Sojitz Corp.

The stable outlook reflects our expectation that the company's RORA will stand at 10%-15% in the coming one to two years. We also expect its adjusted capital to keep increasing steadily above the level of risk-based capital required under the 'BBB' stress scenario. These expectations are based on our view that the company's net profit will recover to about ¥60 billion over the coming one to two years, and accumulative free cash flow after shareholder returns will remain positive for the period of its medium-term business plan. We may upgrade the company if we see a stronger likelihood of either of the following scenarios: RORA stabilizing in the 15%-20% range; or Capital adequacy improving to near 120% of the level

...Net profit is likely to recover to about Ñ60 billion in the next one to two years, from Ñ27 billion in fiscal 2020 amid the COVID-19 pandemic. Japan-based general trading and investment company (GTIC) Sojitz Corp.'s infrastructure, health care, and agriculture businesses are likely to continue to generate stable earnings. This should help mitigate the volatility in its performance that could stem from swings in coking coal and methanol prices. We also expect earnings from its automotive-related, iron and steel, and chemical businesses to recover as the effects of the pandemic peter out. We see only limited risk of substantial impairment losses hurting its performance. This is because it has established a conservative risk management regime. Few of its investments bear the risk of large impairment losses. Also, its diverse portfolio limits exposure to large investments. It is unlikely to incur additional impairment losses. In fiscal 2020, it booked about Ñ5.0 billion in impairment losses...

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