Mitsubishi Corp sees profit jump on commodities boom

Shares in Mitsubishi have quintupled in value over the past five years thanks in large part to soaring prices of coal, oil and other commodities from which Japanese trading houses generate a big chunk of their profits.

Mitsubishi, which owns half of the world's biggest coking coal producer, BHP Mitsubishi Alliance (BMA), this month agreed to sell its coking coal at more than triple the price of last year to global steelmakers.

The company, which is also a big player in oil and liquefied natural gas, said it expects net profit to climb to ¥580 billion ($5.6 billion) in the year to March 2009 on sales of ¥25 trillion yen, up 8.2%.

The forecast falls short of the consensus estimate of ¥615.76 billion in a poll of 14 analysts by Reuters.

Mitsubishi Chief Financial Officer Ichiro Mizuno told reporters the firm had factored in a global economic slowdown that would also impact emerging markets, which have been at the heart of the commodities boom.

“The simultaneous boom for global economies is over,” he said.

Mitsubishi's forecast for a double-digit rise in profit nevertheless stands out among Japanese companies, many of which are taking a more cautious stance given the yen's rise against the dollar and fears of a world economic slowdown. And for most of them higher commodities prices are a curse because they push up raw materials costs.

“It's a conservative outlook. But considering the recent pause in the dollar's slide and the ensuing money outflow from commodities markets, it's reasonable,” said Takeshi Osawa, senior fund manager at Norinchukin Zenkyoren Asset Management.

For the year ended in March, Mitsubishi said net profit came to ¥462.8 billion, a record high for a fifth consecutive year.

In addition to commodities, trading houses are investing in a broad range of businesses around the globe, including car dealing, steel production, power generation and housing.

Mitsubishi also announced a new business plan, saying it would invest up to ¥1.5 trillion over the next two years and forecasting net profit to climb to between ¥600 billion and ¥700 billion by the business year ending March 2010.

It plans a dividend payout ratio of 20% under the new business plan.

Shares in Mitsubishi fell 2% in January-March, compared with an 18% fall in the benchmark Nikkei average. (Reuters)