I would like to extend my sincerest appreciation for your patronage of TOKYO KEIKI.
In the first half of the fiscal year, the global economy remained challenging due to concerns over the impact on the economic recovery. This is because monetary tightening in each country accelerated amid intensifying inflationary pressure on the back of soaring crude oil and raw material prices, following Russia's prolonged invasion of Ukraine and a protracted shortage of semiconductor and other parts.
In the Japanese economy, the outlook remained uncertain owing to factors such as a sharp depreciation of the yen against the backdrop of widening interest rate differentials between Japan and the United States, in addition to the existing shortage of components such as semiconductors.
The First Half of FY2022 Operating Results
Under such a business environment, our group's net sales for the first half were ¥18.59 billion, an increase of 1.2% compared to the same period of the previous fiscal year. This was mainly because of the strong performance of Railway Maintenance business and a favorable influence of the depreciation of the yen in Marine Systems Business.
On the other hand, in terms of profit and loss, the cost of sales ratio rose from the same period of the previous fiscal year due to the steep rise in raw material prices and changes in the product mix, as well as the increase in SG&A expenses. As a result, the operating loss was ¥620 million (the operating income of ¥30 million in the same period of the previous fiscal year), the ordinary loss was ¥320 million (the ordinary income of ¥240 million in the same period of the previous fiscal year), and the net loss attributable to owners of the parent was ¥230 million (the net income attributable to owners of the parent of ¥230 million in the same period of the previous fiscal year).
With regard to new products launched in the first half of the fiscal year, we launched an ultrasonic flowmeter for culverts UVH-3000 in Fluid Measurement Equipment Business as a strategic product for both public and private markets. This flowmeter is an indispensable product for precise flow management at sewerage treatment plants and factories as it allows high-precision measurement of sewerage and industrial wastewater flows containing impurities. We will focus on sales promotion of the product from now on.
Full Year Forecasts
In the second half of the fiscal year, the outlook remains uncertain due to soaring crude oil and raw material prices following Russia's prolonged invasion of Ukraine, protracted shortages of semiconductors and other parts, and the ongoing economic stagnation in China. However, capital investment in the domestic manufacturing industry is expected to continue to recover and public investment will remain firm.
Amid these business conditions, in Marine Systems Business, where the yen is expected to depreciate, Defense & Communications Equipment Business, which recovered from the trough in projects, and Railway Maintenance business, where equipment sales are increasing, sales are expected to increase and the order backlog is at a high level. However, the number of projects will be carried over to the next fiscal year onward because of a shortage of components, and sluggish demands for industrial machinery in the Chinese market are continuing in Hydraulics and Pneumatics Business. As a result, net sales are expected to be ¥44.7 billion, which is ¥700 million (1.5%) lower than the forecast as of May 13, 2022.
Earnings are significantly affected by lower net sales and by higher than expected prices for crude oil, raw materials, semiconductors and other products. Despite efforts to optimize selling prices in each business, more time should be required to obtain effects. In addition, some high-value-added projects are carried over into next year. Accordingly, compared to the initial forecast, we expect a decrease in operating income by ¥810 million (43.8%) to ¥1.04 billion, a decrease in ordinary income by ¥690 million (32.9%) to ¥1.41 billion, and a decrease in profit attributable to owners of parent by ¥590 million (38.1%) to ¥960 million.
By segment, we expect to secure operating income in Marine Systems Business, Fluid Measurement Equipment Business, and Others businesses.
In spite of such tough circumstances, we will continue to identify, select and develop the growth drivers in an effort to achieve sustainable growth and increase corporate value over the medium to long term, as stated in TOKYO KEIKI Vision 2030.
For the fiscal year under review, we plan to maintain our initial dividend forecast to increase the ordinary dividend per share by ¥5 to ¥30.
On behalf of the senior management and workforce at TOKYO KEIKI, I would like to close by asking all stakeholders for your ongoing and further support and cooperation.