Mitsubishi Net Slides 23% as Japan Traders Cut Resource Reliance

Mitsubishi Corp. (8058) said first-half profit fell 23 percent as strikes at Australian coal mines and a slowdown in China push Japan’s biggest trading house and domestic rivals to ease their reliance on commodities.

Net income fell to 190.4 billion yen ($2.37 billion) in the six months ended Sept. 30 after profit at the metals and mining unit, the biggest earner last year, tumbled 88 percent, Tokyo- based Mitsubishi said today. A drop in profits at Mitsui & Co. (8031), Itochu Corp. (8001) and Sumitomo Corp. left Marubeni Corp. (8002) as the only one of Japan’s major traders to boost earnings in the period.

Japan’s trading houses are seeking to cut their exposure to commodities as a slowdown in China’s economy and Europe’s debt crisis weaken demand for raw materials. Marubeni’s spend on non- resource assets this year was more than triple its mining purchases. The trader plans to cut its percentage of profit from commodities to 39 percent by April, the least in at least six years, Marubeni said yesterday.

“The economies of industrialized nations have slowed due to the impact of austerity measures and turbulence in financial markets as a result of the deepening European debt problems,” Mitsubishi said in a statement. “In emerging economies the rate of growth slowed due to sluggish export growth and domestic structural problems even in major countries such as China.”

Mitsubishi’s non-resource income climbed to 50 percent of its total in the three months to October, the highest in at least the last six quarters.

Annual Forecasts Cut

Mitsubishi last month cut its full-year profit target 34 percent to 330 billion yen as strikes at the Australian mines of BHP Billiton Mitsubishi Alliance, the world’s largest coal exporter, hurt output. The cut was bigger than expected by UBS AG (UBSN), which anticipated a downward revision to 350 billion yen.

Mitsui and Sojitz Corp. (2768), Japan’s biggest trader in rare earths, today joined Mitsubishi in lowering their profit outlooks. Mitsui, Japan’s second-largest trading house, cut this year’s forecast by 23 percent to 310 billion yen, after posting a greater-than-expected 26 percent drop in six-month net income to 168 billion yen.

Sojitz said profit for the year ending March 31 will be half the 20 billion yen it estimated in May after bigger-than- expected falls in coal shipments from Australia and oil and gas sales. Net income tumbled 71 percent to 3 billion yen in the six months to Sept. 30, Sojitz said today.

Itochu today said that net profit fell 11 percent to 142.2 billion yen in the six months ended Sept. 30, while Sumitomo said Oct. 31 that profit fell 15 percent to 129.4 billion in the same period.

‘Recovery Delayed’

“It is likely that the timing of the economic recovery originally expected” in the six months to April 2013 will be delayed, Itochu said today in a statement. “A strong sense of stagnation” and fears of a worsening of the European crisis and the U.S. financial position are spreading concern in global markets, it said.

Sumitomo Corp. (8053), the least reliant of Japan’s traders on commodities for profit, maintained its profit forecast as its media businesses helped offset a slump in mining units. The trader sold 50 percent of its Jupiter Shop Channel Co. to Bain Capital Partners LLC for about 100 billion yen in June.

Still, Sumitomo Chief Financial Officer Toyosaku Hamada warned on Oct. 31 that the company may cut the number by 10 percent if global economic conditions worsen “one more notch.”

Coal sales were worst hit among the commodities, with Sumitomo’s Australian unit recording 1.2 billion yen in profit for the six months to October compared with 13 billion yen a year earlier. Lower zinc and lead prices cut profits at the San Cristobal (POLO) mine in Bolivia to 3.4 billion yen in the period from 12 billion yen a year ago, Sumitomo said.

Marubeni Profits

Marubeni, the only one of the traders to post a profit increase, said net income rose 2.2 percent to 105.3 billion yen in the six months to Sept. 30 as its lower exposure to raw materials used to make steel buoyed profits.

A 4.2 billion yen jump in profit from its stake in Chile’s Los Pelambres mine, run by Antofagasta Plc. (ANTO), was the single biggest increase of all Marubeni units and made the asset the trader’s largest earner. The boost from copper sales offset weaker steel exports and U.S. wheat trading, Marubeni said.

Copper traded in London averaged $8,097 per metric ton in the six months to October, compared to $8,811 in the previous 12 months, an 8 percent slide, Marubeni said. That compares with a 23 percent slump in coking coal to $225 a ton in the quarter ending Sept. 30 compared with last year, Sumitomo said.

“At the moment, it looks like the current tough profit environment is set to continue,” Ryoichi Ueda, Mitsubishi’s Chief Financial Officer, told reporters in Tokyo today.

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: Jason Rogers at jrogers73@bloomberg.net

Bloomberg reserves the right to edit or remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.