TOKYO: Japanese metals producers continue to cut profit forecasts, with Sumitomo Metal Mining Co. and Mitsubishi Materials Corp. the latest to warn of the impact of China’s slowdown.
Sumitomo Metal slashed its operating profit forecast by 37 percent to 74 billion yen ($600 million) for the year to March 31, after posting a 6.9 percent decline in the first half to 51.5 billion yen. It cited a significant fall in prices for the cut and warned that capital expenditure for the year would fall to 77.5 billion yen from 85.1 billion, according to a statement to the Tokyo Stock Exchange.
Mitsubishi Materials’ reduction in its forecast was less pronounced, down 2.4 percent to 83 billion yen, after a 6.3 percent increase in first-half operating profit to 36.2 billion yen, according to its own statement. The company is less reliant on metals for earnings.
The companies’ outlooks underscore the challenges facing metals producers as demand slows in China, the world’s biggest consumer. Mitsui Mining & Smelting Co., and top steel companies Nippon Steel & Sumitomo Metal Corp. and JFE Holdings Inc., have been among the companies to cut their full-year earnings forecasts in recent weeks.
At a briefing in Tokyo, Mitsubishi Materials’ Managing Director Nobuo Shibano indicated that copper prices, which are trading at six-year lows, may have bottomed after cuts to supply. “We will likely see the impact of output cuts from copper mines,” he said. “We don’t expect that the supply-demand balance will further weaken.”
Mitsubishi Materials’ metals division produces mostly copper, and accounts for half of the company’s sales, while cement, nuclear energy and engineering services are among its other major businesses. Sumitomo Metal Mining, which produces copper, nickel and gold, derives more than 70 percent of its revenue from metals.
In its statement, Sumitomo said current weak metals prices would continue for the time being, citing concerns over China’s worsening economy and a stronger dollar due to the prospect of higher U.S. interest rates. The company also said its outlook has been clouded by a delay in commercial production at its Sierra Gorda copper mine.
Masahiro Morimoto, a company director, said at a briefing in Tokyo that falling nickel prices had pushed down the company’s full-year earnings forecast by 30 billion yen, while the slump in copper prices had affected it by 16 billion yen.
In terms of sales, Mitsubishi Materials is Japan’s second-biggest nonferrous metals company and Sumitomo Metal Mining Co. it’s third. The top producer is JX Holdings Inc., whose main business is oil refining.
