Japanese trading companies are able to offset the impact of commodity price drops on their food businesses

The disclosures of Mitsui Marubeni Itochu and Mitsui showed that the higher profits in their diversified food business offset lower performances in their commodities unit.

Warren Buffett’s Berkshire Hathaway took a minority stake in these companies because of the diversification away from traditional commodity trading.

Mitsui's profits for the three-month period ended June 30 were down 31% compared to a year ago, partly due to lower iron ore prices. However, income from its lifestyle unit - including overseas shrimp processing and broiler production as well as home foods - grew by about 1 billion yen. This accounted for around 8% of 191.6 billion dollars ($1.3 billion) in total earnings.

Marubeni's Food and Agriculture business recorded a profit growth of 4 billion Japanese yen during the same period, which is 23% of their 154.4 billion-yen total. The company's metals unit saw a decline of 6 billion yen in income to 28,7 billion yen.

Itochu saw its profits in the food sector rise by almost 10 billion yen, to a new record of 28.8 billion. Meanwhile, profits at its FamilyMart convenience stores rose by 4.5 million yen and reached 15.4 billion. Together, they accounted for 16% of Itochu’s highest quarterly net profit ever, 284 billion yen.

Mitsui Marubeni Itochu all kept their profit estimates for the full fiscal year unchanged at 770 billion, 510 billion and 900 billion respectively.

(source: Reuters)