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Itochu takes $1.3bn extraordinary loss on Citic stock price fall

Japanese trading house has been unable to expand through joint venture

Itochu struck its tie-up deal with Citic Group in August 2015.   © Reuters

TOKYO -- Itochu on Friday announced an extraordinary loss of 143.3 billion yen ($1.27 billion) due to a revaluation of the stock of Chinese business partner Citic Group.

The Japanese trading house said it would book the loss for the July-September quarter of the current fiscal year, through March.

Itochu struck a tie-up deal with Citic Group in August 2015. Under the agreement, Chia Tai Bright Investment, a venture equally owned by Itochu and Thai conglomerate Charoen Pokphand Group, spent a combined 1.2 trillion yen to acquire 20% of Citic's core company. Itochu tried to expand several businesses, including foods, apparel and finance, by cooperating with the two Asian giants.

Itochu bought its Citic stake for 13.8 Hong Kong dollars ($1.7) per share. On Thursday, Citic's stock price finished trading at HK$11.8.

"We expected the stock price would rise to 14 or 15 Hong Kong dollars," an Itochu representative said.

The uncertain business climate in China, which is caught in a trade war with the U.S., is a factor working against Citic's share price. In addition, "the Chinese government has more than a 50% stake in Citic," the representative said, adding that low stock turnover might be another reason for the company's dented share price.

Itochu has not changed its goal for net income of 500 billion yen for fiscal 2018 because its convenience store operations and other businesses remain in good condition.

Akihide Anzai

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