Sumitomo Metal Swings to Loss And Warns on Outlook Citing Yenby
Sumitomo Metal Mining Co., Japan’s largest nickel producer and one of its top copper smelters, swung to a first-quarter loss and warned of deteriorating conditions for the full year as a stronger yen hits exports and erodes repatriated earnings.
Its net loss totaled 6.9 billion yen ($68 million) for the three months through June, compared with a profit of 26.3 billion yen a year earlier, the Tokyo-based company said Wednesday in a statement. Sumitomo Metal also forecast a first-half net loss of 3 billion yen, versus 53.8 billion yen in profit a year ago, while warning that its full-year target is likely to be revised lower from 23 billion yen when it releases its first-half results.
The yen is the best performing major currency this year, climbing 18 percent against the dollar, which has weighed on Japan’s exporters. For Sumitomo Metal, the impact of the yen’s appreciation has also fallen on revenue booked on metals processing denominated in dollars. Overseas sales account for about 40 percent of the company’s total in the last financial year through March.
The company’s first-half performance is based on an exchange rate assumption of 100 yen to the dollar. The currency last traded at around 101.
First-quarter operating profit fell 69 percent to 8 billion yen from a year earlier, as lower metals prices and the stronger yen squeezed earnings, while sales slid 26 percent to 177 billion yen, according to the statement.
Sumitomo Metal signaled its appetite for overseas expansion in February with the $1 billion purchase of an additional stake in Freeport-McMoRan Inc.’s Morenci copper mine in Arizona. President Yoshiaki Nakazato has said gold assets are the next target. The company operates the only gold mine in Japan.