Mitsubishi, Mitsui, Sumitomo and Marubeni “are facing quite large revisions”, said Hiroyuki Sakaida, a Goldman analyst in Tokyo. The bank estimates combined writedowns for four of the five largest sogo shosha could total between 811 billion yen ($US6.7 billion) and 1.6 trillion yen in the fiscal year ending March 31. “Investors cannot invest in trading companies under the current environment,” Sakaida said.
From Bloomberg:
This could mark the second straight fiscal year of significant impairment charges for the trading houses. And it may only get worse. Crude-oil prices have tumbled almost 70 per cent in the past two years to less than $US30 a barrel, and that’s probably going to continue to weigh on earnings, Sakaida said.
Almost every major raw material is worth less now than two years ago, from iron ore to oil to crops and base metals. The Bloomberg Commodity Index, a measure of returns from 22 items, has tumbled 40 per cent over that period, touching the lowest level since January 1991.
“Another leg down in commodity prices means that new impairment charges are unavoidable, particularly with the assets that have been bought since 2010,” said Polina Diyachkina, an analyst at Macquarie Group.
One potential writedown target is the Browse LNG export terminal partly owned by Mitsubishi and Mitsui, Diyachkina said. Other candidates including Marubeni’s stake in the Roy Hill iron-ore mine and Sumitomo’s holding in the Sierra Gorda copper project, the Macquarie analyst said.
How about the Curtis Island three? When will we see those white elephants written off? BG Group has already taken a big charge on QCLNG. So much more to come as energy and dirt prices reset, that is, fall and do not rebound.
Advertisement
