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Sumitomo losses mount
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September 19, 1996: 2:13 p.m. ET
Corporation hikes its original loss estimate from $1.8 billion to $2.6 billion
From Correspondent Bill Dorman
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TOKYO (CNNfn) -- Sumitomo Corporation said Thursday that the company's financial damages resulting from the copper trading scandal are much higher than the original estimate of $1.8 billion.
The revised figure, $2.6 billion, is no small piece of change. For this huge corporation, however, this represents only about ten percent of its annual sales, and the loss will not cripple the company. (1.81M QuickTime Movie)
Kota Nakako, a senior analyst with SBC Warburg Japan, noted, "Sumitomo's financial strength is, of course, worsened by this loss; however, its financial strength is still as good as the other two big trading companies -- Mitsubishi Corp. and Mitsui." (370K WAV) (370K AIF)
Analysts say that, prior to Thursday's announcement, further losses had been expected since the copper market has taken such a hard hit recently and Sumitomo had not immediately liquidated all of its copper positions.
Sumitomo Corporation President Kenji Miyahara, told a press conference that another increase in the loss figure is unlikely.
"As a result of our liquidation up to now, there still remain positions, including both short and long positions, but the liquidation of uncovered positions is nearly complete," he stated. "It is our judgment that we will not again revise the estimated loss we have announced today."
Sumitomo announced the revised estimate after trading ended Thursday, and the company's stock gained one yen on the day. Overall, the stock has fallen more than 22 percent since the copper trading debacle was disclosed in June.
The company stated that Yasuo Hamanaka, the rogue trader taking the blame for the massive scandal, conducted as many as 2,000 unauthorized deals in a single year, and that he forged and doctored documents to cover his tracks.
Tomiichi Akiyama, president of Sumitomo when the scandal was first disclosed, established the company line during a press conference last June, and it remains very much the same today.
"These transactions were made solely by Yasuo Hamanaka himself. Hamanaka abused Sumitomo's name, and continued on with such unauthorized trading," Akiyama stated.(176K WAV) (176K AIF)
The company is now pressing authorities to lodge criminal charges against Hamanaka.
For his part, Hamanaka has maintained a low profile, but was photographed by a Japanese magazine recently carrying his golf bag. The trader has had no comment thus far, but promises to tell his side of the story at some point.
The story is not quite over for Sumitomo's management, either. Officials from the United States and the United Kingdom are still investigating whether the company will be subject to fines or any other penalties.
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