Mitsubishi Profit Doubles as China, India Drive Coking Coal Prices Higher

Mitsubishi Corp. and Sumitomo Corp.’s quarterly profit more than doubled after prices of coal, for steelmaking and power generation climbed on demand growth from China and India.

Mitsubishi’s net income rose to 140.4 billion yen ($1.63 billion) in the quarter ended June 30 from 67.8 billion yen a year earlier, Japan’s biggest trading house said in a statement to the Tokyo Stock Exchange. Revenue rose 19.2 percent to 4.73 trillion yen. Sumitomo, the third-largest trader, reported quarterly profit surged to 64.6 billion yen from 25 billion yen.

BHP Billiton Mitsubishi Alliance, the world’s biggest coking-coal exporter, agreed a 55 percent increase in the April- June price for the material with JFE Holdings Inc.’s JFE Steel unit. China’s robust demand also helped boost the price agreed between Japanese steelmakers and the Australian supplier by 12.5 percent in the quarter started this month.

“Coal is a big element of Mitsubishi’s earnings and helped bolster the company’s revenue and profit,” Yasuhiro Narita, an analyst at Nomura Securities Co. in Tokyo, said before today’s announcement. “Mitsubishi should go ahead with aggressive investment in the next couple of years.”

Coal as Driver

Shares of Mitsubishi fell 0.7 percent to 1,903 yen as of 2:15 p.m. Tokyo time after the earnings announcement, while Sumitomo dipped 1.4 percent to 912 yen, tracking the benchmark Nikkei 225 Stock Average. Mitsubishi and Sumitomo have lost 12 percent and 7.7 percent in the past six months, compared with the 6.3 percent decline in the Nikkei.

Sumitomo’s profit from the natural resources and chemical division rose 21 billion yen to 22.6 billion yen in the quarter, equivalent to 35 percent of its overall net income, partly because of ‘good’ coal business performance in Australia, the statement said.

Mitsubishi maintained its full-year profit estimate at 370 billion yen for the year ending March 2011 on revenue of 18.8 trillion yen, the statement said. Sumitomo left its annual profit outlook unchanged at 160 billion yen on revenue of 8.4 trillion yen.

“The 370 billion yen figure for Mitsubishi may be a bit too conservative,” said Narita of Nomura, who expects profit to exceed 450 billion yen for this fiscal year. Narita has a “Buy” rating on the stock.

Mitsubishi plans to spend as much as 2.5 trillion yen in the next three years on businesses such as metals, energy and infrastructure to capitalize on growing demand from China, India and Brazil, Chief Executive Officer Ken Kobayashi said on July 16.

To contact the reporters on this story: Shigeru Sato in Tokyo at ssato10@bloomberg.net; Ichiro Suzuki in Tokyo at isuzuki@bloomberg.net.

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