Sumitomo Metal cuts profit f'cast on appraisal loss on Goro nickel stake
TOKYO Feb 9 (Reuters) - Sumitomo Metal Mining Co Ltd on Monday lowered its net profit forecast for the 2014 business year by 15 percent due to an estimated appraisal loss of $220 million on its stake in Vale New Caledonia (VNC), the operator of the Goro nickel project.
Sumitomo Metal, Japan's biggest nickel smelter, said it plans to book the appraisal loss in the January-March quarter as the Goro project's output came to about half of its annual capacity of 57,000 tonnes in 2014, deputy general manager Shuichi Yasukawa said.
The Goro nickel processing plant in New Caledonia owned by Vale has been beset by problems in recent years, including several chemical spills and violent protests.
Sumitomo Metal and Japanese trading firm Mitsui & Co together hold a total of 14.5 percent in VNC.
Sumitomo Metal has now forecast an annual net profit of 90 billion yen ($757.26 million), down from its previous estimate of 106 billion yen.
But the company raised its recurring profit forecast by 10 percent to 170 billion yen as a weaker yen against the dollar helped boost the value of its metal inventories and credits to its overseas units in yen terms, Yasukawa said.
The appraisal comes as global miners and oil majors, including Japanese trading houses, have been caught flat-footed by the rout in commodities, with copper prices down more than 20 percent and oil plunging over 50 percent since mid-2014.
Sumitomo Metal, also Japan's No.2 copper producer, expects the recent drop in copper prices will not significantly affect its earnings this business year to March 31 which reflects profits of its overseas copper producing units from the January-December period as their business year ended in December.
"It may affect more on our earnings next business year," Yasukawa said.
For the April-December period, the company reported a 58 percent increase in net profit, helped by higher metal sales and a lower yen.
($1 = 118.8500 yen) (Reporting by Yuka Obayashi; Editing by Sunil Nair)
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