Japanese trading houses lift profit outlooks as commodity prices rise

FILE PHOTO: The logo of Japanese trading company Mitsui & Co. is seen in Tokyo, Japan, January 10, 2018. REUTERS/Toru Hanai

By Yuka Obayashi

TOKYO (Reuters) - Japan's Mitsui & Co, Mitsubishi Corp and Itochu Corp on Thursday each lifted their annual profit estimates to above 800 billion yen ($7 billion), thanks to higher commodity and energy prices.

The three trading houses, in addition to Marubeni Corp, raised net profit forecasts for the financial year ending on March 31 to record levels, after similar upgrades three months ago, helped by a recovery in global economic activity from the pandemic-stifled levels of 2020.

Japanese trading houses, just like their global rivals, have benefited from sharp climbs in the prices of key natural resources from copper and coal to liquefied natural gas (LNG).

"Higher income from iron ore and China's ferroalloys business, as well as elevated coking coal prices were behind the upward revision," Mitsui Chief Financial Officer Takakazu Uchida said. "Stronger oil and gas prices and robust performance of LNG trading also helped."

Mitsui raised its net profit forecast for the financial year to March 31 by 17% to 840 billion yen, Mitsubishi's guidance climbed 11% to 820 billion yen and Itochu's rose by 9% to 820 billion yen. Marubeni, a smaller peer, upped its forecast by 14% to 400 billion yen.

For the April-December period, net profit rose from a year earlier by 281% at Mitsubishi, 218% at Mitsui, 86% at Itochu and 102% at Marubeni.

Reflecting tight global supply, an average price of coking coal in April-December soared 91% from the same period a year earlier, iron ore climbed 72% and copper rose 50%.

Energy markets also rallied, with an average price of Asia's spot LNG jumping 376%, thermal coal surging 164% and Brent crude oil increasing 82%.

"We were able to take advantage of a tailwind in resource prices," Mitsubishi CFO Kazuyuki Masu said, adding its salmon and trout farming and automobile sales were also buoyant.

Despite rosy results and predictions, shares in Mitsubishi, Itochu and Mitsui ended lower on Thursday after the announcements, falling between 0.7%-2.7%.

Only Marubeni shares gained 1.1%, outperforming the broader benchmark Nikkei 225 which fell 1.1%.

($1 = 114.6800 yen)

(Reporting by Yuka Obayashi; Additional reporting by Gavin Maguire; Editing by Edmund Blair)

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