Sumitomo Corporation has recorded a loss of ¥89 billion in its Ambatovy nickel project in Madagascar due to plant issues and other factors, leading to a review of the project's plans.
In addition to the nickel business loss, losses were also incurred in the Myanmar telecommunications and agricultural product businesses, resulting in a total of ¥150 billion in extraordinary losses for the first quarter.
Sumitomo Corporation plans to re-examine the operating direction of the Ambatovy project in consultation with stakeholders, considering economic benefits and social responsibility.
Sumitomo Corporation announced on the 2nd that it incurred an impairment loss of approximately 89 billion yen (approximately 900 billion won) from the Ambatovy nickel project in Madagascar that it has been promoting.
This loss recognition stemmed from a downward revision of the outlook due to operational disruptions and a decrease in production caused by malfunctions in the nickel refining plant equipment, as well as a reassessment of the business plan as a result. Sumitomo Corporation stated that the Ambatovy project will no longer be a burden on its profitability and that it will keep all options open for future development directions, taking into account economic and social responsibilities.
In the first quarter of this fiscal year (January-March 2024), in addition to the nickel business loss, there were a total of 150 billion yen in one-off losses due to the recognition of expenses related to the Myanmar telecommunications business and impairment losses in the global agricultural products business.
Regarding its relationship with Elliott Management, an activist fund that has been urging investment streamlining to enhance shareholder value, Sumitomo Corporation expressed its intention to continue engaging with investors and shareholders to gather their opinions.
Sumitomo Corporation, a leading Japanese general trading company, has been working with the Madagascan government on the Ambatovy project since 2005. It is the world's largest project that vertically integrates the entire process, from mine development and smelter construction to nickel production, and it entered full-scale production in 2012.
This project has not only produced nickel but also byproducts such as cobalt and ammonia, making significant contributions to the Madagascan national economy. In particular, it has made efforts in local job creation, social infrastructure development, and environmental protection, but recent poor operating performance has made restructuring unavoidable.
Sumitomo Corporation is expected to review the operating direction of the Ambatovy nickel project in consultation with the Madagascan government, local residents, investors, and other stakeholders. It faces the challenge of balancing economic benefits and social responsibility arising from resource development.