Itochu Seeks Record Annual Profit on Weak Yen, Rising Ore Sales

Itochu Corp. (8001) vowed record annual net income after a weaker yen and a resurgence in iron ore sales lifted Japan’s third-largest trading house to its best-ever six-month result. The company’s shares jumped 3.2 percent.

“We’ve got a bit of slack going forward, and the aim is to expand that into record profit,” Chief Financial Officer Tadayuki Seki told reporters in Tokyo today after the trader released first-half results.

Itochu’s greater focus on assets outside natural resources has narrowed the profit gap with Mitsubishi Corp. (8058) and Mitsui & Co. (8031) at a time when lower Chinese demand is depressing commodity prices. Itochu posted record profit of 300.5 billion yen ($3.05 billion) in the fiscal year ended March 31, 2012.

For the six months ended Sept. 30, profit rose 16 percent to 165.1 billion yen from 142.2 billion yen a year ago, Tokyo-and Osaka-based Itochu said in today’s statement. The purchase of two units from Dole Food Co. (DOLE) this year added 4 billion yen to profit, with higher leasing and iron ore sales also boosting earnings, the company said.

Non-resource net income accounted for 77 percent of profit in the first six months, compared with 67 percent in the same period a year ago, Itochu said. The Japanese currency’s drop against the U.S. dollar added as much as 6.4 billion yen to net income in the period.

Shares Gain

Itochu gained 37 yen to 1,195 yen at the close in Tokyo, extending its advance to 32 percent since Jan. 1. Mitsubishi has risen 20 percent, while Mitsui is up 5.9 percent.

The yen’s 12 percent decline against the dollar this year - - the biggest drop since 2005 -- will help boost Japan’s domestic economy, according to Itochu.

“We anticipate ongoing recoveries in both exports and internal demand, supported by extensive monetary easing, yen depreciation compared with the previous fiscal year” and greater spending on public works, Itochu said.

Shoppers in Japan seeking to beat an increase in the nation’s consumption tax in April will also boost retail, said Itochu, convenience store operator FamilyMart Co. (8028)’s biggest shareholder.

At Mitsui, Japan’s most resource-focused trading house, higher sales of iron ore and improving returns on liquefied natural gas projects helped counter softening prices in the first six months, the company said.

Profit rose 17 percent to 197.2 billion yen from 168.3 billion yen a year ago, Mitsui said. The company’s annual profit target of 370 billion yen was unchanged.

Copper Production

Mitsui will book a 14.1 billion yen loss this year on the rising cost of copper production in Chile, CFO Joji Okada told reporters in Tokyo.

The company’s shares fell 2.3 percent to 1,358 yen in Tokyo, the most in five weeks.

Mitsubishi last week reported its best quarter since the three months ended June 30, 2011, as a weaker yen helped Asian auto sales and a domestic stock rally boosted equity holdings.

Net income jumped 47 percent to 132.7 billion yen in the quarter ended Sept. 30 from 90 billion yen a year earlier, Tokyo-based Mitsubishi said in a statement. First-half profit was 248.4 billion yen, beating the 234.6 billion yen mean forecast from three analysts compiled by Bloomberg.

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

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to 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.