Trafigura is handing more than $1 billion (€890 million) to its top executives and staff after the global commodities trader recorded the biggest profit in its 28-year history on the back of rising demand for oil and metals.
The results underscored the huge fortunes that can be made from moving raw materials around the globe and showed how the world’s biggest commodity traders continue to profit from supply chain dislocations created by the coronavirus pandemic.
Chief executive Jeremy Weir said 2021 had been a year in which the “underlying fragilities in global supply chains were laid bare” as demand rebounded with the easing of lockdown restrictions but “logistics and supply struggled to keep pace”.
“Profit, turnover and volumes handled across our trading divisions for the year were the highest in our history,” he said. “Our core oil and petroleum products and metals and minerals business divisions continued to fire on all cylinders.”
In the year to September, Trafigura generated net profit of $3.1 billion, almost double the previous year’s $1.6 billion, on revenue that rose 57 per cent to $231bn on higher commodity prices and increased trading volumes.
The company traded an average of 7m barrels of oil and petroleum products a day over the year, up 25 per cent on 2020, and handled almost 106m tonnes of metals and minerals, an increase of 7.5 per cent. The metals business was the standout performer with operating profits up 95 per cent to $2.45 billion in the period.
Group equity rose 36 per cent, surpassing $10 billion for the first time, and the privately owned company declared a record dividend of $1.1 billion, up from $586 million. Total debt hit $45 billion, increasing from $32 billion, mainly due to a rise in inventories.
Trafigura’s record profits came with higher risk, however. Its average one-day value at risk – a measure of how much money a trader could lose – rose to $47.9 million, up from $26.4 million a year earlier.
The results also included a one-off non-cash charge of $716 million triggered by a deal to take control of Puma Energy, a fuel storage and petrol station business. This reduced second-half net profit to about $1bn.
Christophe Salmon, Trafigura’s chief financial officer, said the company expected the volatile market conditions of the past two years to continue, “not least because of the unpredictable dynamics of the climate transition”.
“One of these dynamics is a persistent mismatch between growing demand for energy and industrial raw materials on the one hand, and supply constraints including due to chronic under-investment on the other,” he said in the company’s annual report.
Commodity traders are racking up huge profits: Vitol, the world's biggest commodity trader, last year distributed $2.9 billion to its company's almost 400 partners after one of its best years on record. But traders are also thinking about how to adapt their business models as governments and consumers gradually move away from fossil fuels.
Trafigura and its rivals are investing in renewable power and have increased their presence in natural gas, power and carbon trading. However, it remains to be seen whether these activities can be as profitable as trading barrels of oil or other fossil fuels.
Trafigura said its power and renewables division generated underlying earnings before interest, tax, depreciation and amortisation of $80m in its first year of operation.
The annual results also showed that Trafigura had decided to sell its 24.5 per cent stake in an Indian oil refining joint venture with Russia's Rosneft, confirming recent media reports. The company also reported six fatalities at its operations during the year. – Copyright The Financial Times Limited 2021