Investors in Japan’s trading houses are preparing to quiz executives on details of plans to collaborate more closely with Warren Buffett.
Most of the firms hold annual meetings on Friday, the first round of gatherings since the US investor traveled to Japan in April to strengthen ties with the energy and commodities conglomerates, which include Mitsubishi Corp., Itochu Corp. and Marubeni Corp. Buffett first took stakes in the companies in 2020 and his trip this year helped propel their shares to record highs.
The meetings are the only opportunity for many shareholders to question top executives and vote on measures. This is what they will likely ask about:
Buffett Plans
Everyone will want to know what closer cooperation with Buffett might entail. His company, Berkshire Hathaway Inc., has raised holdings in the five top trading houses, which also include Mitsui & Co. and Sumitomo Corp., to an average of 8.5% excluding treasury stock.
He has a goal of lifting that to as high as 9.9%, but is unlikely to stop there if he receives approval from the Japanese boards. So the trading houses may signal whether they are interested in allowing Buffett to take significantly higher stakes.
The Japanese companies have been devising business plans to collaborate with the US investor, so some of those proposals could be released.
Surging Share Prices
The stock prices of the houses — known in Japan as Sogo Shosha — have surged since Buffett started ratcheting-up his investments. They’re now at risk of becoming too expensive for the nation’s mom-and-pop retail investors.
The trading houses are likely to discuss what they will do to help alleviate this issue, like possibly splitting their stock to make it easier for new investors to come onboard.
“Now is the most exciting time” for the trading houses, said Hideaki Kuribara, an analyst at Tokai Tokyo Research Center, who has been watching the companies for nearly two decades. “Management is steadily improving, and business opportunities are increasing.”
Russian Concerns
Mitsubishi, the biggest trading house, will likely be grilled about its continued investment in Russia, especially due to the risk of more sanctions on energy from the country by the US and Europe. The company decided last year to retain its minority stake in the Sakhalin-2 LNG export facility, which is a major source of power-station fuel for Japan.
Mitsui, which also has a stake in the LNG project and is the trading house most invested in Russian energy, said it doesn’t have any plans to abandon its investment in the facility at its shareholders meeting, which it held on Wednesday before the other gatherings.
Female Representation
Japanese shareholders are demanding more female representation on boards and in senior management, and could push trading houses on their plans for this. The companies are struggling to promote female executives, despite pressure from the government.
The aim is to have women make up at least 30% of directors at major firms by 2030, according to a draft plan released by the government this month. Authorities will press for the target to be included in the regulations for some companies listed on the Tokyo Stock Exchange, including the five trading houses.