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MarketWatch: Japan trading houses Mitsubishi, Mitsui benefit from commodities boom

Last Update: 5:34 AM ET Oct 31, 2006

(Updates with details of other trading companies’ earnings, possible problems for firms.)

TOKYO (MarketWatch) — Japanese trading companies Mitsubishi Corp. (8058.TO) and Mitsui & Co. (8031.TO) Tuesday posted sharp increases in fiscal first-half net profit and raised their outlooks amid booming commodities prices.

Mitsubishi Corp., Japan’s biggest trading company by revenue, posted group net profit of Y234.83 billion for the six months ended Sept. 30, up 37% from Y178.31 billion in the year-earlier period, on strong earnings from metals trading and its coal business in Australia.

Group revenue was up 9.1% to Y9.836 trillion.

For the full year ending March 31, Mitsubishi raised its group net profit outlook to Y400.00 billion from Y370.00 billion and its group revenue forecast to Y20.000 trillion from Y19.200 trillion.

The country’s second-largest trading company by revenue, Mitsui, said fiscal-first-half group net profit nearly doubled to Y159.17 billion from Y83.19 billion. It cited rapid earnings growth at its metals and energy businesses.

Group revenue rose 8.1% to Y7.622 trillion.

Mitsui boosted its group net-profit forecast for the full year to Y300 billion from Y240 billion, but left unchanged its group revenue projection of Y15 trillion.

The results mirror strong gains at Japan’s third- and fourth-ranked trading houses, Itochu Corp. (8001.TO) and Marubeni Corp. (8002.TO).
Itochu said Monday group net profit rose 56% to Y96.67 billion in the fiscal first half on strong earnings at its metals and energy division, and its machinery business.

For the current fiscal year, it raised its group net profit outlook by 10% to Y171.0 billion and increased its group revenue projection to Y11.5 trillion from Y10.8 trillion.

Japan’s No.4 trading house Marubeni last week reported group net profit jumped 72% to Y65.65 billion for the fiscal first half, driven by its metals and energy segments.

For the year though March, Marubeni predicted a fourth straight year of record profit, raising its group net-profit projection to Y115 billion from Y100 billion and its group revenue target to Y9.5 trillion from Y9.3 trillion.

The four companies may face some difficulties, however, as Japan’s ambitious 25-year plan to sharply increase oil and gas development, partly by encouraging investment by the trading companies, hits snags.

In September, Russia intervened in the Sakhalin-2 oil and gas project led by Royal Dutch Shell PLC that also involved Mitsubishi Corp. and Mitsui. The government has accused Shell of violating environmental standards and threatened to pull its permits.

Itochu and Marubeni have a stake in the Sakhalin-1 project via their holdings in the Sakhalin Oil and Gas Development Co., or Sodeco, consortium. The Russian government is also probing the Sakhalin-1 project.
 
All four companies report financial results based on U.S. generally accepted accounting principles.

-Edited by Leslie Shaffer
-Contact: 201-938-5400

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