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Mitsui has record profits on strong metals, offsetting Russia’s losses. By Reuters

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© Reuters. FILE PHOTO: The logo of the Japanese trading company Mitsui & Co. was seen in Tokyo, Japan on January 10, 2018. REUTERS / Toru Hanai

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By Yuka Obayashi

TOKYO (Reuters) – Japanese trading house Mitsui & Co Ltd reported a record full-year profit on Monday as rising metals and energy prices offset a loss from its liquid (LNG) business in Russia amid the growing Ukraine crisis.

“All business segments have performed well, with an overall surplus that has reached a significant new record high,” Mitsui Chief Executive Officer (CEO) Kenichi Hori told a news conference.

Net profit for the year to March 31 increased by 173% from a year earlier to 914.7 billion yen ($ 7 billion), beating its February forecast of 840 billion yen as higher iron ore, coal and gas prices tripled earnings from metals and energy operations.

Profits offset a loss of 20.9 billion yen on LNG business in Russia, as it booked in the January-March quarter.

After reassessing the fair value of their Sakhalin-2 and Arctic-2 projects to reflect a downgrade of the Russian government’s credit rating, Mitsui wrote down 80.6 billion yen on these assets and booked the one-time loss, it said.

As a result, Mitsui’s outstanding investments, loans and guarantees for its LNG business in Russia amounted to 404.7 billion yen at the end of March against 430 billion yen at the end of December.

“We will continue our involvement in Sakhalin-2,” Hori said, adding that the project, of which it owns 12.5%, is important for Japan’s energy supply.

Energy giant Shell (LON 🙂 said in February it would abandon all its Russian operations, including Sakhalin-2, after sanctions have been tightened against Moscow.

Arctic-2 continues as there has been no formal decision to change the plan, Hori said, although its partner TotalEnergies has recorded an impairment of about $ 4.1 billion, partly related to the project.

“Still, there is a good chance that different circumstances will change the project plan, and if that happens, we will issue a notice after reviewing the situation and confirming what needs to be confirmed among the partners,” Hori said.

For the year to next March, Mitsui predicted a 13% drop in net profit to 800 billion yen, beating an average forecast of 738.7 billion yen for 11 analysts, according to Refinitiv data.

“Although we expect some commodity markets, such as iron ore, to normalize, we aim to achieve strong earnings that are roughly on a par with the previous year by strengthening our earnings base in areas that are less susceptible to market conditions,” said Hori.

($ 1 = 130,2700 yen)

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