Fiscal year (FY) 2022 was the final year of the medium-term management plan GP25 2nd Stage.
What were the achievements and issues over the past three years?
In 2015, the 70th anniversary of the foundation of the company, we formulated the long-term vision, GP25 for 2025, 10 years after 2015, and announced our goal to become an all-embracing company for building materials. The reason behind the formulation of GP25 was that we were a housing materials manufacturer back then, and most of our sales came from products for the domestic new housing market; therefore, revising our business and market portfolio was a huge management challenge for us since new housing starts would decrease because of the declining population in the future. Thus, we decided to strive to become an all-embracing company for building materials by expanding our business domains from building materials to the supply of industrial materials and installation and construction. We also decided to make proposals not only for the new housing market but also for remodeling and renovation of public and commercial buildings with those industrial materials and expand into global markets.
FY 2022 was the final year of the medium-term management plan GP25 2nd Stage, the second phase of the plan to achieve the long-term vision by dividing the 10 years until FY 2026 into three phases. When we look back on the past three years when we promoted a variety of different measures to accelerate the growth strategies and enhance the management foundation as specified in the basic policy, we appreciate the fact that we made steady progress toward achieving the long-term vision and advanced the stage transition in the midst of unexpected changes in the environment due to the COVID-19 crisis.
We achieved good results, especially in the expansion into global markets, mainly the North American market. To expand into the North American housing market, which is the world's largest wooden housing market and about four times larger than the Japanese market due to the number of housing starts and vast floor area and where continuous population growth is expected in the medium and long term, we merged and acquired a veneer plant in Canada and an LVL plant in the United States in FY 2020. Subsequently, the external environment provided a boost. A wood shock, which was a rise in wood product prices caused by a combination of strong demand due to the growing needs for suburban housing during the COVID-19 crisis and supply chain disruptions, has continued to date, and the North American business fully capitalized on that demand and significantly contributed to the company's profits. In addition, there was an increase in demand for MDF, the primary product in the industrial materials segment along with LVL in North America, as the base material for furniture and buildings. The overseas sales ratio in FY 2022 was 32%, a significant increase from the 6% in FY 2016 when the long-term vision was formulated.
In the domestic market, we were able to capture new opportunities related to the securing of workspaces and sound proofing because of the steady increase in demand for building materials for new houses and home renovations due to the growing needs for more comfortable living environments caused by staying at home and teleworking that had prevailed during the COVID-19 crisis. On the other hand, for public and commercial buildings, we failed to achieve the sales expansion target because of the rapid decrease in demand for building materials for accommodation facilities and commercial facilities caused by the COVID-19 crisis. Thus, we still have issues to solve. We have already started to make proposals tailored to the needs of the new normal by strengthening our sales structure for public and commercial buildings, and we will expand and improve the items that incorporated new ideas developed through collaborations with other companies. We expect that our proposals will bear fruit as the construction projects that were suspended or postponed resume. In the second half of FY 2022, the delay in the delivery of some products in the building materials business was caused by a greater-than-expected increase in orders and maritime transportation disruptions; therefore, we had no choice but to limit the number of orders, which caused significant inconvenience to our customers and business partners. Though we no longer limit the number of orders, we realize the major impact that our supply chain has on the entire industry and will make every effort to prevent it from happening again.
As for performance, we failed achieve the final year sales target specified in GP25 2nd Stage. However, our operating profit was 17.3 billion yen, which far exceeded the target of 12 billion yen, and we exceeded all profit targets. We appreciate the fact that we were able to consistently accelerate our growth by achieving significant results as reflected in the major financial indicators of an ROE of 10.9%, an ROA of 10.5%, and an equity ratio of 41.7%.
In addition, as initiatives related to ESG and sustainability become increasingly more important each year, we have set nonfinancial goals and worked on them. As for the environment, we were able to decrease CO2 emissions by 36%, exceeding the total domestic CO2 emissions reduction goal of 26% (compared to FY 2014) and achieved the goals we set based on our original indicators to raise the level of our initiatives related to diversity. On the other hand, though the degree of penetration of the group corporate philosophy developed on governance improved by five points compared to FY 2018, we failed to achieve our goal of a ten-point increase. We will consistently work to disseminate the Group Corporate Philosophy by continuously implementing penetration programs so that all group employees can relate to the philosophy and perform their daily work according to it.