IT'S ALL ABOUT GROWTH: ITOCHU Corp.'s Diverse Ventures Shine Amidst Commodity Challenges

Large Caps 2 replies 0 votes 1642 views Tags:  acquisitionsbusiness growthcommodity pricesearnings reportITOCHU Corp.non-resource businesses

ITOCHU Corp.'s (OTCPK:ITOCY)(OTCPK:ITOCF) non-resource businesses are stepping up and helping them hit their targets this year, even though commodity prices are a bit on the weak side.

So, what's the scoop? Well, turns out that improvements in their FamilyMart business, as well as their automotive and food ventures, are the ones driving growth. They're also making some smart acquisitions in construction machinery and IT consulting. Quite the diverse portfolio, huh?

Now, onto the nitty-gritty of their recent results. In the first quarter of 2023, they brought in ¥213.2 billion, which is about 27% of their full year plan of ¥780 billion. Not too shabby! And guess what's making this happen? Yep, it's those non-resource segments again. Almost all their segments (except for Metals & Minerals and Corporate and General Products & Realty) are making more profits compared to last year's first quarter. Energy & Chemicals had a nice boost, thanks to a special gain on a lithium battery company.

Now, let's talk about the factors that are putting a damper on things. First off, there's the resource prices, especially coal and iron ore, that took a ¥17.5 billion hit compared to last year. And higher interest expenses chipped away another ¥13 billion. But hey, the good news is that the non-resource side is shining bright.

Now, normally we'd dive into the commodity prices, but honestly, this quarter it's not that big a deal. The lower prices are all part of the plan, and they're not moving much from last quarter. So, the big trading companies aren't changing their profit or dividend forecasts for the year. Instead, let's focus on those non-resource businesses and what they're up to for the rest of the year.

For instance, the Machinery segment is really stepping up, contributing ¥7 billion to the profit game and already reaching 30% of its yearly target. The car-related companies are doing well, especially since the chip shortage situation has improved. And they're benefiting from that cool acquisition they made in Hitachi Construction Machinery.

And oh, did I mention FamilyMart? This segment brought in ¥6.5 billion of profit improvement, and they're halfway to their full-year target. FamilyMart is on the upswing, with sales up 5.7%, and more folks visiting the store and spending more per visit. New stores are also raking in higher sales per store compared to last year. Looks like they're onto something good there.

Now, let's talk about ICT and Financial. They've added ¥4.5 billion to the core profit. Sure, they're at 18% of their yearly goal, but they're making moves. They're increasing their stake in Itochu Techno-Solutions, and they're benefiting from higher insurance commissions and their purchase of a stake in a foreign exchange broker.

Food is in the game too, adding ¥4 billion to the core profit. They're doing better with food distribution, and they've hit 34% of their yearly profit plan, which is pretty darn good.

Of course, there's always gotta be a segment that's not quite hitting the same high notes. General Products & Realty is lagging behind last year's results by ¥10.5 billion, mostly because of their European wood pulp business. But hey, they've got some solid plans in the pipeline to bounce back.

And guess what? I've got some juicy stock info for you too. While Itochu's stock price isn't leading the pack like it used to, it's still got some moves. Its P/E ratio isn't the highest anymore, and its return on equity is pretty darn good.

They're planning some dividend increases too. They're talking about a 40% payout ratio, which could lead to bigger dividends later in the year. And let's not forget about their capital management. They've got the cash to cover dividends and share buybacks, and they're even thinking about increasing their shareholder returns.

Things are looking pretty bright for ITOCHU Corp. this year. Commodity prices might be a bit of a hurdle, but their non-resource businesses are coming to the rescue. With a solid plan and some promising moves, they're ready to tackle the challenges ahead.

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