Mitsui, Mitsubishi See $1 Billion Profit Boost This Year on Yen

Mitsui & Co. and Mitsubishi Corp., Japan’s biggest trading companies, expect a weaker yen to add almost $1 billion to profit this year, putting them on track to outpace their domestic peers in net income growth.

With both companies forecasting the yen to average 95 to the dollar in the year to March 31, Mitsui expects net income to grow 20 percent to 370 billion yen ($3.74 billion). Mitsubishi sees an 11 percent increase to 400 billion yen.

Mitsui, the most reliant of Japan’s traders on resources for profit, may book a 65 billion yen foreign exchange gain this year, it said yesterday when reporting earnings. Mitsubishi sees a 30 billion yen addition from foreign exchange, the trader said today.

“Yen depreciation is providing a strong lift to Mitsui’s shareholder equity because of extensive foreign currency investments,” Barclays Plc said in a note to investors today, forecasting Mitsui to beat its peers in profit growth.

Japan’s top trading houses, which include Itochu Corp., Sumitomo Corp. and Marubeni Corp., earn about half their profit from producing and selling oil, gas, coal, iron ore, copper and grains, which are all priced in the dollar.

Monetary easing under the administration of Prime Minister Shinzo Abe since December has caused the currency to fall more than 20 percent in the past six months, the most among the 10 developed-market currencies tracked by Bloomberg Correlation Weighted Indexes.

Profit Forecasts

Marubeni, Japan’s top trader of agricultural commodities, was the only one of the top five to report profit growth for the year ended March 31. The company, based in Tokyo as are all the traders, said today net income growth may slow to 2.1 percent this year to 210 billion yen. Marubeni also expects the yen to average 95 to the dollar, the company said.

Itochu, which expects the yen to strengthen to 90 to the dollar in the 12 months to April, forecast net income to gain 3.5 percent to 290 billion yen this year led by quadrupling of profit from oil and gas sales, the company said in a statement today.

The company expects its energy unit to report 24 billion yen in net income this year from 5.8 billion yen a year earlier, with most of that coming from liquefied natural gas, for which Japan is the world’s top importer.

Itochu, which overtook Sumitomo last year as Japan’s third-largest trader by profit and market value, will also ramp up its investments in commodities to two-thirds of total in the next two years, from about 50 percent in the prior two years, the company said. Itochu plans 1 trillion yen in investments in the next two years.

Sumitomo, which also sees the yen at 90 this year, forecast profit to rise 3.2 percent to 240 billion yen this year from a recovery in non-resource businesses and one-off gains from “business reorganization,” the company said May 2.

Sojitz Corp., one of Japan’s two largest sellers of rare earth metals, said today that it returned to profit last year with 14.3 billion yen in net income. The trader forecast net income to jump to 25 billion yen this year on expectations of increased sales of automobiles and fertilizers.