Trafigura, one of the world’s biggest commodity traders in base metals and energy, logged in a record best performance since its inception in 1993.
The Singapore-based, privately-owned company generated record gross profits, earnings and cash flows this year. In turn, it has rewarded its executives and top traders in excess of half a billion dollars. According to a Reuters report, the company has fully reimbursed the family stake of its late founder Claude Dauphin, its chief financial officer told Reuters.
“The Dauphin family stake has been fully reimbursed,” CFO Christophe Salmon said, adding that an initial public offering was not on the cards.
Big commodity traders, including Vitol, Glencore, Gunvor and Mercuria, all raked in big money as prices of oil and other raw materials crashed in March and April due to the lockdowns ordered by the governments across the globe.
Oil-producing nations and companies saw a downturn due to the crash in prices, but traders were able to take advantage by betting on the price swings and market volatility, storage and other associated opportunities created by a supply glut and low prices.
“These figures reflect an outstanding performance by both core trading divisions, Oil and Petroleum Products and Metals and Minerals, in the volatile markets, which were mainly created by the Covid-19 pandemic,” said Trafigura’s Christophe Salmon.
Trafigura itself suffered some losses due to the pandemic. It was levied nearly $1.6 billion in impairment charges on its Impala Terminals businesses in Colombia, holdings in Indian refiner Nayara Energy, and stake in Puma Energy.
Trafigura’s net profit till September is $1.6bn, up from $867.8m in 2019, its best result since 2013. Gross profit hit a record $6.8bn, compared to $2.9bn in the same period a year ago. Earnings before interest, tax, depreciation and amortization came in at $6bn, up from $2.1bn.
The company, though based in Singapore, t runs its operations from Geneva, said it spent $586m in shares buybacks from employees, up from $337m in 2019. Trafigura uses buybacks to return capital to its management and 850 senior staff.
In 2019, it had struggled a little bit, hence it slashed the payments, following a deal to take control of struggling zinc producer Nyrstar.
After adjusted net debt, which strips out borrowings from its securitization programs and inventories — fell to $2.76bn from $5.3bn, or 0.35 times its equity value of $7.8bn. “Strong earnings and cash flows enabled us to significantly strengthen our balance sheet during the year,” said Salmon.
The company raked in profits during the pandemic by buying vast amounts of oil in the spot market and storing it for future sales. “The team managed the fall in demand and the subsequent resumption well, backing their judgment by taking substantial long-term tankage positions in Asia, the US and Europe,” the company said.
Oil was trading in negative territory in April, as many US traders were caught without access to storage at Cushing, Oklahoma, the key delivery hub for the benchmark West Texas Intermediate contract.
Metals trading also recovered from the pandemic pretty fast with the Asian economies boosting demand, especially China — the world’s biggest consumer of copper and other metals.
Trafigura is planning to complete the purchase of a stake in Russia’s Vostok Oil project in the Arctic, with the sale of some assets.
Rosneft approved the sale of 10% of capital in the project last month. Salmon said the reserves were comparable to the United States’ prolific Permian basin and the trader “cannot ignore this huge supply.”
