TOKYO -- Japan's seven major trading houses have reported their half-year results through September.

Overall, the outcomes -- all announced by Monday -- were encouraging, thanks mainly to a recovery in resource prices. More than half the companies raised their full-year forecasts, with some even deciding to increase shareholder dividends.  
Mitsubishi Corp. on Monday revised up its forecast for full-year group net profit through March 2018 by 50 billion yen to 500 billion yen ($4.39 billion). That would mark a 14% increase on the previous year and exceed the trading house's all-time high of 471 billion yen posted during the year through March 2008 -- a time when the global economy was buoyed by the rise of emerging countries.

Sumitomo Corp., Itochu and Toyota Tsusho also expect to log record-high profits for fiscal 2017. Sumitomo has raised its net profit projection now to 280 billion yen. 

Mitsui & Co., on the other hand, is unlikely to renew the record profit posted for the year through March 2008. It will, however, at least see its highest earnings since adopting international accounting standards in the year ended March 2013.

Soaring resource prices have been the biggest contributing factor behind the strong performances. Prices of coking coal used in steel production have risen around 80% from the average during the first half of the previous year. Copper and iron ore prices have followed suit.

Car sales, construction machinery leasing, food and food products are also performing well at all the trading houses, largely supported by a strong global economy, especially in Asia.

By sector, Mitsubishi's metal business, which includes coking coal, will likely see a 32% increase in profits to 195 billion yen, while earnings at its machinery division, which includes car sales, are expected to almost triple to 75 billion yen.

"The boom in resource prices tends to be highlighted, but this is the result of consistent efforts to enhance other [machinery and food] businesses," said Kazuyuki Masu, chief financial officer at Mitsubishi, during a briefing on Monday.

Some trading houses are looking to use the extra cash from the enhanced profit forecasts to increase dividends to shareholders. Mitsubishi, Sumitomo and Toyota have raised their payouts for this fiscal year. Itochu and Mitsui have so far kept the amount unchanged, but will likely either increase dividends or launch a buyback scheme during this fiscal year.

The leading trading houses appear to be generally expecting the positive outlook to continue for the time being. "Resource prices could drop within a short space of time, but over the long term, they will return to an upward trend," said Mitsui's CFO Keigo Matsubara.

Koichi Takahata, Sumitomo CFO, is also optimistic about the near-future forecast for resource prices. "For the next 12 months or so, we will not see sharp ups and downs," he said.

Geopolitical risks could pose one of the few uncertainties for the rest of the fiscal year. Results could depend on whether the trading houses are able to rebalance portfolios to secure new revenue sources while the business environment remains favorable.

Published Date:2017-11-07