TOKYO/SINGAPORE (Reuters) - Mitsubishi Corp (8058.T), Japan’s biggest trading group, said on Wednesday it would shut its Singapore-based crude oil and fuel trading unit after revelations in September that a trader there racked up enormous unauthorised trading losses.
The unit, Petro-Diamond Singapore, will lose about 34.2 billion yen (£244.24 million) before taxes after closing the unofficial trading positions. That means the final debt for the unit could be as high as 30.8 billion yen, the company said in a statement.
Mitsubishi, Japan’s biggest trading house by sales, said in September that a trader lost $320 million in unauthorised transactions in crude oil derivatives and that the matter had been reported to the police.
The trader, Wang Xingchen, also known as Jack Wang, denied any wrongdoing in a statement issued through a lawyer.
These were the first such losses at Mitsubishi, which invests in everything from salmon to natural gas and trades many commodities globally.
Mitsubishi will bring some oil and fuel trading back to Tokyo, Chief Financial Officer Kazuyuki Masu said during the company’s first-half results briefing on Wednesday.
“Since it booked such a big loss, we could not reinvest in the same company and it’s better to reinforce our management system,” Masu said.
He added that the company’s oil trading in the United States and Europe was unaffected. In recent years, Mitsubishi had shifted its oil trading headquarters to Singapore.
Some settlements would be done in Hong Kong, he said. Masu did not say how many staff would be cut or affected by the shutdown. Petro-Diamond has about 50 employees in Singapore.
Mitsubishi also said it would cut its full-year earnings forecast because of the Petro-Diamond losses and lower coal prices.
The company expects profit to be 520 billion yen for the year through March, down from a forecast of 600 billion yen.
First fiscal-half profit fell 22% to 242.4 billion yen, the company said.
Petro-Diamond staff weren’t told of the decision until Wednesday and are “shocked,” a person with direct knowledge of Petro-Diamond’s operations told Reuters. The person was not authorised to speak to the media and spoke on condition of anonymity.
Since the losses came to light, Mitsubishi has required all of its transactions to be reviewed by Mitsubishi headquarters in Tokyo.
Mitsubishi has had no contact with Wang and does not know where he is, other than that he is outside Singapore, Masu said.
(This story corrects by inserting dropped word in 14th paragraph)
Reporting by Yuka Obayashi and Shu Zhang; Writing by Aaron Sheldrick; Editing by Tom Hogue, Christian Schmollinger and Gerry Doyle