Trafigura reports record half-year profits of $2.1bn

Trafigura made record profits in the first half of its financial year as the commodity trader rode the wave of a recovery in demand and prices for oil and metals.

The privately owned company generated net profit of $2.1bn for the six months to the end of March, up from $500m in 2020, on revenue of almost $100bn, which rose 18 per cent on the back of higher commodity prices and increased trading volumes.

Profits in the six-month period exceeded those in the year to September 2020 when Trafigura, which is based in Singapore but run from Geneva, reported net profit of $1.6bn. The result included $1.6bn of impairment charges compared to just $55m this year.

The world’s biggest commodity traders are continuing to profit from the volatility created by the pandemic after a record trading year in 2020.

But results have been bolstered even further by rising prices for oil and metals as the world’s economic recovery gathers pace. Crude oil is up 40 per cent this year, while copper has gained 25 per cent and hit a record high.

Trafigura said it had increased oil trading volumes to 6.4m barrels a day during the first half of its financial year, a 14 per cent jump from the 2020 fiscal year, while metals and minerals trading rose 7 per cent compared with the same period last year. That has narrowed the gap on rival Vitol, the world’s largest independent oil trader, whose oil volumes fell 11 per cent in 2020 to 7.1m b/d.

Trafigura said it had struck a number of “substantial” oil supply agreements with producers and refiners including Prax Group, which owns the Lindsey oil refinery on the Humber.

Gross profit margins, a measure of performance for commodity traders, rose to 4.3 per cent in the period from 3.8 per cent last year. Only three years ago, commodity traders were battling shrinking margins, which fell as low as 1.3 per cent at times in 2018.

The company said it had been an “exceptional” performance by its trading business “by any standards”.

“Our core trading divisions are firing on all cylinders,” said Jeremy Weir, Trafigura’s executive chair.

“While we do not expect to match the first-half results in the second half of this financial year, we do expect very strong performance for the full year and look with increasing confidence to 2022.”

Trafigura said performance was boosted by a recovery in its industrial assets, such as the Spanish copper mining joint venture Matsa, and smelters, which benefit directly from rising commodity prices.

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Trafigura’s strong performance in recent years has helped the company manage its debt load, which has previously been a concern among some analysts.

The company’s adjusted net debt ratio — Trafigura’s favoured leverage metric, which strips out borrowings from its securitisation programme and inventories — fell to $750m from $2.76bn, or 0.1 times group equity, which rose to almost $10bn.

To handle large trade flows the company secured access to bigger funding lines, according to its finance chief Christophe Salmon. He said Trafigura had benefited from a “flight to quality” as lenders, rattled by a series of scandals in Singapore last year, focused on the biggest and best capitalised traders.

In Thursday’s results statement, Trafigura confirmed it had invested €1.5bn of its own cash into a €7bn deal to buy 10 per cent of a giant Arctic oil project being developed by Rosneft, a longstanding trading partner.