Japan’s Warren Buffett-favored trading houses posted strong earnings last quarter, despite a drop in commodity prices over the period and China’s disappointing economic rebound.
(Bloomberg) — Japan’s Warren Buffett-favored trading houses posted strong earnings last quarter, despite a drop in commodity prices over the period and China’s disappointing economic rebound.
Mitsubishi Corp., Mitsui & Co. and Sumitomo Corp. beat net-income estimates for the first quarter of Japan’s fiscal year as they reported this week. Mitsubishi and Mitsui said they will consider additional shareholder returns depending on future results. Marubeni Corp. and Itochu Corp. will release earnings on Friday.
The results so far should please Buffett, whose Berkshire Hathaway Inc. raised its stake in the five biggest trading houses in June to an average of more than 8.5%. He first invested in the companies in 2020 and traveled to Japan earlier this year to strengthen his ties with the trading houses, known as Sogo Shosha.
The Japanese results are in contrast to energy majors like Exxon Mobil Corp. and Shell Plc, which missed estimates on falling gas prices and weak oil-refining margins. While the trading houses are heavily involved in oil, gas and coal, they have wider investment portfolios ranging from convenience stores to salmon farming.
Read More: Buffett Boosts Stake in Japan Trading Companies as Shares Surge
Mitsubishi and Mitsui said the drop in metallurgical coal prices had impacted their natural resource segments. Sumitomo’s earnings were affected by a decline in thermal coal prices, partly due to China’s slow recovery, Chief Financial Officer Reiji Morooka said at a press conference on Thursday.
Mitsubishi’s consumer industry segment, which includes the Lawson convenience store chain and other businesses, booked record profits in the quarter. The company has been able to build a “strong portfolio,” Chief Financial Officer Yuzo Nouchi said at a press conference on Thursday.
“We think the strong start in 1Q will raise expectations for a guidance hike and additional shareholder returns at 1H results,” SMBC Nikko Securities Inc. senior analyst Akira Morimoto said in a note released Tuesday about Mitsui’s results.
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