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Japan's Sumitomo stares down record $1.4bn loss for the year

Shutdown of Madagascar nickel mine exacerbates coronavirus slump

Sumitomo's nickel project in Madagascar has suspended operations since March.

TOKYO -- Japanese trading conglomerate Sumitomo Corp. on projected Friday a record 150 billion yen ($1.4 billion) net loss for the year ending next March, primarily due to massive impairment charges at an African nickel mine.

The results would be down from the 171.3 billion yen profit from the previous fiscal year. Sumitomo's shares lost as much as 3% during Friday's trading.

Sumitomo will record 250 billion yen in one-time losses. Although the details are pending, it appears much of the damage stems from the company's interest in Madagascar's Ambatovy joint venture, one of the biggest nickel mining projects in the world.

Because of Madagascar's restrictions on the movement of people due to the novel coronavirus pandemic, operations at Ambatovy have been suspended since the end of March. It is not yet determined when the business will restart.

Sumitomo has already booked 55 billion yen in impairment losses for the first quarter through June. With its balance of investments and financing at roughly 100 billion yen as of the end of June, the company will book additional impairments if the work stoppage persists.

The pandemic has dealt a blow to a wide spectrum of businesses. Sumitomo is looking at write-downs at steel tube operations in North America, the automobile financing business in Indonesia, and green goods operations in Western markets.

Sumitomo will book the costs of restructuring the organization, which will include withdrawals from unprofitable businesses.

Leaving out the one-time charges, Sumitomo would earn a 100 billion yen profit, a roughly 60% decline from the comparable income in the previous financial year.

The automotive segment is weathering a global slump in demand. In the steel business, sales tied to appliances are underperforming.

Sumitomo suffered a net loss of 41 billion yen in the first quarter, reversing the 79.7 billion yen profit a year earlier. The company has kept in place the annual dividend at 70 yen per share, a reduction of 10 yen from the previous fiscal year.

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