New Mitsubishi CEO Seeks `Urgent' Shift After Commodity Sting

  • Trader sees commodity slump possibly lasting three more years
  • Company in March announced 430 billion yen in impairments

Mitsubishi Corp. is shifting growth away from its energy and mining-related businesses after being stung by the metals and oil collapse that led it to forecast its first-ever annual loss on a group basis.

Takehiko Kakiuchi, the newly appointed chief executive officer, said he will focus Japan’s biggest trading house toward non-resource businesses, from agricultural machinery and industrial finance to automobiles and salmon farming. The company expects writedowns of as much as 430 billion yen ($4 billion), primarily on its commodities businesses.

“I want to rebalance our portfolio, replace assets in our resource portfolio and build our non-resource business into our growth engine,” Kakiuchi, who took on the top role this month, said in an interview in Tokyo on Monday. “Rebalancing our portfolio has become an urgent task.”

The shift away from resources comes after heavy investments in metals and energy at the height of the commodities boom soured as see prices tumbled. Mitsubishi announced last month it expects a net loss of 150 billion yen in the year ended March 31, compared with a profit of 400.6 billion yen the previous period.

Fried Chicken

The Bloomberg Commodity Index, a measure of returns from 22 raw materials, has dropped more than 40 percent the last two years, and earlier this year touched the lowest level since 1991. One of Kakiuchi’s first tasks as CEO will be the release of the company’s three-year plan next month.

For every dollar drop in the price of crude, Mitsubishi’s full-year earnings falls by about 1.5 billion yen, while every $100 decline in copper results in a 1.4 billion yen loss, according to a company presentation in February.

“We have to operate under the assumption that the current price of commodities is going to continue for the next three years,” said Kakiuchi. “We are exploring for a way for Mitsubishi to be able to survive under the current price environment.”

While commodity-related businesses have been its core, Mitsubishi has found success in other arenas. The company negotiated with Colonel Sanders to bring Kentucky Fried Chicken restaurants to Japan in 1970, clearing the way for the eateries to become a runaway success and a Christmas day staple, according to the company’s website.

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