TOKYO — Major Japanese trading houses on Friday said they expected higher fiscal year profits as the US-Israeli war on Iran keeps commodity prices high, while domestic utilities warned of losses as procurement costs spike.
Japan, one of the world’s most vulnerable countries to energy import disruptions, has stepped up diplomatic efforts and pledged billions of yen in public support — from subsidies to a currency intervention — as it tries to cushion economic shock from the war and the closure of the Strait of Hormuz.
Marubeni Chief Executive Masayuki Omoto said the crisis in the Middle East poses more upside than downside risks to the company’s earnings, thanks to higher commodity prices. For the current fiscal year, the firm expects a net profit of 580 billion yen ($3.7 billion), which would be a record.
The forecast represents an increase of 6.6 percent from last fiscal year’s profit of 544 billion yen, which was also a record.
Mitsui, which like Marubeni counts Warren Buffett’s Berkshire Hathaway as a large minority shareholder, on Friday forecast a 10-percent increase in net profit for the year ending in March to 920 billion yen, as it expects higher commodity prices and bets on gains from other businesses.
In addition, Sumitomo and Itochu said they expect fiscal-year net profit increases of 5 percent and 6 percent, respectively. Berkshire is also a shareholder in Sumitomo and Itochu.
Japanese utilities
feel the pain
Before the Iran war broke out in late February, Japan relied on the Middle East for around 11 percent of its liquefied natural gas (LNG) imports, of which 6 percent passed through the Strait of Hormuz.
Australia is Japan’s biggest LNG supplier.
Despite being secure with their LNG supplies for now, thanks to alternative sources and solid stockpiles, Japanese utilities warned this week that procurement costs would likely rise as many long-term LNG contracts are linked to oil prices. LNG is a key fuel for thermal power generation.
Six of 10 of Japan’s regional electric utilities, including Kansai Electric Power and Kyushu Electric Power, forecast a drop in profit for the current fiscal year, while the rest withheld guidance, amid uncertainties over the fuel price outlook.
