Mitsui Forecasts Record Profit on Higher Commodity Prices

Mitsui & Co., Japan’s second-largest trading house, said its profit may rise 17 percent to a record this financial year because of forecast higher commodity prices.

Net income may be 430 billion yen ($5.34 billion) in the year ending March 31 2012, the Tokyo-based company said today in a statement. Annual profit in the 12 months ended March 31 more than doubled to 367.9 billion yen, it said today.

Commodities beat stocks, bonds and the dollar for a fifth straight month in April as demand for raw materials increases. Demand for iron ore, led by the world’s biggest consumer China, may help boost earnings in Mitsui’s mineral and metal resources unit by 22 percent to 37.6 billion yen this year, it said today.

“Strong global demand will continue to be a supporting factor for the commodity markets,” the company said in a presentation today. Its forecast includes a 9 billion yen loss from the impact of the Japan’s March 11 earthquake and tsunami.

Commodities yesterday dropped the most in two years as the 6.5 percent tumble of the Standard & Poor’s GSCI Index of 24 raw materials reflected investor concerns that economic growth may slow because central banks are seeking to cool inflation by raising borrowing costs.

The global economy will continue a “moderate trend of recovery,” Mitsui said today, noting the speed of the recovery may be unbalanced.

Oil Tumbles

Oil futures tumbled 8.6 percent yesterday in New York and silver headed for its steepest weekly decline since at least 1975 today.

The run-up in commodity prices over the last year, which accounted for more than half of Mitsui’s increase in net income, has also made it harder for traders to meet margin requirements on financing used for the purchases.

Mitsui’s free cash flow plummeted to 20.5 billion yen in the last fiscal year from 452.3 billion yen a year earlier, the company said today. Sales rose 14.2 percent to 4.68 trillion yen in the period.

Separately, Mitsui’s oil exploration unit and Anadarko Petroleum Corp. have received additional invoices from BP Plc to help share the clean-up costs of last year’s oil spill in the Gulf of Mexico, the Mitsui unit said today in a statement on its website. The total payment obligations sent through by BP were $2.1 billion as of April 5, Mitsui said.

Mitsui “expects to receive additional invoices from BP, but it expects to continue to withhold payment given that at the present time it is uncertain whether there will be an obligation to pay,” Mitsui said in the statement.

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

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

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