Itochu Plans to Invest $10 Billion to Expand China, Resources Operations

Itochu Corp. (8001), Japan’s fourth-largest trading company, plans to invest 800 billion yen ($10 billion) over two years to expand in China and the resources industry.

The company will establish a China business promotion committee to help it acquire more assets in Asia’s largest economy, where it plans to invest as much as a quarter of the total amount, Itochu said today in a statement. It also plans to invest in resources businesses from uranium to natural gas.

“The investment seeks to positively increase the scope of our profits,” Chief Financial Officer Tadayuki Seki told reporters in Tokyo today. The company has joined Mitsui & Co., Japan’s No. 2 trading company, and Marubeni Corp. (8002), the fifth- largest, in forecasting record full-year profit.

The investments would double Itochu’s oil and natural gas assets, and include participation in new coal projects especially in Australia and Brazil. The plans are based on the company’s outlook for crude oil prices, the most bullish of the four Japanese trading companies to so far report 2010 results.

The Tokyo-based trader forecasts crude to average $109 a barrel in the year ending March 31, compared with Sojitz Corp. (2768)’s estimate of $105, Mitsui’s $94, and Marubeni Corp.’s $85.

“A price of over $100 is probably taking into account geopolitical risk,” Joji Okada, chief financial officer of Mitsui, told reporters in Tokyo today. ‘In the medium-term, we’re talking about $90 as about the right level.”

N.Y. Crude

Crude oil for June delivery fell $9.44, or 8.6 percent, to $99.80 a barrel yesterday, the lowest settlement on the New York Mercantile Exchange since March 16.

Under the investment plan, Itochu also seeks to add uranium, basic metals, and biomass fuel businesses, as well as purchasing infrastructure and auto retail finance assets. Machinery-related businesses, including lithium battery manufacture to capture the growing electric car market, and renewable energy and healthcare, are allotted as much as 200 billion yen.

Itochu is forecast profit of 240 billion yen in the fiscal year ending March 31, 2012, a 49 percent increase. That would outpace the 25 percent increase Marubeni expects to hit its target 170 billion yen and Mitsui’s forecast 17 percent increase to 430 billion yen in the current fiscal year.

To contact the Bloomberg staff on this story: Yuriy Humber in Tokyo at yhumber@bloomberg.net; Ichiro Suzuki in Tokyo at isuzuki@bloomberg.net

To contact the editors responsible for this story: Andrew Hobbs in Sydney at ahobbs4@bloomberg.net

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