Japanese Trading Houses Make Windfall Profits From Commodities
(Bloomberg) — Some of Japan’s biggest trading houses have reported windfall profits and are warning of more to come as they benefited from higher energy and commodity prices.
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Sumitomo Corp. raised its full-year net profit forecast by nearly half to a record 550 billion yen ($3.7 billion). Marubeni Corp. raised its profit forecast to a record high, while profits at Itochu Corp. in the second quarter exceeded analysts’ estimates.
The three companies, along with Mitsubishi Corp. and Mitsui & Co., are the top five trading houses in Japan and are partially owned by Warren Buffett’s Berkshire Hathaway Inc.
The houses, known as sogo shosha, benefited from supply constraints, geopolitical disputes and a rebound in demand that pushed up prices for some commodities. The weakness of the yen, which hit a 32-year low against the dollar last month, has also boosted their repatriated income. However, headwinds are building in the form of accelerating inflation and slowing growth.
“The first-half result is extremely strong,” Marubeni chief financial officer Takayuki Furuya said during a briefing in Tokyo. However, “the outlook for the second half is quite hazy,” he said.
Mitsui, the first of the major traders to report results, said on Tuesday net profit would hit a record 980 billion yen for the current fiscal year, up from its previous forecast of 800 billion yen. The company also announced a buyback of 3.8% of its shares. Mitsubishi will report on Tuesday.
See also: Japan to maintain investment in Sakhalin-1 oil project in Russia
Itochu’s chief financial officer, Tsuyoshi Hachimura, said on Friday that the company had decided to keep its investment in the Sakhalin-1 oil and gas project in Russia through its involvement in the Sakhalin Oil and Gas Development Co. Tokyo had asked the consortium to retain its stake in the project, which is an important source of energy for Japan. Marubeni and the country’s Ministry of Commerce are also part of the group.
–With the help of Shoko Oda.
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