Sumitomo predicts record loss as covid-19 hits nickel project

“We have been hit hard by the coronavirus pandemic, especially in metals, machineries and resource/chemical areas,” Chief Financial Officer Masaru Shiomi told a news conference.

“Tough business conditions will likely continue through this year (to March),” he said.

The loss warning, after a profit of 171 billion yen in the last financial year, reflected an estimated one-off loss of 250 billion yen, including an impairment loss of 55 billion yen on Ambatovy it booked in the April-June quarter and other potential losses in steel products, transportation and construction machinery, he said.

“We plan to step up restructuring in unprofitable areas, which may lead to one-off losses,” Shiomi said, without elaborating further.

Sumitomo suspended operation at Ambatovy and its San Cristobal silver-zinc-lead mine in Bolivia in March to prevent the spread of the coronavirus.

It resumed operation at San Cristobal in May, but it expects Ambatovy to restart operations only in the January-March quarter.

It expects Ambatovy to book a 93.7 billion yen loss this year.

Sumitomo also warned that there is a risk for the trading house to book a further impairment loss on Ambatovy if the business environment deteriorates due to any delay to the planned restart, or if nickel prices slump.

Sumitomo’s stake in Ambatovy is due to rise to 54.17% in September from 47.67% currently as Canadian partner Sherritt International is restructuring its debt.

For the April-June quarter, it reported a net loss of 41.0 billion yen, against a profit of 79.7 billion yen a year earlier.