Tokyo Gas Expects First Loss Since 1945 on LNG Costs

By Shigeru Sato

July 29 (Bloomberg) -- Tokyo Gas Co., Japan's largest natural gas distributor, forecast its first full-year loss since the end of World War II, saying the cost of importing the fuel may surge 51 percent.

The company may post a net loss of 7 billion yen ($65 million) in the year ending March 31, Tokyo Gas said in a statement today, reversing its April 25 forecast for net income of 50 billion yen. Sales may reach 1.8 trillion yen compared with its earlier projection of 1.71 trillion.

Tokyo Gas expects to pay a record 907 billion yen to import liquefied natural gas this year after crude oil prices reached an all-time high of $147.27 a barrel in New York on July 11. Osaka Gas Co., Japan's second-largest distributor of the fuel, also cut its profit forecast today citing higher costs.

``Tokyo Gas' and Osaka Gas' bottom lines are driven by procurement costs,'' said Hirofumi Kawachi, a senior energy analyst at Mizuho Investors Securities Co. in Tokyo. ``This may persist as long as oil prices hover near record levels.''

Osaka Gas estimated profit of 11 billion yen for the year ending March 31 compared with the 40.5 billion yen net income it predicted in April, according to a statement to the Tokyo Stock Exchange. It predicts sales of 1.42 trillion yen, up from the previous forecast of 1.37 trillion yen.

Tokyo Gas' net income fell 29 percent to 16.4 billion yen in the first quarter from a year earlier, the company said. The company's shares fell 3.8 percent to close at 405 yen on the Tokyo stock exchange. The stock has declined 23 percent in the past 12 months. Osaka Gas dropped 1.8 percent to close at 381 yen in Tokyo trading. The shares have lost 9.5 percent in a year.

Crude oil in New York gained 63 percent in a year and traded at $125.33 a barrel at 5:08 p.m. Tokyo time.

Tokyo Gas's full-year loss would be the first since 1945, when the company went 23 million yen into the red, it said. At the time Japanese utilities faced heavy costs for rebuilding infrastructure destroyed during World War II.

To contact the reporter on this story: Shigeru Sato in Tokyo at ssato10@bloomberg.net.