Trafigura Group Pte Ltd (“Trafigura”), one of the world’s leading independent commodity trading companies delivered a strong performance during the first half of the company’s financial year ending 31 March 2019.
Group revenues were flat at USD86,297 million compared to USD86,935 in the first half of 2018, reflecting trading volumes that remained largely stable and average commodity price levels broadly in line with last year. Profit for the period, however, rose by 92 percent to USD426 million from USD222 million, principally due to a strong performance in Oil and Petroleum Products trading.
The company’s restructured oil trading operation was able to quickly adapt to increased price volatility due to geopolitical events during the period, as well as to benefit from its market-leading position in strategic commodity flows, notably the increase in exports of crude oil and liquefied natural gas from the US.
Gross profit was USD1,472 million, a 50 percent increase on the level of USD979 million registered in the first half of 2018. Gross profit margin was 1.70 percent, up from 1.13 percent a year ago. EBITDA was close to a record at USD1,112 million, compared to USD658 million.
Gross profit in Oil and Petroleum Products trading was USD1,035 million, nearly three and a half times higher than in H1 2018. Whilst all of the division’s books performed well during the period, the crude oil, gasoline, LNG and wet freight desks were the stand-out contributors. Gross profit in Metals and Minerals trading fell by about a third to USD437 million compared to this time last year, reflecting a slow start for the non-ferrous concentrates and refined metal books.
“Trafigura Group registered a sharp increase in profit for the first half of its 2019 financial year, with margins on oil trading showing an especially strong recovery,” said Christophe Salmon, Trafigura’s Group Chief Financial Officer. “In commodity markets that remained fiercely competitive, the company prioritised profitable business over further volume growth and maintained a very robust financial position with ample access to liquidity. As a whole, these results once again demonstrate the benefits of our diversified business model, focused on two commodity clusters whose market cycles are largely uncorrelated.
“In the first half of 2019 the recovered performance of the Oil and Petroleum Products segment more than compensated for the weaker performance in Metals and Minerals. This led to stronger profit generation across the board in H1 2019, reflecting the critical mass and market share the company has attained in the commodities traded and the efficient and scalable infrastructure developed to support the trading activity,” concluded Christophe.
After four years of rapid volume growth, the company is in a phase of consolidation across its trading books. Total volume traded in Oil and Petroleum Products reduced by seven percent from the same period a year ago to an average 5.5 million barrels per day, while Metals and Minerals total volumes increased marginally by three percent.
A key event of the period was Nyrstar NV, the leading European smelting group in which Trafigura is the largest shareholder, negotiating to restructure its debts. The expected outcome of this process will be that Trafigura will eventually hold a 98 percent stake in the operating companies of the Nyrstar Group. The restructuring agreement that was signed after the end of the reporting period reduces Nyrstar’s liabilities substantially and will lead to Trafigura consolidating the assets and remaining liabilities of the company within its balance sheet before the end of the financial year.
Other key events over the half year included the appointment of Emma FitzGerald as the new CEO of Trafigura’s mid- and downstream investment Puma Energy. Emma’s wealth of relevant experience and expertise gained from energy and utility industries puts her in an ideal position to build on the strong foundations that Puma Energy has established over the last 15 years. Andrew Kemp will join as its CFO in June. His deep experience of emerging markets will bring valuable insights to Puma Energy as it implements its strategy to deliver sustainable growth.
In terms of financing and liquidity, Trafigura maintained in the first half of 2019 total credit lines of USD59 billion from a record total of around 135 banks around the world to support trading activity, retaining a significant buffer of unused credit in case of unforeseen events.
During the six months ending 31 March 2019, the Group completed a number of important capital market transactions, both in established markets and in promising new ones, and in addition took the opportunity to build on successful efforts made the previous year to expand into new financing markets, most notably with further tranches of its Panda Bond programme. In all respects, the company’s credit and market risk parameters remained unchanged.
Sea News, June 13