Posted on 01 Jul 2015
The Australian operations of Japanese giant Sumitomo have suffered heavy losses of $56 million in the latest financial year, as the conglomerate – which locally has interests in grains trading and industrial and automotive wholesaling – went deep into the red for the second consecutive year.
Sumitomo, which holds a 23 per cent stake in listed agricultural chemicals group Nufarm and was a potential trade buyer of the fruit and vegetable company Costa Group before Frank Costa opted for a $637 million initial public offering, has been active on the acquisition trail in the past two years.
It bought out the remaining 50 per cent stake in Emerald Grain in February 2014 in a deal worth about $120 million, giving it full ownership of Australia's fifth largest grains handler and exporter.
But the Sumitomo Australia arm has had a rough time, suffering big losses and a big drop in revenue, which its directors blamed on falling sales in its food products and steel divisions. Although this hasn't diminished its appetite for further acquisitions: "The company continues to see new investment and business opportunities with a view to further diversify the company's business," the directors state in a review of operations of its latest annual financial report.
Sumitomo Australia in the 12 months ended March 31, 2015 suffered a loss of $55.9 million, compared with a loss of $60.5 million in the previous year.
Revenues in its latest financial year tumbled by 47 per cent to $414 million from $785 million a year earlier.
Sumitomo has several joint venture distribution arrangements, the latest being a deal where Nufarm's United Kingdom business has distribution rights in the UK and Ireland for the Sumitomo Chemical Company's range of crop protection products. That distribution deal came into being on June 1 this year.
Sumitomo also has a representative on the board of Nufarm, which has a market capitalisation of $2 billion.
The Australian operations of global conglomerates have been in the spotlight on the tax front over the past few months as authorities and politicians including Federal Treasurer Joe Hockey seek to ensure that multinational firms pay their fair share of tax. Companies such as Google, Apple and Microsoft have been in the sights of Mr Hockey. Tax Commissioner Chris Jordan said earlier this year it was broadly the technology multinationals who were the most aggressive in tax minimisation.
The losses being booked by Sumitomo Australia means that it didn't pay any tax in its latest financial year, and instead received a $2.3 million tax benefit. On a pre-tax basis, the loss reported by the company was $53.2 million. In the previous year, Sumitomo Australia paid $986,000 in tax.
The Australian business hasn't paid any dividends in the past two years to its Japanese parent Sumitomo Corporation, which is listed on the Tokyo Stock Exchange and has a market capitalisation of around $15 billion.
