ITOCHU Corporation today decided at the board meeting that as part of the plan, "Restructuring for Success in the 21^st Century," bold measures will be taken to dispose of inefficient and under-performing assets in construction and real estate.   Investments in affiliates, other investments, Southeast Asian receivables and other assets which may result in losses in the future will also be subject to the same measures.  The losses incurred from such measures will basically be appropriated in the six-month period ended September 30, 1999.  (Please refer to attached sheets for details on the plan, "Restructuring for Success in the 21^st Century.")

Thus, regrettably, a large loss is expected this fiscal year, and estimates for performance and cash dividends announced at the year-end closing of accounts on May 18, 1999, will be revised as follows.

I Revision of Non-Consolidated Performance Estimates for Fiscal 1999

Performance estimates for the six-month period ended September 30, 1999, and for fiscal 1999 (April 1, 1999 - March 31, 2000) have been revised from estimates announced after the closing of accounts for fiscal 1998 on May 18, 1999.

1. Revision of Non-Consolidated Performance Estimates for the Six-month Period Ended September 30, 1999

Performance Estimates for the Six-month Period Ended September 30, 1999

(Reference)  Performance for the Six-month Period Ended September 30, 1998

2. Revision of Non-Consolidated Performance Estimates for Fiscal 1999 (April 1, 1999 - March 31, 2000)

Performance Estimates for Fiscal 1999 (April 1, 1999 - March 31, 2000)

(Reference) Fiscal 1998 Performance (April 1, 1998 - March 31, 1999)

3. Reasons for the Revision of Non-Consolidated Performance Estimates for the Six-month Period Ended September 30, 1999, and Fiscal 1999

As a result of difficult economic conditions in Japan and Southeast Asia and elimination of inefficient transactions, both total trading transactions and gross trading profits are projected to underperform previous estimates. Ordinary income for the six-month period ended September 30, 1999, is estimated to be 13 billion yen, and fiscal 1999 (April 1, 1999 - March 31, 2000) is estimated to be 40 billion yen.

Extraordinary losses arising from disposal and write-downs of inefficient and under-performing assets are expected to total 340 billion yen for the six-month period ended September 30, 1999, and 395 billion yen for fiscal 1999. On the other hand, special gains including sales of securities are expected to yield approximately 12 billion yen for the six-month period ended September 30, 1999, and 43 billion yen for fiscal 1999. As a result, a net loss of 185 billion yen are projected for the six-month period ended September 30, 1999, and 183 billion yen for fiscal 1999.

It should be noted that the above forecasts are based on deferred tax accounting.

4. Details of Extraordinary Losses

(1) Management Restructuring Strategy

Losses incurred from the disposal of real estate inventory and other losses which will incur from the Management Restructuring Strategy implemented in November 1997 will be appropriated in the six-month period ended September 30, 1999. As a result, a loss of approximately 52 billion yen is expected.

(2) Disposal of inefficient and under-performing assets related to construction and real estate

• 1.Policy to deal with long-term development plans will be changed from that stated in the Management Restructuring Strategy implemented in November 1999. Real estate inventory which have become inefficient and unprofitable with the business environment deteriorating as land prices continue to fall will be disposed of. The difference with the market value, the total valuation loss, is expected to reach approximately 41 billion yen in the six-month period ended September 30, 1999.
• 2.Investments and loans for golf course managing companies will be reviewed; these reviews will be based on prospects for sales in membership and balance of revenue and expenditure in an environment where operating income and membership-collection is aggravating. Allowance for doubtful investments and loans of approximately 76 billion yen is expected in the six-month period ended September 30, 1999.
• 3.Collateral for project finance transactions in construction and real estate with general customers - those not included in the Management Restructuring Strategy - will be revalued as valuation losses are expanding with land prices continuing to fall. Allowance for doubtful loans are expected to reach approximately 14 billion yen in the six-month period ended September 30, 1999.

(3) Reorganizing, merging and reducing the number affiliates and the disposal of inefficient general investments

• 1.Reorganizing, merging and reducing the number of affiliates is one of the most important issues of the Group in order to increase operational revenues. Forty-eight companies were reorganized, merged or liquidated in the six-month period ended September 30, 1999, and a loss of approximately 30 billion yen is expected. About 120 affiliates will be reorganized in the second half of fiscal 1999, and a total loss of approximately 80 billion yen is expected for fiscal 1999.
• 2.General investments that have decreased considerably in market price are undergoing review. These include those in the Asian region where economic growth remains sluggish. Loss from disposal and revaluation of these investments is expected to reach approximately 36 billion yen in the six-month period ended September 30, 1999.

(4) Dealing with the anticipated introduction of new accounting standards from Fiscal Year 2000 onward

• 1.Profitability and efficiency of fixed assets held for operations together with land and other properties held for sale were reviewed with the future introduction of accounting for the impairment of long-lived assets and investments in consideration. Those which have become low in profit with the fall in land prices will be disposed of in accordance with company policy to reduce total assets. A loss in valuation of approximately 70 billion yen is expected for the six-month period ended September 30, 1999.
• 2.The classifications of receivables and allowance were reviewed with the application of mark to market accounting which is to be introduced in the next fiscal year. Thus, allowance for Southeast Asian and Russian receivables is expected to reach approximately 21 billion yen for the six-month period ended September 30, 1999.
• 3.The revision of the retirement pension plan, which will include the lowering of the discount rate and the rate of return on assets, will take place shortly in order to improve its financial position. Concurrently, unfunded accumulated benefit obligations will be amortized in five years starting in the second half of fiscal 1999. Additional amortization of approximately 5 billion yen in the latter half of fiscal 1999 and approximately 10 billion yen from Fiscal Year 2000 onward is expected.

II Revision of Consolidated Performance Estimates for Fiscal 1999

The consolidated basis performance for fiscal 1999 (April 1, 1999 - March 31, 2000), after revisions in the non-consolidated basis performance, have been revised from estimates announced after the closing of accounts for fiscal 1998 on May 25, 1999. Revisions are summarized in the following chart.

With some items on the non-consolidated basis, such as loss from the Management Restructuring Strategy, already being accounted for on the consolidated basis, and ITOCHU International Inc. expecting special gains of approximately 25 billion yen, consolidated loss is estimated to be 130 billion yen.

Performance Estimates for Fiscal 1999 (April 1, 1999 - March 31, 2000)

(Reference) Fiscal 1998 Performance (April 1, 1998 - March 31, 1999)

III Revision of Cash Dividends for Fiscal 1999

As detailed in the following chart, cash dividends for fiscal 1999 (April 1, 1999 - March 31, 2000) will be revised from projections made after the closing of accounts for fiscal 1998 on May 18, 1999.

Fiscal 1999 (April 1, 1999 - March 31, 2000)

(Reference) Fiscal 1998 (April 1, 1998 - March 31, 1999)

Due to radical restructuring of inefficient and under-performing assets, performance for the six-month period ended September 30, 1999, and performance for fiscal 1999 are expected to result in large losses. Unappropriated losses are expected to be offset by legal reserve and other reserves. Therefore, the Company regrettably plans to forgo the payment of a cash dividend for fiscal 1999.

Stockholders' equity will be impaired temporarily. However, with the disposal of inefficient and under-performing assets and the shifting of management resources to “Attractive and Powerful” businesses, stockholders' equity will be recovered promptly with a 20 billion yen profit on the non-consolidated basis and a 40 billion yen profit on the consolidated basis for Fiscal Year 2000 onward expected.

• Message from the President
• To Our Individual Stockholders
  • SNAPSHOT
    • Tireless Business Creation
    • Strengthening Profitability and Financial Base
  • Latest Financial Highlights
• IR News
  • 2012
  • 2011
  • 2010
  • 2009
  • 2008
• Information for Stockholders
  • Information for Stockholders
  • General Meeting
  • Dividend Policy and Dividend
• Financial Information
  • Financial Highlights
  • Segment Highlights
  • Financial Data
  • Credit Ratings
  • Risk Information
• Financial Statements
  • Fiscal Year 2012
  • Fiscal Year 2011
  • Fiscal Year 2010
  • Fiscal Year 2009
  • Fiscal Year 2008
  • Fiscal Year 2007
  • Fiscal Year 2006
  • Fiscal Year 2005
  • Fiscal Year 2004
  • Fiscal Year 2003
  • Fiscal Year 2002
  • Fiscal Year 2001
  • Fiscal Year 2000
• IR Calendar
• IR Library
  • TSE Filings
    • 2012
    • 2011
    • 2010
    • 2009
    • 2008
    • 2007
    • 2006
    • 2005
    • 2004
    • 2003
    • 2002
    • 2001
    • 2000
    • 1999
  • Annual Report
    • 2011
    • 2010
    • 2009
    • 2008
    • 2007
    • 2006
    • 2005
    • 2004
    • 2003
    • 2002
    • 2001
    • 2000
  • Fact Book
  • Analyst List
• Frequently Asked Questions
• IR E-mail Service
• IR Site Map