Japan's Mitsui & Co is set to post its first annual loss since being established in 1947 after a slide in energy and metal prices forced it book 260 billion yen ($2.3 billion) in writedowns, it said on Wednesday.
Like major international oil and mining companies, Japanese trading firms have been caught flat-footed by the rout in commodities brought about by softening demand in top consumer China, where economic growth has slowed.
The Tokyo-based company said it expected a net loss of 70 billion yen for the financial year ending on March 31, having earlier forecast a profit of 190 billion yen, following hefty one-off losses in its copper and other resource assets.
"Under the resource supercycle, our resource and energy assets have grown significantly, but our non-resource businesses have not grown as fast to counterbalance," Mitsui President Tatsuo Yasunaga told a news conference, when asked for a reason for the company's first annual consolidated net loss.
"A spike in demand, led by China's massive economic stimulus since 2008, was so huge that a trough came so deep," he said.
Still, Mitsui will continue to buy competitive resource assets, especially iron ore and gas, while reinforcing non-resource operations such as medical and healthcare services, automobiles and infrastructure, Yasunaga said.
The 260 billion yen in asset writedowns includes a 115 billion yen loss on its copper assets in Chile, including Anglo American Sur, to reflect a revision in its long-term outlook for the metal price, as well as a 40 billion yen loss on the Browse liquefied natural gas (LNG) project in Australia.
Its partner Woodside Petroleum and other stakeholders have shelved plans to build the $30 billion Browse floating LNG project in the face of global oversupply, spelling the end of an era of mega LNG projects.
Mitsui's other writedowns include losses on its Brazilian resource unit and coal mine in Australia.
Despite its loss forecast, Mitsui maintained its dividend forecast of 64 yen per share for the full year. Shares in Mitsui closed down 1 percent at 1,405 yen on Wednesday - before the results revision was announced.
Markets for everything from oil to iron ore have been hit hard by oversupply and faltering demand as growth slows in China, the world's second biggest economy, hitting the value of assets held by Japanese trading houses.
In February, Sumitomo Corp more than halved its net profit forecast for this year due to 170 billion yen in writedowns on resource assets.
Mitsubishi Corp has not recorded writedowns, but it has warned it would carefully evaluate its resource assets at the end of the year.
A spokesman at Mitsubishi, which is also a partner in the Browse project, said on Wednesday the company was reviewing its finances to see what impact the cancellation will have.
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