Trafigura cashes in on oil turmoil with file earnings

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Trafigura, one of many world’s largest commodity merchants, cashed in on the turmoil created by coronavirus to file the very best efficiency in its 27-year historical past.

The privately owned firm generated file gross earnings, earnings and money flows within the 12 months to September, permitting it to reward its high merchants and executives with a complete cost in extra of half a billion {dollars}.

The outcomes present the power of the large commodity merchants — a bunch that features Vitol, Glencore, Gunvor and Mercuria — to revenue from the chaos in commodity markets as costs of oil and different uncooked supplies crashed in March and April when containment measures to halt the pandemic hit demand.

Whereas large oil producers struggled as costs for his or her core merchandise tumbled, merchants profited by betting on large value swings, storage offers and different alternatives created by market volatility.

“These figures replicate an impressive efficiency by each core buying and selling divisions, Oil and Petroleum Merchandise and Metals and Minerals, within the unstable markets, which had been primarily created by the Covid-19 pandemic,” mentioned Trafigura’s chief monetary officer Christophe Salmon. 

The blockbuster outcomes got here despite losses at Trafigura’s industrial property and nearly $1.6bn of impairment costs on property together with its Impala Terminals companies in Colombia, holding in Indian refiner Nayara Power and stake in Puma Power.

Within the 12 months to September, Trafigura posted web revenue of $1.6bn, up from $867.8m in 2019, its greatest outcome since 2013. 

Gross revenue hit a file $6.8bn, in comparison with $2.9bn in the identical interval a 12 months in the past. Earnings earlier than curiosity, tax, depreciation and amortisation got here in at $6bn, up from $2.1bn.

The corporate, which is predicated in Singapore however run from Geneva, mentioned it spent $586m repurchasing shares from workers, up from $337m in 2019.

Trafigura makes use of buybacks to return capital to its administration and 850 senior employees. It slashed funds in 2019 to strengthen its stability sheet following a deal to take control of struggling zinc producer Nyrstar.

Adjusted web debt — Trafigura’s favoured leverage metric, which strips out borrowings from its securitisation programmes and inventories — fell to $2.76bn from $5.3bn, or 0.35 instances its fairness worth of $7.8bn.

“Sturdy earnings and money flows enabled us to considerably strengthen our stability sheet throughout the 12 months,” mentioned Mr Salmon. 

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The corporate highlighted its oil division’s wager on snapping up huge quantities of storage capability because the pandemic hit, enabling it to purchase up low-cost barrels within the spot market to promote at the next value as soon as lockdowns eased.

“The staff managed the autumn in demand and the next resumption effectively, backing their judgment by taking substantial long-term tankage positions in Asia, the US and Europe,” the corporate mentioned.

US oil costs traded in damaging territory for the primary time ever in April as many merchants had been caught with out entry to storage at Cushing, Oklahoma, the important thing supply hub for the benchmark West Texas Intermediate contract.

Metals buying and selling was additionally robust because of a faster restoration from the pandemic by economies in Asia and notably China — the world’s largest client of copper and different metals — boosting demand and costs.

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