Itochu Corp’s aviation unit is set to conclude its strategic collaboration with Israeli defense company Elbit Systems Ltd by the end of February, a move announced by the Japanese trading house’s executive on Monday. This decision comes against the backdrop of the ongoing conflict in Gaza.
The catalyst for ending the partnership appears to be the International Court of Justice’s recent order to Israel. The court directed the country to take proactive measures to prevent acts of genocide against Palestinians and to intensify efforts to safeguard civilian lives. In light of these developments, Tsuyoshi Hachimura, Chief Financial Officer of Itochu, explained during an earnings press conference that the decision to terminate the collaboration is in response to the court’s ruling.
Hachimura clarified that the collaboration initially stemmed from a request by Japan’s defense ministry, aimed at importing defense equipment essential for the Self-Defense Forces and crucial for Japan’s national security. Importantly, he emphasized that the decision to end the partnership is not influenced by the ongoing conflict between Israel and Palestine. This distinction underscores the strategic nature of the collaboration, focused on Japan’s security needs, rather than being directly tied to the geopolitical situation in the Middle East.
Company Mentions It’s a ICJ Ruling
The executive from Itochu Corp’s aviation unit announced a significant development regarding its strategic cooperation with Israeli defense company Elbit Systems and Nippon Aircraft Supply (NAS). Citing the International Court of Justice’s order issued on January 26 and expressing support for the Court’s role, the executive revealed that they have already halted any new activities related to the Memorandum of Understanding (MoU). Furthermore, there are plans in place to officially terminate the MoU by the end of February.
The strategic cooperation MoU, initially signed in March 2023, involved Itochu Aviation, Elbit Systems, and NAS. It is noteworthy that this agreement was established seven months prior to the outbreak of the conflict. The decision to suspend and eventually conclude the MoU underscores the impact of international legal developments on business partnerships and reflects a commitment to aligning with global directives and standards, as supported by the Japanese government.
Regarding business activities related to Israel, Itochu currently holds minor fintech investments and operates a car sales business. According to Hachimura, the company is not encountering challenges in debt collection or any other issues within these ventures.
In terms of financial performance, Itochu disclosed a 10.3% decline in net profit for the period of April to December. This dip is attributed to reduced prices of coal and pulp, along with diminished gains from energy trading during this timeframe.
For the nine months concluding on December 31, the trading company posted a profit of 611.7 billion yen ($4.1 billion), representing a decrease compared to the previous year’s figure of 682.2 billion yen. This decline was attributed to various factors, including lower prices of coal and pulp, as well as reduced gains from energy trading during this period.
Despite the observed dip in profits, the trading company is adhering to its full-year profit forecast through the end of March, maintaining a projection of 800 billion yen. It’s noteworthy, however, that this forecast falls slightly below the mean estimate of 821 billion yen, as indicated by a poll involving nine analysts and compiled by LSEG. This discrepancy suggests a cautious outlook for the remainder of the fiscal year, possibly influenced by ongoing market dynamics and economic conditions.