Sumitomo to Stick With Commodities in Face of $2 Billion Charge

Sumitomo Corp. will press ahead with investments in commodities even after announcing this year’s profit will be almost entirely written down due to more than $2 billion in losses from shale oil and coal.

The trading house is deciding on what investments to make in coming years and remains interested in raw materials including oil and gas, copper, nickel, and coal, Chief Executive Officer Kuniharu Nakamura told investors and reporters today in Tokyo. Sumitomo will prioritize investments over offering shareholders greater returns via buybacks, he said.

Sumitomo posted its first half-year loss in 16 years last week after writing down the value of a tight oil field in the U.S. and an Australian coal mine by 167.3 billion yen ($1.47 billion). After the loss, Nakamura had his pay slashed by 40 percent.

While the ratio of new commodity investments may drop in the next strategic plan, Sumitomo won’t quit the business altogether as it helps balance assets and profit, Nakamura said.

“Even now with the low gas prices we’re making money from our fields in the Marcellus shale,” Nakamura said.

Sumitomo’s stock slumped by the most since 1996 on Sept. 29 when the company said it expected 240 billion yen in total writedowns this year.

Unlike bigger rivals Mitsubishi Corp. and Mitsui & Co., which have embarked on shareholder-friendly measures such as buybacks, Sumitomo will direct cash flow from assets back into the business to boost profit in the hopes that investor trust in the stock will be revived, Nakamura said.

Sumitomo is unlikely to look at share buybacks in the next two years, he said. The company will seek to deliver a “stable” dividend, he said.

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