Trafigura Group Pte Ltd has announced another year of strong trading performance and profit.
The robust global economy drove strong growth in demand for all the commodities that the company trades and a tightening supply-demand balance pushed prices of many products higher. However, the oil and refined product markets were still characterized for much of the year by oversupply and relatively low volatility, reducing margins and arbitrage trading opportunities.
In this mixed environment Trafigura delivered a strong performance. Profit for the year was USD887 million, 9 percent below the level of USD975 million recorded in 2016, but broadly within the range of profits registered in each of the last five years. Gross profit was USD2,239 million, just 2 percent below the year-ago figure of USD2,291 million. Gross margin for the year was 1.6 percent, down from 2.3 percent recorded in 2016.
EBITDA, which Trafigura sees as a more precise measure of operating performance since it strips out investment gains and impairments, was USD1,580 million, 3 percent below the figure of USD1,628 million recorded in 2016. Revenue increased by 39 percent to USD136,421 million from USD98,098 million, reflecting increased volumes and higher commodity prices.
“In commodity markets that are more competitive and transparent than ever, these results demonstrate the benefits of our scale, our resilient and diversified business model, as well as our ability to generate profit consistently throughout the economic cycle,” said Trafigura’s CEO Jeremy Weir.
Highlights of the year included significant growth in volumes handled by both trading divisions, Oil and Petroleum Products and Metals and Minerals, reinforcing the company’s position as a top-tier trader across these markets and in all important geographies. The company’s global reach grew, for example through establishing a leading position in exporting crude oil and refined products from the US and the doubling of oil and products volumes sold into and out of India over the year.
A good profit performance was reported by all trading books, and a near-equal contribution to gross profit by both trading divisions. Metals and Minerals had an exceptionally strong year across the board from non-ferrous concentrates to refined metals and bulk minerals; in Oil and Petroleum Products profit was lower than last year owing to reduced market volatility and margin compression.
Trafigura continued to invest in industrial assets that support access to trading flows. These included investment in the world-class Indian refining and distribution business Essar Oil and through Galena Private Equity Resources Fund into Terrafame, the Finnish nickel, cobalt and zinc producer. During the year the company also announced support for a large order for oil tankers that will be used, when delivered, to carry Trafigura oil cargoes as well as to generate value.
The company was also able to renew and increase its credit facilities at tighter yields and returned to the debt capital markets in a limited way.
“For 2018 we see a positive outlook for the markets in which we trade, underpinned by increasing demand, tightening supply and the potential for greater price volatility. As such we believe the need for the marketing, logistics and risk management services we provide can only grow over the coming year,” concludes Christophe Salmon, CFO for Trafigura. PWKD11122017
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