We will now begin the financial results briefing for the second quarter of fiscal year 2022, ending December 31st. First of all, I would like to introduce the attendees. First, Mitsuru Saito, President, Chief Executive Officer, and Representative Director of NIPPON EXPRESS HOLDINGS, INC. Satoshi Horikiri, Executive Vice President, Chief Operating Officer, and Representative Director. Akira Kondo, Executive Vice President, Chief Operating Officer, and Representative Director. Eiichi Nakamura, Executive Vice President, Chief Operating Officer, and Representative Director. Takashi Masuda, Director and Managing Executive Officer, Nippon Express. We also have Mr. Suzuki, General Manager, Director of Financial Planning Division, and my name is Tsumori from the IR Promotion Group Corporate Planning Division. Today's schedule is as follows.
First, President Saito will speak for about 20 minutes on the overview of the financial results, followed by Mr. Kondo, who will speak for 10 minutes on the status of forwarding business as well as key industries. Then Mr. Nakamura, who will speak for 5 minutes on the progress of initiatives to strengthen our Japanese operations and reduce overhead cost for a total of 35 minutes. Thereafter, we will have a 20-minute Q&A session. The event will close at 6:00 P.M. There are handouts. We have PowerPoint presentation, timing report, and a PowerPoint presentation with notes. They are available on the company's website. The Q&A session will be conducted in a teleconference format. Please move to teleconference when we finish all the presentations and move to the Q&A session. The main theme of today's presentation will be financial results.
However, we will also cover business overview and the update on the business plan. We will take sufficient time to discuss sustainability and governance and risk management at IR Day and other events scheduled for next month onwards. The presentation materials to be used today include figures for air freight forwarding, which were previously presented as Japan outbound air export freight forwarding revenue minus international forwarding cost. From this time, we disclose figures for each overseas region, as well as the breakdown for forwarding costs by business in the attachment. I now would like to turn to Mr. Saito for his presentation on financial results for the first half of FY 2022.
My name is Saito. Thank you for coming despite your busy schedules today. Thank you for attending our financial results presentation. We also like to thank you for your continued support. Today, I would like to begin by providing an overview of our financial results for the first half of FY ending December 31st, 2022. Our full year earnings forecast and the progress of our business plan and shareholder returns. First is an overview of the financial results. Please turn to page 3 of your handout. Consolidated financial results for the first half of FY 2022 are as shown here.
Despite the resurgence of geopolitical risks such as the invasion of Ukraine and the lockdown in China, and negative impact of stagnant economic activity and rising fuel costs, our Overseas business and International Logistics continued to perform well, resulting in an increase in both revenue and profit year-on-year. The larger increase in net income is mainly due to the gain on the sale of the former Shiodome Headquarters Building.
Next, compared to the figures announced on May 12, revenue and operating income and other incomes exceeded the forecast. The supply-demand environment in the Air and Ocean Transportation businesses is basically tight. There is no change in our assumption that the supply-demand balance will gradually loosen and revenues will decline. The supply-demand balance did not loosen as fast as we had expected. As a result, the main reason for the higher than expected earnings, that is what I have just discussed, mainly due to earnings from Overseas and International Logistics. Under these circumstances, all overseas regions posted a year-on increase in revenue and profit. In China, the lockdown caused the closure of airports, ports, and other facilities. Production activities were suspended and declined. However, the lockdown was lifted in June and their operations have gradually returned to normal.
With the resumption of corporate activities, logistics volume are recovering. Under the zero-COVID policy, we need to continue to monitor the situation carefully. As for the Japan region, domestic logistics remained sluggish, partly due to production stagnation caused by semiconductor shortages, although some industries are recovering from COVID. In addition, air exports saw a decline in logistics volume from the previous year due to the semiconductor shortage, as well as the stagnant production activities caused by the lockdown in China. The Air and Ocean Transportation business continued to experience a tight demand supply environment and high unit prices, resulting in an increase in both revenue and earnings. For the first quarter, Nippon Express made a prior period adjustment of liabilities for retirement benefits worth JPY 2.1 billion.
In addition, at Nippon Express, a change in the accounting treatment of outsourcing software royalties boosted revenue net operating income by JPY 0.9 billion, without which the Logistics Japan segment's profit increased by JPY 4 billion. The driver of the performance continued to be our Overseas and International Logistics businesses, which leverages our global network. On the other hand, the trends are changing as the tight supply-demand balance in forwarding businesses caused by the pandemic appears to be easing in some areas. With the transition to living with COVID phase, the Overseas and International Logistics businesses, which have driven our performance so far, will see a reactionary decline in the future. We expect that the recovery in domestic logistics will absorb some of the decline, but we will work to control costs, which has been a focus of our efforts so far, to maximize the benefit of the recovery phase.
At the same time, we need to respond not only to short-term changes, but also to fundamental changes in the global conditions, supply chains, et cetera, which are more important challenges. Under these circumstances, we will aim to realize our long-term vision, and the progress so far will be explained later. That was my brief overview of the financial results. On pages 7 and 8 of the document, we provide a breakdown of changes in net sales and operating income, taking into account variable factors. Details for each segment are also provided on pages 17 to 24. Please refer to them at the same time. Next, I will explain the full-year consolidated earnings forecast for FY 2022. Please refer to page 9. We have revised the forecast in view of the comprehensive considerations of the current situation and outlook.
As explained earlier, we have not changed the assumptions for our forecast in the forwarding business, but the easing of supply and demand has not occurred as expected, resulting in overperformance for the first half. Since July, there has been no marked change in the handling of air and ocean freight forwarding, and we expect the air and ocean freight forwarding business to remain strong in the second half. In addition, the shortage of semiconductors should be resolved, and the automotive industry should recover shortly. Compared with the May 12th full-year forecast, the company has decided to revise the forecast upward in both revenue and operating and other incomes. With the spread of BA.5 strain, we are now facing the seventh wave of the pandemic in Japan, and the outlook is very uncertain.
Since we cannot predict how the external environment will change going forward, it is important for us to be more sensitive to the global trends than in the past. In every country, our customers are starting new activities to prepare for unexpected events, and we believe that business opportunities will surely be found there. Next, I will explain the status of the initiatives in our management plan. I will explain the key points focusing on future initiatives, and the vice president in charge will explain the details of the progress data. Please see page 25. First, with regard to the core business growth strategy, the strategy is to focus on the customer industry axis as the main axis of strategy and to expand volume by placing account management at the center of the sales approach.
At the same time, the basic strategy is to strengthen the business axis as a force to implement logistic services. As you know, we reorganized the Global Business Headquarters, or GBHQ for short, in July, and this is something that we have been promoting even under the pandemic. The purpose of this reorganization is to accelerate the implementation of business strategies by consolidating and strengthening the command functions of global businesses and clarifying the roles of each group company. This organization includes a marketing strategy division, sales strategy division, logistic solution division, air and ocean freight forwarding division, and a business strategy division. The aim is for customer industry access and the business axis to function as two wheels. In addition, we are promoting the appointment of foreign nationals by hiring two new foreign executives and transferring one from the European region to Japan.
While globalization and the penetration of Japanese strengths by Japanese nationals are more important than ever, we believe that both our business structure and human resources need to be global in order to expand our non-Japanese customer base and compete with global competitors. In a way, this transition to a new structure will never complete, and we will work to further strengthen our functions and expand our business. We will develop a global sales structure and also promote account management as a means of expanding sales. Please see page 27. Next, with regard to the strategy to strengthen our Japanese operations, although we have achieved results in reducing overhead costs and outsourcing costs, it is important to expand market share and maintain and grow the top line, and we believe that we need to further focus on this theme.
The basis of this effort is the promotion of growth strategies for core businesses. While we are expanding our industrial targets to pharmaceuticals, the semiconductor industry, and other areas where future expansion is expanded, we believe it is necessary to redesign and reform our businesses to accommodate new business models. In terms of direction, we will work to increase the profitability of our domestic business by reorganizing our organizational structure to match the market characteristics of each region while concentrating our management resources in Tokyo, Nagoya, and Osaka, with the starting point of expanding our business globally. At the same time, we believe that we can differentiate ourselves and demonstrate our strength by reinforcing transportation models such as rail, small lot cargo, coastal shipping, and domestic air transportation, or by combining network services. We have selected six themes for this initiative and have begun specific studies.
Please see page 32. Now that the holding structure is in place, it has become easier for us to review our business portfolio, businesses we should focus on, and the businesses that may be subject to carve outs. It has also become easier to have M&A strategies that are essential for improving corporate value over the medium to long term. We are currently in the process of exploring specific M&A projects from multiple perspectives, and we would like to pursue M&A that will complement the functions and the customer base that we lack and that will contribute to our management. In selecting target companies, we would like to determine their suitability, including their corporate culture, and proceed while confirming synergies, initially including the option of a business alliance.
In conjunction with the transition to a holding structure, the group's financial governance structure has also been strengthened through the establishment of an investment committee and other measures. We are allocating management resources to appropriate regions and businesses, optimizing the business portfolio, and continuously considering the reorganization of group businesses. The decision has been made to spin off the security transportation business in January of next year. Furthermore, the reorganization and integration of overlapping businesses and functions within the group, as well as the reorganization of the Japanese businesses, are seen as important themes. Specific studies are underway and will be implemented in order of readiness.
Regarding the optimization of our business portfolio, rather than starting with the improvement of existing businesses, we would like to clarify what to keep and what to discard in order to realize our long-term vision of becoming a logistics company with a presence in the global market. Based on this, we will strengthen those businesses that need to be strengthened while appropriately reorganizing non-core businesses and unprofitable businesses, and we will make sure to carry this out. Therefore, as we proceed with the transformation under the holding company structure, how we can raise the top line and optimize our business portfolio through M&A strategies is the most important theme for the realization of the current management plan and the long-term vision. By the way, we have now revised the numerical targets for the final year of the management plan.
We'd like to explain as next year's forecast in the year-end financial result presentation while keeping an eye on this year's progress. Next, please see page 33. Regarding shareholder returns for the fiscal year ending December 2022, the company's dividend forecast calls for an interim dividend of JPY 250, including a commemorative dividend of JPY 150 for the establishment of the holding company and a year-end dividend of JPY 150 for a total of JPY 400. In addition, as announced today, the company plans to carry out share buybacks up to JPY 10 billion. As a result, the dividend payout ratio will be 29.0%. The total return ratio, including share buybacks, will be 37%. The total return ratio for the cumulative four-year period beginning in fiscal year 2019 is projected to be 51.3%. We will continue to strive to enhance shareholder returns, keeping in mind the goals of the management plan.
In summary, we have been promoting the strategies and the measures formulated in the management plan and have been implementing organizational and structural changes to realize our long-term vision, including the holding structure. By putting in place the organization and systems in accordance with the strategies, employees have changed their ways of thinking and acting and have reached a new stage in their careers. I feel that a true understanding of the group's long-term vision is emerging and a changing corporate culture is taking place. The entire group will continue to work together to realize our long-term vision, and we look forward to your continued support. Thank you very much.
Next is Mr. Kondo, Vice President.
Yes, this is Kondo. Thank you very much. I will explain the status of our Shipping and Air Forwarding businesses, the status of key industries, and our future initiatives as part of our core business growth strategy. Page 25, please. As shown in the materials on ocean and air forwarding, ocean forwarding volume for the first half of 2022 increased year-on-year, while air forwarding volume fell year-on-year due to the impact of production suspensions caused by shortage of semiconductors and the production cuts in the automotive industry where we have a significant exposure. As for ocean transportation, a temporary slowdown in cargo movement and lower freight rates were seen due to the situation of Ukraine and the impact of lockdown in China. However, since the lockdown was lifted, cargo volume has been increasing.
Furthermore, as we enter into the peak season, the supply-demand is expected to get tighter. Although the outlook for the global economy is unclear, we expect tight supply-demand situation to continue through 2022 and gradually ease from 2023 onward. Therefore, securing space will continue to be a challenge for the time being. We will focus on securing space using the NX Global Ocean Network, NGO, which started full scale operations in Singapore in May and has a centralized purchasing function. In the phase of easing supply and demand, having economies of scale will be a key in rate and price negotiations. We will try to expand cargo volume handled by both sides of trade lane management, which optimizes the forwarding business of each operating company across the entire group.
Furthermore, we are developing a system to digitize market information including air forwarding, enhance traceability functions, and improve online quotation functions with plans to eventually build an online platform that integrates these functions. We plan to launch the service sequentially starting this year to strengthen our approach not only to existing customers but also to potential customers going forward and establish a new sales style in the new normal phase. Next, for air. As with ocean transportation, there is a temporary easing of supply and demand at present, but the IATA, or I-A-T-A's June report shows a demand forecast for 2022 of about 11% increase compared to pre-COVID year 2019. While the latest data shows a 7% decrease in space supply in June, the supply/demand balance has not been resolved yet.
The supply/demand environment should tighten as production recovers following the lifting of the lockdown in China, automotive related production increases, and the peak season arrives. Under these circumstances, despite the gradual easing of supply/demand, the underlying trend remains tight until the end of 2022, and the balance should ease from 2023 onward. For the time being, we will continue to place priority on securing cargo space and promote stable space supply, space supply while closely monitoring customer trends. On the other hand, as the balance eases due to the recovery of space supply, we expect to see a return to long term contracts based on pre-COVID auctions. In terms of contracts with airlines, we will seek the best mix to respond to changes by controlling price fluctuations through long-term contracts and utilizing spot rates in response to market conditions.
Furthermore, in view of further changes in the future in the global supply chain, no matter what the transportation model is, i.e., shipping, air forwarding, or others, the fundamental competence of the logistics companies will be the key determinant. Let me come back to this point later. Next, trends in key industries including handling volumes and annual targets are shown in the handout. Despite the impact of production cutbacks in the automotive electric and electronic industries, revenues in all industries were higher than in the previous year, mainly driven by sales expansion in the airline and the shipping industries. We expect that the tight supply-demand balance in the forwarding business will continue throughout 2022, and the shortage of semiconductors for automotives will be resolved, leading to an increase in auto production.
Each industry is expected to expand, and we should achieve our annual target figures. In the results meeting held at the end of the previous fiscal year, we focused on the automotive and semiconductor industries. We are steadily implementing initiatives we had explained. In other industries, we are also promoting initiatives for each industry, and after completion, we would like to explain our initiatives for the next stage sometime in the future. With regard to the pharmaceutical industry, although we have been promoting global supply chain for pharmaceuticals by linking our global network with distribution in each country, the prolonged impact of COVID and the delay in the legislation of GDP, Good Distribution Practice, have caused cancellations and delays by pharma companies' full-scale response to pharmaceutical distribution and auctioning.
Our local pharma logistics centers at four locations has been also affected by this situation, and we have revised our plans. We are postponing the initial plan to generate profits during the current business plan by about one year. In light of this situation in the pharma industry, let me explain two points regarding future catch-up strategies. First, with regard to GDP or Good Distribution Practice, although the need remains unchanged, we believe that it will take time to complete domestic legislation in Japan. In addition to the Japanese pharmaceutical manufacturers, we will also focus on sales and marketing towards foreign manufacturers who are ahead of Japanese. Second is to provide logistic solutions for GMP or Good Manufacturing Practice based manufacturing. Regarding GMP, the ministerial ordinance was significantly revised on August 1st last year, and the regulations were tightened based on international standards.
One of the reasons for the revision or amendment of the law is that the suspension of drug production or business operations due to GMP violations has recently caused a shortage of drug supply in the generic drug market, leading to a serious social problem. As the need for GMP compliant warehouse increases in the pharma industry in response to increased production and imports, our pharmaceutical center is capable of providing logistic services such as packaging, labeling, and storage under strict quality control. We can contribute to stable supply of products for our customers. By providing such solutions, we will actively work to expand our business in new areas of pharmaceuticals. The global supply chain is still disrupted, triggered by the outbreak of COVID-19, but we believe that it will gradually begin to normalize.
At the last point, I would like to explain the changes in the external environment going forward and how do we extend our top line in the world of living with COVID-19. I would like to cover two points regarding our future efforts. First, in the current trend of supply chain reorganization, customers are demanding the realization of stable supply, high quality, reasonable prices, and furthermore, CO2 reduction. For the realization of these, the logistics that is required is not the one to consider shipping air forwarding and other modes of transportation separately, but the one to consider them as a means of solution utilizing all modes of transportation networks, IT systems to derive and design the optimal solutions.
In promoting this initiative, we will strengthen our structure through the establishment of the Global Business Headquarters or GBHQ, as explained by the president earlier, and also design and develop new logistics products by thoroughly adapting a marketing approach such as supply chain solutions and solution products. Secondly, to realize our business strategy, it is essential to strengthen our sales force. In addition to the sales structure, including the number and assignment of sales personnel, we believe it is necessary to increase the productivity of sales activities, in addition to maximizing the points of contact with customers in sales activities. To this end, we will implement and promote account management targeting based on growth potential in each of our priority industries.
At the same time, as for the sales structure for global customers, the Global Key Account Sales team, or GKAS for short, which has already been established in Singapore and is responsible for sales approaches to the headquarters and regional headquarters of global customers, will be reorganized as an organization under GBHQ and will be positioned in each region. As a current challenge, some projects contribute to business expansion on a global basis, but some regions' profits are damaged, resulting in missed opportunities for entry, or in other words, partial optimization is a pitfall. By revitalizing account management and allowing GKAS to take the lead in promoting global customer sales, we aim to expand entry opportunities and improve the certainty of customer acquisition.
In addition, to strengthen our sales force, we need to design a database and a system to motivate salespeople. We are aware of the need to strengthen or revamp our existing foundation and system. We have already started to consider this issue, and will aim to expand our top line and market share by strengthening our product power and our ability to sell them. That is all from me. Thank you very much.
Next, Mr. Nakamura, please take the floor.
I'm Nakamura. I would like to explain our strategy to strengthen our Japanese operations and the status of overhead costs. Please see page 26 of the material. Here, we show Nippon Express sales by business segment for the first half of fiscal year 2022. International Logistics continues to be strong, and the shipping and airline businesses are growing. The recovery with respect to domestic logistics is limited, and overall, the situation has not reached the pre-pandemic level.
Although infectious diseases and stagnant production due to the shortage of semiconductors are the main factors, we expect to see an increase in handling volume in the future due to the recovery of automobile production and other factors. On the other hand, the second wave of the infection and other uncertainties are still undeniable, and we intend to manage our business by closely monitoring the economy and customer trends. See page 27, please. Under these circumstances, we have been pursuing various initiatives as part of our strategy to strengthen our Japanese operations. The main ones are described here.
First, as for the reduction of subcontracting costs as part of our efforts to improve profitability, the subcontracting cost ratio declined by 2.5 points while net sales increased by 11.1% year-on-year. However, since the forwarding business with the high unit cost affects this number, we estimate that the ratio has decreased by about one point compared to the level before the outbreak of the pandemic, if we are to exclude special effects. The utilization ratio of company-owned vehicles improved by 0.6 percentage points year-on-year as we strengthened our efforts to match vehicles to daily workforce utilization. We will continue to promote cost control and take advantage of the recovery phase of cargo movement in the future. In the areas of productivity improvement, evolution of land-sea-air fusion, and enhancement of network products, progress is being made as described in the material.
In addition, as mentioned earlier in the explanation by the President, with respect to business reforms, we will work to promote structural reforms in each of our transportation businesses, which are the pillars of our business. For this effort, we have selected six themes as the Business Structure Reform Project as described in the material. In March, a project team was formed and is currently identifying issues with 120 employees across departments as members. We view this project as preparation for a farther jump in the next management plan, and we will implement the measures that need to be immediately addressed while transferring them to line operations. At the same time, we will not stop at improvements that are an extension of our existing operations. Rather, we will also promote business reform from the perspective of improving capital efficiency and optimizing our business portfolio.
Next, please see page 29 for information on efforts to reduce indirect overhead costs. With respect to the reorganization and streamlining of the administrative organization, 27 employees were reallocated in the first half of the year, and 40 employees are expected to be reallocated during this year as a result of further promotion of efficiency improvement at the head office and branch offices. Regarding administrative process reforms, overtime and staffing costs increased by JPY 110 million and JPY 400 million respectively, due to the handling of increased volume and increased administrative burden that deviates routine operations such as charter flights arrangements. On the other hand, we believe that our efforts to reduce the burden of on-site administrative work through RPA and centralization of office work are curbing the increase in overtime costs.
We will continue to aim to achieve our targets by centralizing office work at integrated sites and mechanizing on-site administrative work. As a result of the above, as of the end of the first half of fiscal year 2022, the cumulative reduction in indirect costs from fiscal year 2019 was JPY 6.06 billion, 63.8% progress towards the target of JPY 9.5 billion. Please refer to page 28 of the document for the status of cost increases related to employee system reforms. Now that I have explained the strategy for strengthening our Japanese business and the status of indirect costs, I believe that the key theme is how to respond to changes in the supply chain and raise the top line.
This basic strategy will be the core business growth strategy in Japan as well, and we believe that it is important to view the Japanese market within the context of the entire global supply chain. We will continue to strengthen our efforts in the strategy to fortify our Japanese operations, and with the goal of winning in the mother market, we will strive to become overwhelmingly strong in Japan, our home market. This is all from me. Thank you very much.