Japan's trading houses serve up buffet of record earnings

By Yuka Obayashi and Aaron Sheldrick

TOKYO (Reuters) - Japan's trading houses booked record profits and upped full-year guidance, lifted by surging prices for commodities and growing demand for machinery, shipping and food as the global economy began to shake off the effects of a pandemic-induced slump.

Like their global rivals in energy and mining, Itochu Corp, Mitsubishi Corp and other Japanese trading houses have benefited from the rally that has driven the prices of items from coal to coffee to record, or near-historic, highs.

Itochu said on Friday its net profit almost doubled to a record 500.6 billion yen ($4.4 billion) in the six months through Sept. 30, while Mitsubishi's profit more than quadrupled to a record 360.6 billion yen.

"A historic rally in iron ore prices and a recovery in our overseas businesses, thanks to a pick-up in economic activity in China, Europe and the United States contributed to our earnings," said Keita Ishii, the president of Itochu.

The sogo shosha, as they are known in Japanese, have also paid handsome returns to U.S. investor Warren Buffett's Berkshire Hathaway after it bought 5% stakes in each of the five trading houses a little over a year ago.

With dividends re-invested, those investments, valued at about $6.2 billion at the time, have returned between about a quarter in the case of Itochu and more than 70% for Marubeni, Refinitiv Eikon data shows.

All five trading companies raised annual dividend forecasts, while Itochu also announced a new policy of minimum dividends as it lifted its full-year forecast to 750 billion yen, another record.

Mitsubishi nearly doubled its full-year profit estimate to 740 billion yen, also a record, as it paid a dividend of 71 yen per share for the first half.

Analysts had predicted full-year profits of about 70 billion yen less for Itochu and Mitsubishi, according to Refinitiv data.

Marubeni Corp, Mitsui & Co and Sumitomo Corp, the other three, also reported record results this week.

Recent falls in commodities, China's slowing growth and the bottleneck in global supply chains are likely to constrain future profit growth, executives said. [IRONORE/]

Mitsubishi's forecasts reflect expected falls in prices of coking coal, said Chief Financial Officer Kazuyuki Masu, adding that such high levels were unsustainable.

"We don't appreciate high volatility in natural resource prices ... but it is important that we are able to take advantage of them when they rally," he said.

($1=113.7800 yen)

(Reporting by Yuka Obayashi and Aaron Sheldrick; Editing by Clarence Fernandez)

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