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Trafigura’s first-half net profit falls in calmer market
Global Banking & Finance Review®
Company
By Natalie Grover
LONDON (Reuters) – Trading house Trafigura posted a more than 74% drop in net profit in the first half of its 2024 financial year, the lowest since 2020 for the same period, as the extreme turbulence that defined commodity markets in recent years fizzled out.
Top trading executives warned the market earlier this year that the staggering returns of the last few years were unlikely to be repeated.
Trafigura and its rivals like Vitol posted record or near-record results every year between 2020 to 2023 thanks to unprecedented market dislocations resulting from the COVID-19 pandemic and Europe’s energy crisis coupled with Russia’s invasion of Ukraine.
Geneva-based Trafigura’s 2023 results marked the fourth successive year of record profits, but the bulk of its earnings – $5.5 billion – came in the first half of the company’s financial year, which doubled profits compared with the 2021-2022 first half.
Markets have since stabilised. In the six months ending March 31, 2024, Trafigura generated about $1.5 billion in profit.
The performance over this period was very much in continuity of “what we’ve been through in the second-half year 2023, which is a more normalised market condition,” said outgoing CFO Christophe Salmon in a video accompanying the results.
Revenue dipped 5% in the first half to roughly $124.2 billion, reflecting lower average commodity prices, partially offset by higher trading volumes, particularly for crude oil and bulk minerals, the privately-held company said.
Core earnings before interest, tax, depreciation and amortisation (EBITDA) roughly halved to $4.3 billion.
Traded oil volumes rose 15% to around 7.2 million barrels per day (bpd) compared to the same period last year, due to new supply agreements European refineries.
Trading houses have been spending billions of dollars on new assets and expensive hires. Still, commodity markets remain vulnerable to price spikes and a cushion is desirable, incoming group CFO Stephan Jansma suggested, noting the company has built up its equity to just over $17 billion.
For instance, he said, “(in) the copper market, there was a massive spike less than a month ago, which does require you to have an extra buffer.”
(Reporting by Natalie Grover in London and Julia Payne in Brussels; Editing by Toby Chopra)
Commodity markets are venues where raw or primary products are exchanged. These markets deal with the trading of physical goods like oil, gold, and agricultural products.
EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. It is a measure used to analyze a company's operating performance.
Trading volume refers to the total number of shares or contracts traded for a specific security during a given period. It is an important indicator of market activity.
Capital refers to the financial assets or resources that a company uses to fund its operations, while liquidity refers to the ability to convert assets into cash quickly.
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