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Japan's Mitsui, Marubeni keep FY earnings forecasts, cut metal estimates

* Mitsui, Marubeni cut metals units' forecasts on iron ore, coal slide

* They retain full-year profit forecasts, post rise in H1 net

* Energy boost seen for Mitsui in full-yr; grains to help Marubeni


By Yuka Obayashi

TOKYO, Nov 6 (Reuters) - Japanese trading houses Mitsui & Co and Marubeni Corp stuck on Thursday to their full-year net profit estimates but cut the forecasts for their metals business on a slump in iron ore and coal prices.

They also reported a rise in net profit for the April-September period, with Marubeni, the third-biggest trading house by sales, posting a record profit as the weak metal performance was offset by growth in other businesses.

Their steady earnings contrasted with the results of No.5 Sumitomo Corp, which last week posted a net loss of 38.4 billion yen ($335.5 million) for the six months after cutting its annual profit forecast by 96 percent in September on hefty losses on a U.S. shale asset and the plunges in iron ore and coal prices.

The drop in prices of industrial commodities is weighing on the balance sheets of trading houses, which have business portfolios like investment funds.

Mitsui, which had an annual iron ore output of 51 million tonnes in the last business year through its equity holdings in mines, slashed its profit forecast of metals by 32 percent to 80 billion yen for the fiscal year ending March 2015.

But the shortfall will be offset by a bigger contribution from energy business, Joji Okada, Chief Financial Officer, told a news conference.

Mitsui, Japan's No.4 trading house by sales, maintained a full-year profit estimate of 380 billion yen after reporting a 9 percent rise in first-half profit.

"We don't expect any writedowns on our resource assets this year if the prices stay flat. Even if the prices go further down, we don't expect any major impairment losses," Okada said.

Iron ore prices .IO62-CNI=SI have plunged more than 40 percent this year, hit by a glut in supply as top, low-cost global miners boosted output at the same time as demand slowed in China, the biggest consumer of the steelmaking ingredient.

"We think iron ore prices have overshot and we don't expect any further fall. We'll see how long the Chinese high-cost operators can go on with the current production," Okada said.

Marubeni also kept its annual net profit forecast unchanged at 220 billion yen, as strong grain trading offset slack earnings from metal and energy segments.

It reported a 16.5 percent growth in first-half net profit to a record 130 billion yen, despite a 12.8 billion yen loss on Canada's Grande Cache Coal project, from which it had announced in September its exit.

"The loss on Grande Cache ate into our profit of metal segment," said Marubeni CFO Yukihiko Matsumura.

"We had booked writedowns on the U.S. shale gas assets in the previous years. We don't expect any more impairment losses on resource assets this year," he said.

Japan's trading houses have invested heavily in North American shale oil and gas fields as the world's third-largest economy looks to diversify its energy sources after the Fukushima nuclear disaster in 2011. But revised reserve estimates and unproductive wells have led to write-downs.

Mitsubishi Corp, the No. 1 trading house, will report results on Friday. (1 US dollar = 114.4500 Japanese yen) (Editing by Muralikumar Anantharaman)

Published on:
November 6, 2014
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