With commodity prices in a tailspin, the ability of Japanese trading houses to fall back on assets outside of raw materials is being tested.
Mitsubishi Corp., Japan’s largest trader and importer of gas, posted its lowest first-quarter net income in six years, citing the collapse in crude oil, gas and metals. Rival Itochu Corp. relied on one-offs to bolster earnings.
A slowdown in China’s economic growth and the outlook for higher U.S. borrowing costs and stronger dollar, have ripped through commodity prices this year. Crude oil entered a bear market. Precious metals trade at multiyear lows. On Monday the Bloomberg Commodity Index slid to the lowest level since February 2002.
“Spot prices for oil, metals are in an extremely tough situation right now, while a recovery in China is taking longer than we expected,” Mitsubishi Chief Financial Officer Shuma Uchino said at a briefing in Tokyo Tuesday. “But, we can catch up” with profit targets during the remainder of this fiscal year ending March, he said.
Net income plunged 33 percent to 75 billion yen ($605 million) in the three months ended June, Tokyo-based Mitsubishi said in a statement. That was below the 93 billion yen mean estimate from three analysts compiled by Bloomberg.
Mitsubishi fell 6.9 percent to 2,467 yen at the close in Tokyo, the biggest decline since September 2011. The benchmark Topix index was little changed.
The stock declines spread to Itochu, which closed down 1.1 percent at 1,484.5 yen even after posting a record first fiscal quarter profit.
Net income at the trading house behind Paul Smith apparel and Dole-branded fruit sales in Asia relied on 53 billion yen in one-off items for a profit of 121.5 billion yen from 80.8 billion yen a year earlier.
Itochu booked 20 billion yen in profit from the sale of U.S. retailer PrimeSource Building Products, Chief Financial Officer Tsuyoshi Hachimura said at a briefing in Tokyo Tuesday.
The trader also has a 34 billion yen tax rebate due to earlier writedowns on its shares in Samson Resources, a U.S. shale oil producer, Hachimura said.
Itochu sold its 25 percent stake in Samson back to the company for $1 in June, citing the outlook for gas prices in North America. This ended a $1 billion foray into U.S. shale after Itochu posted several years of losses and wrote down all of the value of its Samson stake. The investment was Itochu’s biggest in energy when it was made in 2011.
Sojitz Corp., a Japanese trading company with investments in Australian coal and rare earth metals, said net income was up 19 percent to 10.6 billion yen in the quarter ended June. However, the company’s operating profit fell 19 percent to 8 billion yen on lower crude oil prices, sending shares down by as much as 3.9 percent.
Sojitz closed down 1.4 percent at 277 yen in Tokyo.
Mitsubishi is Japan’s biggest importer of liquefied natural gas and co-owns the world’s largest exporter of coking coal with BHP Billiton Ltd.