Marubeni cuts exposure to Russia as it writes down stake in Sakhalin-1 project

Japanese trading house Marubeni Corp. said Friday it had cut its exposure to Russia by ¥12.6 billion ($97 million) in the year that ended March 31, mainly by writing down its stake in the country’s Sakhalin-1 oil project.

Its net exposure to Russia, including long-term credit, fixed assets and investments, was reduced to ¥12.3 billion as of the end of March, from ¥24.9 billion a year earlier, the company said.

“Most of the reduction in exposure comes from the trimmed valuation of our stake in the Sakhalin Oil and Gas Development (SODECO),” Marubeni Chief Executive Officer Masumi Kakinoki told a news conference, saying it had factored in lower prices of Russian oil amid the deepening Ukraine crisis.

Marubeni owns a 12.3% stake in SODECO, a Japanese consortium that owns 30% of the Sakhalin-1 project, from which Exxon Mobil Corp. is pulling out.

Marubeni will keep its stake in Sakhalin-1 in accordance with Japanese government policy, although it wants to withdraw due to the war situation, Kakinoki said.

“Russia accounts for less than 0.5% of our total overseas exposure at ¥2.7 trillion … there will be no major hindrance even if problems occur in the full amount of our Russian exposure,” he said.

Marubeni said in April it would freeze all new transactions in Russia, including those not subject to sanctions, and seek to terminate existing deals as much as possible.

Kakinoki reiterated Marubeni had no plans to invest in new energy projects in Russia.

Marubeni also announced that its consolidated net profit nearly doubled to a record high in the year ended in March from the previous year, propelled by soaring commodity prices.

Higher prices boosted profits for commodities operations, such as Marubeni’s copper mining business in Chile and coking coal business in Australia.

The company posted a net profit of ¥424.32 billion for the 2021 fiscal year, a 90.1% increase from the previous year.

“We were able to push up our record profit significantly thanks to rising commodity prices and the improved profitability of our existing operations,” Kakinoki said.

Marubeni’s oil and gas development business also produced rosy results, while its agriculture-linked business in the United States was strong thanks to rising demand and prices for farm materials.

Its aviation and marine business also reported higher profits, thanks to improvements in the shipping market.