Itochu Posts Record Net as Sumitomo Falls Behind on Coal

Itochu Corp. (8001), vying to become the Japanese trading house that earns the most from non-resource assets, posted record annual profit as Sumitomo Corp. failed to meet its forecast because of coal mine writedowns.

Itochu, which overtook Sumitomo as Japan’s third-largest trading house in terms of profit and market value in 2012, said net income rose 11 percent to 310.3 billion yen ($3.03 billion) in the year ended March 31, in line with its forecast. Sumitomo’s net income slid 4 percent to 223 billion yen, below the 240 billion yen forecast the company reiterated on Feb. 4.

Investments in commodities, including the $5.3 billion Ambatovy nickel project in Madagascar, have weighed on Sumitomo. The Tokyo-based trading house attributed last year’s profit slide in part to a 27.7 billion yen impairment at the Isaac Plains coal mine in Australia co-owned with Vale SA.

“The severe business environment” for its mining assets is set to continue, Sumitomo said today in a statement.

Hard coking coal may decline to $120 per metric ton this fiscal year from $153 last year, while iron ore may drop to $125 per ton from $135, Sumitomo forecast today.

At Itochu, a double-digit increase in profit at the company’s machinery, food and construction business units outweighed lower energy profits.

Itochu said it earned 7.1 billion yen last year from its Dole unit, similar to the 7.3 billion yen profit it booked from owning 31.5 percent of FamilyMart Co., Japan’s third-largest convenience store chain. The trader last year paid $1.3 billion for Dole Food Co.’s fresh produce business in Asia as well as the U.S. company’s global canned foods business. The Dole unit’s profit may rise to 10 billion yen this year, Itochu said.

Itochu, based in Tokyo, is Japan’s largest importer of iron ore after Mitsui & Co. Resources assets contributed 18 percent to profit last year, down from 28 percent in the previous 12 months, the company said.

Sumitomo fell 6 yen, or 0.5 percent, to 1,321 yen at the close in Tokyo after earlier gaining as much as 2.2 percent to 1,356 yen. Itochu rose 1.2 percent to 1,158 yen.

To contact the reporter on this story: Yuriy Humber in Tokyo at yhumber@bloomberg.net

To contact the editors responsible for this story: Jason Rogers at jrogers73@bloomberg.net; Andrew Hobbs at ahobbs4@bloomberg.net Iain Wilson, Andrew Hobbs

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