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Mitsubishi Plan for Biggest Buyback in 7 Years Boosts Shares

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May 8 (Bloomberg) -- Mitsubishi Corp. said it’ll buy back as much as 60 billion yen ($589 million) of its stock, the most in seven years, joining Mitsui & Co. in increasing returns to investors. The shares rose.

Japan’s biggest trader will buy back as many as 40 million shares, or about 2.4 percent of its stock outstanding, from tomorrow, according to a statement today. The purchase, which ends July 31, comes on top of a record dividend last fiscal year and the company’s expectations of higher returns this year.

Mitsubishi gained 6.5 percent to 1,938 yen at the close of trade in Tokyo, the biggest gain since October 2011. Shares of Japanese general trading houses, which include Itochu Corp. and Sumitomo Corp., have fallen short of gains in Japan’s stocks since Shinzo Abe became prime minister 16 months ago, which spurred enthusiasm for a domestic economic revival.

“We wanted to send out a message that management is very much concerned with returns on equity,” Mitsubishi’s Chief Executive Officer Ken Kobayashi told reporters in Tokyo today. It’s a “good time” for a buyback after the company returned to positive cash flow last year, he said.

As the China-led, decade-long rally in commodity prices winds down, Japanese trading houses are left with excess cash and a need to boost attractiveness to investors. Mitsui, Japan’s second-largest trader, bought back 50 billion yen of stock in February, its first repurchase in more than a decade.

Profit Result

While Mitsubishi’s profit from coal, liquefied natural gas, and other raw materials was little changed last year at 172 billion yen, non-resource net income jumped 33 percent to 259 billion yen, compared with the preceding 12 month period.

Non-resource assets, including selling Japanese cars in Southeast Asia, grain collection in Brazil, and condominium construction in the Philippines, could yield Mitsubishi as much as 350 billion yen in annual profit by 2020, Kobayashi said.

“That’s my dream,” he said. “Obviously there are issues in the short term, like the slowdown in China and so on, but the theme of population growth and finite resources is still there for the mid-to-long term.”

Mitsubishi will split investments this year evenly between resource and non-resource assets and target markets in India, Brazil, Myanmar, Morocco and the Philippines among others, he said.

Record Dividend

The trader said today it posted a profit of 444.8 billion yen, exceeding its own 420 billion yen target. That allows Mitsubishi to pay out 68 yen a share in dividend for last year, 4 yen more than forecast on Feb. 4, Mitsubishi said. That’s a record payout, Kobayashi said.

This fiscal year Mitsubishi said it expects to pay a 70 yen dividend, of which 60 yen will be fixed and the rest based on earnings performance. The fixed portion is made up of the 50 yen base that Mitsubishi promises to pay each year, plus a 10 yen bonus to mark its 60th anniversary.

In terms of his expectations for the Japanese economy, the world’s third-largest, the Mitsubishi CEO said he expects the Bank of Japan to achieve its 2 percent inflation target and has authorized the payment of a 100,000 yen one-time bonus to all full time staff to offset last year’s increase in domestic consumer tax to 8 percent from 5 percent.

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 editors responsible for this story: Jason Rogers at jrogers73@bloomberg.net Madelene Pearson, Rebecca Keenan

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