Trafigura Group Pte Ltd (“Trafigura”), one of the world’s leading independent commodity trading companies, has today announced a growth in revenues and volumes in its Oil and Petroleum Products and Metals and Minerals trading divisions for the first half of the financial year ending 31 March 2018.
However, profits were lower than in the first half of the 2017 financial year as the effects of challenging conditions in the oil market were only partly offset by a strong performance in non-ferrous metals and bulk minerals trading.
Gross profit was USD979 million, a fall of 21 percent from the year-ago figure of USD1,238 million. Gross profit margin was 1.13 percent, compared with 1.84 percent in the first half of financial year 2017. EBITDA was USD658 million, 29 percent less than the figure of USD921 million recorded a year earlier.
“The fall in profitability was the result of a major shift in the oil market during the period from a contango structure, where forward prices are higher than spot prices and act as an incentive to hold inventories, to the opposite condition of backwardation, where holding stocks is costly. In consequence we undertook a substantial restructuring of our trading books, reducing costs by shrinking inventories and radically adjusting our storage commitments,” said Christophe Salmon, Trafigura’s Group Chief Financial Officer.
Total volumes traded in Oil & Petroleum Products grew by 16 percent from the same period a year ago to an average 5.8 million barrels per day, while metals and minerals total volumes increased by 48 percent.
“The results again demonstrate the benefits of the Group’s diversification with a focus on two broad categories of commodity whose market dynamics are uncorrelated,” said Christophe. “Overall the interim results underlined the resilience of Trafigura’s business model in generating profit by capturing global arbitrage opportunities throughout the commodities cycle. The restructuring of the oil trading positions and current increased volatility across commodity markets should have a positive impact on the second half of the 2018 financial year,” he concluded.
Trafigura maintained a very strong liquidity position throughout the half-year, ensuring the company was optimally placed to handle increased trading volumes and rising commodity prices. During the half year ending 31 March 2018, the Group completed a number of important transactions including the launch of a pioneering securitisation programme, Trafigura Commodities Funding Pte Ltd, a USD470 million non-recourse funding programme backed by inventories of crude oil and refined metals.
After the end of the reporting period a number of further transactions were undertaken to tap new sources of liquidity and further solidify and diversify the company’s financing base, including the successful raising of a renminbi-denominated bond (Panda bond) and a Swiss franc denominated senior bond under the company’s European Medium Term Notes programme.
Sea News, June 13