Thank you very much for your patience. We would now like to start the result briefing for the first half of fiscal year ending in December 2021. Let me introduce the attendees from the company. In the front row, on your left is Mr. Saito, the President and Chief Executive Officer and Representative Director. On his left is Mr. Ishii, the Executive Vice President, Chief Operating Officer, and Representative Director in charge of business solutions.
In the back row we have Mr. Akita, the Executive Vice President and Chief Operating Officer in charge of Japan business unit. To his left is Mr. Horikiri, Executive Vice President and Chief Operating Officer in charge of corporate solutions. We also have Mr. Masuda, Director and Managing Executive Officer in charge of corporate planning and financial planning. As Secretariat, we have Mr. Suzuki, the General Manager from Financial Planning.
I will be serving as your MC today. My name's Tsumori from Investor Relations Office from the Corporate Planning division. As for the schedule for today's session, for the first 15 minutes, Mr. Saito will present about the outline of the results. Then marine and air freight forwarding business and measures on priority industries will be presented by Mr. Ishii for 10 minutes. In terms of enhancement of domestic business in Japan, Mr. Akita will present. Regarding the KPIs for overhead cost reduction and ESG management, Mr. Horikiri will present respectively for five minutes. In total, the presentation will take 35 minutes. Afterward, we have a question-and-answer session for 20 minutes. We are planning to finish by 5:00 P.M. Tokyo time. We have three materials for today.
The PowerPoint presentation for the results, and also financial statements, and the memo for the result briefing. They are all uploaded on our website. As you have been notified, the question-and-answer session will take place in the conference call format. In the question-and-answer session, the live streaming will finish, and we will switch to the conference call line. From this year, we have changed our fiscal year end from March 31st- December 31st. So our business fiscal year will be from January- December. As this year is the first year after the change, this will be an abnormal year, as our fiscal year will only contain nine months, from April to December.
For comparative purposes from previous year, we have created a pro forma financial statement which covers the one year from January to December. We have combined the January-March quarter of 2021, and also the result and outlook from April to December. Also for the previous year's figures, we have reconciled with a three-month gap with the overseas segments, so that it's easy for you to compare.
Also, in the presentation material for results, we have two types: the pro forma based presentation and also the one based on the financial statements for Tanshin. But in our main session today, we will be using the material based on the pro forma basis. As for the other material based on Tanshin, it is uploaded on our website as a complimentary document. Please refer to that as needed. Now, without further ado, we would like to have the presentation of the results for the first half of fiscal year ending in December 2021 from Mr. Saito.
Hello, ladies and gentlemen, this is Saito. Thank you very much for taking time out of your busy schedule to participate in our financial results briefing today. I would also like to express my sincere gratitude for your continued patronage. Today, I would like to begin with an overview of our business results for the first half of the fiscal year, our full year guidance, and progress of our management plan, as well as the shareholder return. Please turn to page five of the presentation material. The consolidated financial results for the first half of the fiscal year ending in December 2021 are shown on this page.
Coming into the second quarter, the overseas and international logistics business remained strong, but the domestic logistics business was unable to recover due to the effects of the continued status of emergency. On the other hand, our consolidated business results showed an increase in revenue and an increase in each profit below operating income compared to the previous year, due as the business bounced back from the impact of the pandemic last year.
Net sales and operating income exceeded the forecast announced on August 13. However, in China, in the East Asia block, a high amount of bad debts in the handling of marine transportation resulted in a provision of CNY 1.2 billion, which somewhat muted each profit below operating income. Overseas, in the Americas, in addition to the volume growth in the motor transport business among others, cost reduction measures implemented since last year contributed to increased profits.
In Europe, both sales and profits expanded thanks to steady demand for automobiles and electronic component transportation, as well as the handling of apparel-related air charters from Italy. In South Asia, air exports of automobile-related products continue to be strong. An increase in marine freight forwarding volume also contributed to higher revenue and profits. On the other hand, in East Asia, air exports increased, but car transport services were sluggish due to a decline in auto production cuts caused by a shortage of semiconductors. The posting of provisions for bad debts, as mentioned earlier, resulted in higher revenue, but lower profits.
In Japan, the air and marine freight forwarding business and the e-commerce business performed well, but the domestic logistics business was sluggish due to the state of emergency disruption in railroads caused by heavy rains in the San'in region or the western part of Japan, and the impact of factory shutdowns in the automobiles and other industries due to semiconductor shortages. In sum, we believe that our management strategy to date has been successful in driving the performance of our overseas business and international logistics business, utilizing our global network. However, domestic logistics remained weak due to factors such as cargo movement not reaching pre-COVID-19 levels, with the exception of some industries.
With the lifting of state of emergency, while we expect a recovery going forward, it is essential for us to respond to changes in the supply chain and to capture growth areas. We intend to promote our core business growth strategy to expand globally, including in Japan. We will also take seriously the fact that occurrence of non-performing loans had a negative impact on our business performance this fiscal year, and we will once again strengthen our credit management. Furthermore, although there is no direct relationship with this NPL, we believe that we need to pay closer attention to the tightening of controls by the Chinese authorities and its impact. As can be seen in the stagnation of air cargo due to measures against the pandemic, regulations and controls are tightened at a very fast pace, especially in China.
It is important to always be prepared for unforeseen circumstances. Therefore, we believe that it is essential to strengthen our global governance system, which is one of the objectives of the transition to a holding company structure, and to increase the level and speed of risk management while keeping in mind global country risks, including those in China. I have provided an overview of the financial results. On page 12 and page 13, you will find the details behind the changes in net sales and operating income, taking into account variable factors. The details of each segment are shown on page 22-page 29. Please refer to those pages for details of each segment. Next, I would like to explain the consolidated earnings forecast for the full year. Please turn to page 17. We have comprehensively taken into account the current business environment and outlook.
Compared with the full-year forecast announced on August 13, we have revised upward guidance as follows. Net sales revised up by JPY 30 billion. Operating income and ordinary income by JPY 1 billion respectively, and net income by JPY 6 billion. The outlook over the pandemic remains unclear due to concerns that they may spread again. But at this point, we have temporarily assumed that domestic logistics will gradually recover with the lifting of the state of emergency.
As for the forwarding business, we expect the marine forwarding business to continue to face space shortages until the first half of next year, and the airfreight forwarding business to remain strong at least until the Chinese New Year next year, due to the expected increase in transportation demand toward the end of the year and demand for switching from marine transportation.
As of October, air and ocean freight forwarding volumes have increased more than expected, which is the main reason for the upward revision. Although air and ocean freight costs remain at high levels, we believe it is important to continue to maintain profit per unit, such as by weight. Let me also note that the greater increase in net income is mainly due to an increase in gain on sales of stocks. Next, I will explain the status of the management plan initiatives. I will cover the main points focusing on future initiatives, and the Executive Vice President in charge will explain the details of the progress later.
Please turn to page 31. First, with regard to the growth strategy for core businesses, our enhanced global sales structure is now in place, and we will implement account management as a means to expand sales. We will promote customer-based approach, which identifies the value that customers are looking for, and enhance our sales efforts based on the concept of Market in by focusing on products and services that meet their clients' needs. This approach is directly connected to the business and area-based approaches. Collectively, these three approaches will contribute to the three dimensional enhancement of our core businesses. Please turn to page 33.
Next, with regard to the strategy to enhance domestic businesses in Japan, we are seeking results in the reduction of back-office expenses and outsourcing costs. But we believe more can be done, including the enhancement of the productivity of warehouse operations. At the same time, by promoting the growth strategy for core businesses in Japan, we are expanding our targeted industries to future growth sectors, such as the pharmaceutical and semiconductor industries. We also believe that it is necessary to design businesses that correspond to new business models. Next, I would like to explain three points regarding our efforts to realize our long-term vision of becoming a logistics company with a strong presence in the global market. Please turn to page 38.
As we have already announced, we are preparing to introduce a new brand and set up the integrated NX Group office as we transition to a holding company structure in January next year. We believe that these efforts will help us build the foundation for achieving our long-term vision. The details of this transition to a holding company structure will be disclosed in the near future as soon as the organization and management structure are determined. In addition, the company will continue to restructure the group to achieve further growth in its global businesses and to build a structure that will enable stronger group management. We have begun discussions on the implementation of a global business promotion unit and the reorganization of overlapping businesses and functions. The second point I want to mention is about inorganic growth strategy.
Simply put, this is a strategy to become a mega forwarder through M&A. As the President, I have placed this at the top of my mission. In order for us to become a global mega forwarder without lagging behind our global competitors, we believe it is necessary to build a global business base, a customer base of non-Japanese global accounts, and affordable business infrastructure by leveraging M&A. On the other hand, we are recently seeing increased cases of M&A by global mega forwarders aimed at expansion of scale. Because of this, the acquisition price can be as high as 15x the EBITDA. We are constantly reviewing potential deals to realize our M&A strategy, but we would like to carefully assess the acquisition price and seek collaboration to pursue synergies.
The third point I want to raise is the establishment of ESG-oriented business management to realize sustainable development and improve corporate value. Currently, there is a global demand for the preservation of global environment, and we would like to accelerate our efforts in this respect. As part of that transition to a holding company structure, we have decided to establish a system to strongly promote sustainability throughout the entire group, including efforts to tackle climate change. We will put together medium and long-term goals for the group in order to promote these efforts. We aim to achieve carbon neutrality in 2050 and will come up with concrete targets to be included in the next management plan. We are also working on a project to study the necessary efforts to achieve digital transformation.
We hope to discuss the grand design in the near future and show the way forward through Investor Relations Day and other occasions. I have given you an overview of our activities regarding the managed planned plans so far. The year 2021 is the interim year of the current management plan, and we will decide whether to review the target figures or not based on the progress made, the state of the global economy, and the outlook of the economic recovery trend. Despite the uncertainty ahead, we are making steady progress on each of the actions set forth in the management plan to realize our long-term vision.
Toward 2023, we would like to achieve our goals from two directions. One that focuses on the acceleration of organic growth through the strengthening of our core businesses and businesses in Japan, and another that seeks contribution from M&As. Please turn to page 39. For the fiscal year ending December 31st, 2021, we focused on interim dividend of JPY 19 per share and a year-end dividend of JPY 95 per share for a total dividend of JPY 185 per share. The same amount as in the fiscal year ending March 31, 2020. The payout ratio would be 37.4% and the total return ratio, including share buybacks, would be 59.5%.
The total return ratio for the three years from fiscal 2019 is expected to be 66.2%. Based on the net income for the current fiscal year, excluding extraordinary factors such as asset sales and impairment, we will continue to strive to enhance shareholder returns. As set forth in the management plan, we aim to achieve the dividend payout ratio of 30% or more and a total return ratio of 50% or over in the five-year cumulative period of this management plan. I hope I was able to provide an overview of our financial results for the first half of the year ending December 31st, 2021. I would like to ask for your further support as we continue to make group-wide efforts to fully realize our management plan. Thank you.
Next presentation will be provided from Mr. Ishii.
I will now explain the current status and future plans for the marine and air forwarding businesses, as well as our initiatives on priority industries as part of the growth strategy for core businesses. Please turn to page 31. Both marine and air forwarding volumes are increasing year-on-year. The air forwarding business is expected to achieve its forecast for 2021, while the ocean transport business is expected to fall short of the projection due to the shortage of containers. In the ocean transport business, volume is expected to increase significantly, driven by the growing consumption in Europe and the U.S., while the supply-demand gap is widening due to port congestion and operational delays.
Furthermore, the industry has reached its peak season from August, driving up a demand for transport, and consequently leading to price hikes. However, as some European mega forwarders have indicated that they will not raise spot rates further, we do not expect another material spike in the prices. On the other hand, there is no sign that the shortage of marine containers will be resolved, and the situation is unlikely to improve anytime soon due to uncertain factors such as the renewal of the labor agreement on the West Coast of the U.S. We expect that tight space availability to continue during the course of the first half of next year.
Under these circumstances, we believe we can enhance our value proposition by capitalizing on our ability to provide our customers with the best transportation methods based on our understanding of space, lead time, and cost using real information. This way, we should be able to grow our business. To this end, we will centrally manage real information, such as the number of vessels waiting offshore and the state of overdue cargo in each channel, including ports and transcontinental railroads in the U.S. and Europe and other countries. In addition, we have focused on securing space mainly at our global NVOCC center and have been working to strengthen the system to control the entire logistics with a sense of urgency. In the recent market environment for air freight forwarding, cargo movement from Asia to North America has been strong, especially for electric and electronic products and consumer goods.
While transportation demand is high, the supply of space has not kept pace. According to the IATA report, the supply of international air cargo space in September was reported to be about 11% lower than that of 2019 due to reduced flights caused by the tightening of anti-pandemic measures in China, and the mismatch between supply and demand continues. Also in 2022, international passenger flights were expected to decrease by more than 50% compared to pre-COVID-19 levels, and it is expected to take some extended time to close the gap. Under these circumstances, the air forwarding business is expected to remain strong until at least the Chinese New Year next year, as demand is expected to increase further leading into next year, as well as demand to switch from marine transport.
We will continue to closely exchange information with our customers and airline carriers, and focus on securing space to keep the supply chain uninterrupted. At the same time, we believe that space control in accordance with changes in supply and demand will be a critical point. In that context, we intend to secure about 70% of the space against the forecasted demand by industry. The remaining 30% will be dealt with flexibility by responding to changes in the market. Our ability to respond to these changes will depend on the speed of information gathering and the relationship with carriers, and we believe that is where we can exert our strength. That is the current status of the freight forwarding business.
Due to the shortage of space caused by the pandemic, we are not expected to achieve the interim volume target for fiscal year 2021 under our midterm business plan. As this year is the midpoint of the midterm management plan, we will be reviewing the final target for fiscal year 2023, and we will determine the freight forwarding volume outlook after fully analyzing the future prospects, and we will update you with the new information.
Next, I would like to walk you through our initiatives for priority industries. We have identified five priority industries under the midterm management plan. With the global economy recovering, we have been accurately capturing logistics needs, such as air transportation demand from the automotive, electric, and electronic industries, among others. As a result, we expect to achieve year-on-year growth as well as the guidance for fiscal year 2021, with the exception of domestic apparel industry.
The domestic apparel industry was impacted by factors such as major customers internalizing their warehousing capability to their own facilities. Having said that, we would like to gain momentum for the apparel-related business with the increase in apparel imports and the start of the new DC operations. Today, I would like to touch upon our initiatives in the semiconductor and pharmaceutical industries, where we can expect some strong growth. Let me start with the semiconductor industry. The world map of semiconductor sector is beginning to change drastically, with the U.S. and China taking the center stage. Under these circumstances, we will strategically focus on the global expansion of U.S. chip makers and Taiwanese foundries, as well as a trend toward in-house manufacturing in China.
In particular, in the state of Arizona in the U.S., where U.S. chip makers are ramping up their capacity and Taiwanese foundries are setting up factories, we are planning to start at a warehouse operation of 3,000 tsubo in size, dedicated to semiconductors within the next year. We believe that the success of this project will be a touchstone for the expansion of our semiconductor industry-related logistics business on a global basis. In Japan, there are more than 140 factories involved in chip making, and most major manufacturers have their own logistic subsidiaries, and most of the work has traditionally been done in-house. Recently, however, manufacturers have been putting their logistic subsidiaries up for sale in order to focus on their core businesses, and this is a golden opportunity for us to take over logistics demand directly from the manufacturers. Today, we are mainly handling the semiconductor production equipment.
We will thoroughly challenge the area of production logistics in semiconductors and pursue the logistics related to semiconductor production in Japan. In September next year, we will start operation of a 15,000 tsubo warehouse in Yokkaichi, one of Japan's leading semiconductor manufacturing base. Leveraging on this as the core site, we aim to provide production logistics solutions to suppliers, in addition to handling implant logistics. Our domestic multifunctional business will expand its target industries to include leading edge sectors in response to changes happening in the industrial structure. As the semiconductor manufacturing bases are reorganized in the future, we expect ourselves related to the chip industry to grow by more than 40% per annum. Next topic is the pharmaceutical industry. In February this year, warehouses dedicated to pharmaceuticals started full scale operations at four locations in Japan.
We have started a service with major Japanese pharmaceutical companies and are planning to start operations of new businesses such as domestic DC operations for non-Japanese pharma companies, and ultra low temperature warehousing operations related to bio drug manufacturers from the beginning of next year. Overseas, we are developing airport CFS spaces that have acquired GDP certification, and their pharmaceutical business is expanding with the help of our global network and forwarding services. In addition, the sales structure that we have established in Japan and overseas are now connected, and we will be aiming for accelerated expansion by using account management methods for both Japanese and non-Japanese pharmaceutical companies. In this context, Japan still only has guidelines regarding GDP, but non-Japanese companies are already highly aware of this topic.
Under these circumstances, we have already signed a contract with a major non-Japanese customer, and we have also received requests from other foreign manufacturers to participate in the bidding process. In addition, prior to these bidding opportunities, we have received inquiries for forwarding services originating from overseas, such as Singapore, and we intend to actively offer such services and contribute to the global supply chain of our customers in compliance with the GDP. We also believe that our leading role in providing high quality logistic services in compliance with GDP may become a turning point for Japanese manufacturers in the field of pharmaceutical logistics. Therefore, as a strategic scenario for the future, we believe that we will be building a position as a leader at this flexion point in change, and we expect a dramatic growth in ourselves related to the pharmaceutical industry.
I have so far explained the two growth strategies for our core businesses. We will practice global account management as a method to expand our overseas sales with the global market as our main battlefield. We have selected 10 measure companies consisting of Japanese and non-Japanese global clients, and we are aiming for further growth of our core businesses by identifying the value that customers appreciate, and by developing sales with the concept of Market in® to provide products and services that meet customers' needs as well as ability to execute, which is part of our business focused approach.
We are already in the process of hiring multinational, non-Japanese talent to manage accounts. Next year, we will transform our structure so that the common language will be English, and with the new formation, we aim to better serve our global clients. This will conclude my presentation. Thank you very much for your attention.
Next is Executive Vice President Akita.
My name is Akita, and I am in charge of the businesses in Japan. I would like to express my sincere gratitude for your continued support. Let me explain the situation of our domestic businesses. Please turn to page 32. Here, you can see our non-consolidated revenue by business segment for the first half of this year. Although the handling of imports and exports has grown significantly, the recovery in domestic logistics has been limited. In general, the situation has not reached pre-pandemic levels. The prolonged declaration of a state of emergency, the shortage of semiconductor supplies, and the water disasters during the summer were the main factors. The cargo movement has been recovering to a certain degree since October.
However, there are still many uncertainties, including the spread of COVID-19 overseas, and we believe that the future outlook remains unpredictable. Please refer to page 33. Under these circumstances, we have been promoting various initiatives as part of our strategy to strengthen our businesses in Japan. The following is a list of the major initiatives. First, I would like to talk about the improvement of profitability. Regarding the reduction of outsourcing costs, which we have been working on since last year, the ratio of outsourced work decreased by 3.2 percentage points year-on-year, while total sales increased by 16.5% in the first half. The utilization rate of company-owned vehicles also increased by 2.3 points as a result of efforts such as efficient vehicle matching. We have a total of about 20,000 vehicles, including about 14,000 company-owned vehicles and about 6,000 vehicles used by our branch offices in Japan.
For example, a 2.3 point improvement means that roughly 460 more vehicles are in use every day, which has led to a reduction of outsourcing costs. We will continue to vigorously promote these cost control efforts in line with the cargo movement recovery. To improve productivity, we are continuing to work on improving the overall level of warehouse operations and automating and simplifying office operations. in October this year, we newly established the Logistics Department to strengthen the function of promoting the improvement of overall warehouse operations, including the use of advanced technologies. As for the promotion of land, sea, and air integration initiative, we focused on expanding transactions by implementing cross-mode sales promotion nationwide to fight against the negative impact caused by the pandemic. In an effort to strengthen our network products, we achieved the results as described in the presentation materials.
In particular, sales of Protect BOX increased by 80.6% year-on-year in the first half of this year, and it has become a big hit in the midst of the pandemic. In October of this year, we launched a new service called One-Stop Navigation. This is a new service that allows users to search for various transportation routes, fares, and durations by simply entering the origin and the destination. The service can be easily used from a smartphone and suggests the best transportation route. The greatest feature of the One-Stop Navigation service is that it displays the amount of CO₂ emissions, which are certified by the certifying organization for each transportation route, making the most of our strength as a comprehensive logistics provider covering land, sea, and air. Although the domestic economy is on a recovery track, the future with COVID-19 remains uncertain.
However, we will continue to strengthen and promote various initiatives to further strengthen our businesses in Japan. That is it from my side.
Next, Executive Vice President Horikiri.
I am Horikiri. I would like to explain about the back office expenses and ESG-oriented business management. First, please look at page 34. This shows the cost increase related to human resource management reform. The impact for fiscal year 2021 is expected to reach JPY 1.4 billion. As of the end of September 2021, the actual cost increase was JPY 800 million, of which JPY 400 million was due to the extension of the retirement age at our company, and JPY 400 million was related to the introduction of equal pay for equal work at our consolidated subsidiaries.
Next, please refer to page 35 of our cost reduction efforts. With regard to the grouping of our local branches on the streamlining of the management structure, 2021 will be the period in which we aim to strengthen the new structure implemented in 2020 by reallocating the back office staff at the branches and those at the head office to achieve company-wide efficiency. As a continuation from 2020, we plan to relocate eight head office personnel, and three have already been relocated in the first half of this year.
We will continue to promote the grouping of our local branches and the streamlining of the management structure. As for the administrative process reform, overtime work increased by JPY 270 million in the second quarter, mainly due to the recovery in the handling volume and also due to temporary overtime work in connection with the promotional projects to accelerate the settlement of accounts and standardize operations.
The temporary staffing cost decreased by JPY 60 million this year as the effects of the review conducted last year have come full circle. On the other hand, the promotion of reducing the workload of on-site administrative work through RPA and SSC has curbed the increase in overtime costs and the cumulative reduction in overtime work since 2019 has reduced the associated cost by JPY 2 billion.
As for back office cost reduction, the cumulative reduction from fiscal year 2019 reached JPY 6.55 billion as of the end of the first half of fiscal year 2021, which was approximately 69% of the target of JPY 9.5 billion. We will continue to centralize administrative operations and visualize the utilization status of systemized operations. This includes introduction of automated expense reimbursement and electronic invoicing. We will monitor these activities at the branch level by using efficiency indicators that promote the reduction of frontline administrative work.
We aim to achieve our targets through measures such as centralizing office work and improving productivity, as well as promoting paperless office. For details of our RPA initiatives as part of our office process reform, please refer to page 36. Now, please turn to page 37. Regarding ESG-oriented business management, the list of KPI achievements is provided in the presentation material.
However, I would like to say a few words on CO₂ emissions. Last year we moved up our long-term goal of reducing CO₂ emissions to 350,000 tons by 2030 or a 30% reduction compared to 2013 by seven years to 2023, which is just two years from now. We have been strengthening our efforts to achieve this new goal. Cumulative emissions since April 2021 have increased by 6,497 tons compared to the previous year. This was mainly due to an increase in the use of automobiles and forklifts as a result of an increase in the volume of cargo handled and an increase in electricity consumption resulting from the start of operations at our new warehouse.
Under these circumstances, it seems difficult to achieve the target with the conventional measures alone, such as switching to LED lighting to reduce CO₂ emissions from electricity, switching to environmentally friendly vehicles to reduce CO₂ emissions from fuel, and energy saving measures for domestic vessels. Therefore, we are considering the use of renewable energy and other measures as a new approach. We will continue to work on establishing the medium and long-term goals for the entire group toward carbon neutrality in 2050, the result of which will be reflected in the next management plan. That is it from my side.
With that, we would like to conclude the live broadcast. From here on, the question-and-answer session will be done via conference call.