Itochu Corp Forecasts 160B Yen Net Profit for F2008

Itochu Corporation’s energy, metals & minerals company estimates its annual consolidated net profit at 160 billion yen for fiscal 2008 ending March 2009, revising up by 25% from the previous estimation. The firm aims to grow net profit for the metals division by 26% to 105.8 billion yen compared with the original estimation, which would reach 100 billion yen for the first time. The firm posted net profit at 86.4 billion yen for the energy, metals & minerals company in the first half of F2008, 63 billion yen of which was gained from the metals division. Capital expenditure for the metals division was 5.3 billion yen for 1H and is planned at 139 billion yen for 2H.

In 2H of F2008, spot prices of iron ore and coke are plunging though one-year contract prices are already fixed. Crude oil price dropped down as well. Itochu Corp is also concerned about underlying trend of stronger yen against other currencies and evaluating loss of stocks. Yoichi Kobayashi, Itochu Corp’s senior managing director and the president of the energy, metals & minerals company, said it is difficult for the company to gain annual net profit as much as 160 billion yen in these business circumstances.

The company’s profit is unlikely to be impacted so much by lower oil price. Coke production maintains steady while original coke demand is decreasing due to steel makers’ output reductions. Iron ore shipment is slightly decreasing effected by accidents at mines and ports. Nonferrous metal businesses keep stable including aluminium. Marubeni-Itochu Steel, the affiliate company, sets its annual net profit estimation at 30 billion yen for F2008.

Itochu Corp implemented 32-33 billion yen capex for the energy, metals & minerals company during 1H of F2008, 5.3 billion yen of which was for the metals division. Annual capex for the company is planned at 170-180 billion yen through F2008 and 139 billion yen for the metals division. The capex covers approximately 120 billion yen for an iron ore project in NAMISA of Brazil, expansion of existent iron ore and coke projects, development of new energy related businesses, and exploration of iron ore and nonferrous metals.