure by the end of this fiscal year and pass on to the next management plan.
This fiscal year is the final year of the current management plan, and we consider it an important year that will lead to the next management plan. Although we expect the business environment to be difficult in fiscal 2023, we intend to strengthen our ability to generate a certain level of sales and profit without fail, irrespective of the business environment changes. To this end, it is necessary for us to deepen the growth strategy for core businesses and the strategy for strengthening Japanese businesses, both of which are set forth in our management plan, and we intend to continue to work on them. We also see our long-term vision toward the 100th year anniversary of the founding as a basis for building strategies going forward. Please turn to page 39.
Regarding shareholder return for the fiscal year ending December 31st, 2022, we have set the annual dividend at JPY 400 per share, including a commemorative dividend of JPY 150 for the establishment of the holding company. As a result, the dividend payout ratio is 32.8%, and total return ratio, including the share repurchases, is 41.9%. For the cumulative total return ratio, 54.6% over the four-year period beginning fiscal year 2019. In addition, for the fiscal year ending December 31st, 2023, the annual dividend forecast is set at JPY 300. We will continue to strive to enhance shareholder returns, keeping in mind the management plan targets of the dividend payout ratio of 30% or more and a total return ratio of 50% or more over the current management plan period and over the five-year cumulative period.
That is an overview of the financial results for the fiscal year ending December 31st, 2022. We will continue to make group-wide effort to realize our long-term vision, and I would like to ask for your continued support. Thank you very much.
Next, I would like to ask for Mr. Nagashima, Executive Director.
My name is Nagashima. I am in charge of the entire global business, including the forwarding business, and I will be promoting the growth strategy for core businesses. Thank you for this opportunity. Today, I would like to explain our future initiatives in the ocean and air forwarding businesses. Please turn to page 30 of the presentation. In the forwarding business, as Mr. Saito explained earlier, we expect the supply-demand balance to remain soft for the time being. Under these circumstances, we believe that the keys to promote expansion of trading volume and the reduction of usage fees in tandem. In addition, the key to this is to aim to expand our business with non-Japanese customers and in areas and industrial fields with large room for growth. In other words, capture what we have not captured yet.
First, with regard to ocean, we will strengthen our purchasing power centering on the NX Global Ocean Network, NGO for short, which has a centralized purchasing function. In addition, we will focus on intra-Asia, where cargo volumes have not declined, relatively speaking, and where we have greater choice of shipping companies compared to European and U.S. routes seeking to expand economies of scale. Since October, we have shifted our focus from pricing based on shipping companies' costs to our own pricing strategy based on market data and other analysis, and we are aiming to expand the volume of cargo handled through trade lane management, which optimizes the forwarding business for the entire group. We are aiming to expand the volume of cargo through the dual approach of trade lane management and group-wide optimization in the forwarding business.
In terms of our own pricing strategy, we now can analyze market prices to increase orders. In addition, we have already started to operate in-house freight rates on Nordic trade from Japan last October and the Thailand Laem Chabang trade from Japan last month, and will gradually expand to other lanes as well. In addition, we are developing systems for both ocean and air forwarding to enhance traceability and online quotation functions and plan to release the online quotation system in March of this year and other functions sequentially, and we plan to eventually build an online platform that integrates these functions. In addition, we have been forced to suspend our strategy to expand through the so-called Nittsu named cargo, in which we purchased space from shipping companies, collected cargo, and consolidated it due to the shortage of space during pandemic.
But now that supply of space has normalized, we have decided to renew our efforts and have begun negotiations with shipping companies. In the air freight, we will focus on strengthening the trade lanes where our volume is low with a large market size. Specifically, we will strengthen our sales approach, including landings and bidding response to targets in key industries in the long- haul and transatlantic routes from Asia. Space procurement is based on the best mix of contracted freight cost reduction through bidding for global purchasing and flexible purchasing in local deals. In addition, we will further enhance consolidation and forwarding functions at existing gateways and surrounding areas such as Chicago and Los Angeles in the United States, and Frankfurt in Europe, in order to thoroughly improve the efficiency of consolidation.
At the same time, we are negotiating with specific carriers to establish strategic partnerships, and are considering a scheme to maximize consolidation revenues by capturing multiple lanes in total mainly between Asia and Europe. We aim to start operations around April. That was the explanation of our approach to the Freight Forwarding business. Amidst the changing trends in global supply chains, we do not view ocean, air freight, and other modes of transportation in isolation, but rather by utilizing all modes of transportation networks, IT systems, and other means, we are able to provide the best solutions. In other words, logistic solutions are required now. From this perspective, we will provide end-to-end solutions that are indispensable for the Logistic Solution business in the future. We would like to establish solutions and optimize the entire supply chain and create new value through our supply chain database.
Specifically, we would like to create a platform that visualizes various aspects such as inventory transportation and order information in the customer supply chain, and also temperature for sensitive products such as pharmaceuticals and CO2 emissions from a sustainability perspective, and we will report on the details in due course. That is all from me. Thank you for your attention.
Next, President Horikiri, please continue.
This is Horikiri speaking. Taking over the baton handed from Mr. Saito, I am responsible for the management of Nippon Express as President. I look forward to working with you. I would like to explain the progress of the strategy to strengthen our Japanese business and the status of our efforts to reform the structure of Japanese business. Please see page 32 of the document. First, as part of improving profitability, the utilization ratio of the company-owned vehicle improved by 0.5 percentage points year-on-year through the vehicle matching and other initiatives. As for subcontracting expenses, while net sales increased 9.4% year-on-year, the subcontracting expense ratio improved by 2.0 percentage points during the period.
However, since the forwarding business was affected by the high unit price, the analysis shows that the improvement was about 1 percentage point compared to the pre-COVID level excluding the special effect from COVID. Progress was made in productivity improvement, integration of land, sea, and air, enhancement of network products described in the documents. As part of our strategy to strengthen our Japanese operations, we are taking various measures, the effects of which we believe are being seen in the reduction of outsourcing costs. We will continue our efforts to improve profitability.
Next, please see page 33 for information on our efforts to reduce indirect department costs. As of the end of FY 2022, the cumulative reduction in indirect costs was JPY 5.52 billion, 58% to the target of JPY 9.5 billion. The organization has been streamlined this fiscal year by streamlining the management structure. Additional 100 or more will be reassigned.
As for the administrative process reform, we continue to catch up the centralizing administrative work at integrated sites and automating on-site administrative work. But at this point, the cumulative reduction in indirect department cost is projected at JPY 8 billion, 84% of the JPY 9.5 billion target. Therefore, further cost reduction will be necessary in order to strengthen our Japan operations. With the next management plan in mind, we will expand the scope of our effort from the existing Nippon Express-centric initiatives to the entire group, and will continue to pursue cost reductions. We would like to work on reducing indirect department cost. Please refer to page 35 of the document for the status of cost increases related to employee system reforms. Now, I have explained the status of our efforts in the strategy to strengthen our Japanese business.
While we expect the business environment to be difficult in FY 2023, our basic strategy remains the same, to expand our core businesses and promote the strategy to strengthen our Japanese business with achievement of our long-term vision in mind, even as we aim to secure short-term business results. Some of the effects have already been seen, but we are now in the phase of horizontal deployment of improvement method established through the case studies for overall improvement of warehouse operations in productivity enhancement, which we believe will be effective in increasing profit in the future. In the area of organizational restructuring and streamlining of the administrative organizations, some measures are gradually beginning to have an effect in the strengthening of the sales force by reallocating employees from the administrative division to the sales division and other divisions.
In addition, the integration of vehicle operation and distribution has been progressing in tandem with the integration of bases. As a result of these efforts, we have seen improvements in low-profit branches, and we expect these effects to expand in the future. In addition, the various costs such as energy costs are rising. It is essential to review rates to be appropriate and to take efforts to gain the understanding of customers and society for efficient logistics such as reduction of waiting time and joint operations, so we would like to have a good dialogue with them. In order to achieve our long-term visions, we will continue to reduce structural cost while at the same time, we will focus on key industries such as pharmaceuticals, semiconductors, in order to raise the top line in the future.
We believe that a basic management stance is also to make aggressive investment to focused industries. Please see page 36. Regarding the Business Structure Reform Project, as Mr. Saito explained earlier, we are identifying issues and holding specific discussions on the six themes listed in the document. Themes 1 through theme 4 are aimed at reforming and strengthening each businesses. Theme 5 is being studied with an eye toward the nature of the business structure in Japan while encompassing each business. In addition, Theme 6 aims to strengthen the M&A promotion system in cooperation with each overseas region's Global Business Headquarters, GBHQ, and other holding divisions in order to maximize the contribution to the entire group and synergy effect created and to strengthen PMI of acquired companies.
The purpose of this project is to solidify recommendations for the next management plan, while measures that need to be addressed immediately will be transferred to the line operations and implemented. At the same time, we intend to promote business reforms from the perspective of improving capital efficiency and optimizing our business portfolio rather than merely improving the existing operation as an extension of the existing ones. With the goal of winning in the mother market and at the same time becoming the starting point for global growth, we aim to become an overwhelmingly strong presence in our home country, Japan. That is all from me. Thank you very much.
This concludes the presentation part from our company.