Mit­sui sees first loss since 1947 amid $2 bil­lion write­down

The Pak Banker - - COMPANIES/BOSS -

TOKYO: Mit­sui & Co., Ja­pan's sec­ond big­gest trad­ing house, forecast its first net loss since it was founded in its mod­ern form in 1947 due to im­pair­ment charges on min­ing and en­ergy projects from South Amer­ica to Aus­tralia.

The Tokyo-based trad­ing house ex­pects a net loss of 70 bil­lion yen ($623 mil­lion) in the fis­cal year end­ing March af­ter book­ing im­pair­ment charges of 225 bil­lion yen on as­sets in­clud­ing the Browse LNG project in Aus­tralia and the Caserones cop­per devel­op­ment in Chile, ac­cord­ing to a state­ment Wed­nes­day. Mit­sui pre­vi­ously forecast net in­come of 190 bil­lion yen.

"Un­less com­mod­ity prices re­bound and stay sta­ble, there is a chance for fur­ther im­pair­ments," Thanh Ha Pham, an an­a­lyst at Jefferies Group LLC, said by phone. "When most of the trad­ing houses in­vest in an as­set, they look at the cur­rent price and they in­ter­po­late it for the fore­see­able fu­ture. When things were very good that made sense, now those price as­sump­tions are un­re­al­is­ti­cally high."

The global com­mod­ity slump is squeez­ing the sogo shosha, or general trad­ing houses like Mit­sui and Mit­subishi Corp.that sup­ply ev­ery­thing from gaso­line and steel to seafood and noo­dles in re­source-poor Ja­pan. They in­vested in met­als and en­ergy only to see prices fall.

"The im­pair­ment charges have been in­cor­po­rated in all of our busi­ness ar­eas," Mit­sui Pres­i­dent Tat­suo Ya­sunaga told re­porters on Wed­nes­day. "We will ex­haust all means in or­der to re­turn to profitabil­ity."

Al­most ev­ery ma­jor raw ma­te­rial is worth less now than two years ago, from iron ore to oil to crops and base met­als. The Bloomberg Com­mod­ity Index, a mea­sure of re­turns from 22 raw ma­te­ri­als, has tum­bled al­most 40% over the pe­riod, touch­ing the lowest level since 1991 in Jan­uary.

The down­turn in oil prices led to the de­ci­sion on Wed­nes­day to scrap plans to de­velop the $40 bil­lion Browse liq­ue­fied nat­u­ral gas project in Aus­tralia. Mit­sui owns a mi­nor­ity stake in the project. Over two-thirds of Mit­sui's profit comes from its re­source busi­ness, such as oil, iron ore, coal and gas trad­ing. For ev­ery dol­lar drop in the price of crude, Mit­sui's profit falls by about 2.7 bil­lion yen, ac­cord­ing to a com­pany pre­sen­ta­tion in Novem­ber. -

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