According to Reuters article published on May 2, 2023, Japan's trading houses Mitsui & Co Ltd (8031.T) and Sojitz (2768.T) forecast lower net profit in the current fiscal year as commodity prices are retreating from last year's peaks when the both enjoyed record-high earnings.
While the post-pandemic energy crisis fuelled by Russia's invasion of Ukraine allowed the world's top energy players, including U.S. oil majors Exxon Mobil (XOM.N) and Chevron (CVX.N), to post record profits, consumers, including utilities, were caught in by rising costs and a resulting inflation.
Mitsui posted a 24% increase in 2022/23 net profit to a record 1.1 trillion yen ($8 billion) on Tuesday, boosted by high prices of liquefied natural gas (LNG) and oil, while Sojitz saw a 35% spike to a record 111.2 billion yen on higher coal prices.
Mitsui, involved in LNG and other fossil fuel projects worldwide including in the United States, Australia and Russia, sees 2023/24 fiscal year net profit 22% lower at 880 billion yen.
Mitsui expects commodity prices to go down from last year's peaks, but results should be supported by the company's machinery and infrastructure, as well as lifestyle businesses.
"We have factored in the reactionary decline from the normalization of post-covid pent-up demand and commodity market conditions, but also the expansion of the services we can offer and the organic growth of what we have invested in the past three years," Mitsui CEO Kenichi Hori told a briefing.
Unveiling a new three-year business plan, Mitsui forecast profit of 920 billion yen in the year to March 2026, with a full-year dividend of 150 yen per share or higher. It plans to more than double renewable energy in its power generation portfolio to over 30% by 2030 on 2019 levels.
Sojitz forecasts a drop in net profit to 95 billion yen for the year to March 2024 as it expects coking coal prices to weaken, it said. The company plans to pay a full-year dividend of 130 yen per share on last and current fiscal year results.
"Both are guiding for double-digit earnings decline for FY23/24 amid rising macro uncertainties and weaker commodity prices. However, shareholders' returns are kept at high levels, and this shall support share price," Jefferies said in a note.
Mitsui shares closed 1.3% down and Sojitz lost 4% on Tuesday. Most Japanese shares declined on Tuesday as jitters surrounding the U.S. banking system weighed on domestic financial stocks.
U.S. billionaire investor Warren Buffett said last month he had increased his stakes in Japan's five largest trading houses to 7.4%, including Mitsui, adding he may invest more in the country.
($1 = 137.6800 yen)
