Commodities trader Trafigura posts record FY results despite impairments

By Julia Payne

LONDON (Reuters) – Trafigura recorded “stunning” 2020 results, its chief executive said on Wednesday, thanks to the extreme market volatility caused by the COVID-19 pandemic that conversely caused some major impairments among the company’s physical assets.

Trafigura’s total earnings before interest, tax, depreciation and amortisation (EBITDA) hit a record $6 billion, up from $2.1 billion in 2019. The firm’s financial year ends Sept. 30.

The Geneva-based firm’s gross profit more than doubled to a record $6.8 billion compared with $2.9 billion in 2019. Net profit jumped to $1.6 billion from $867.8 million in 2019, which was a comparatively weak year.

“2020 saw a record performance from our two main trading divisions: oil and minerals and metals … They were also able to increase gross margin to 5%,” Chief Executive Officer Jeremy Weir said in an accompanying video.

“It was a stunning year.”

Group equity rose by $1 billion to $7.8 billion and the gross profit margin jumped to 4.6% from 1.7%. Chief Financial Officer Christophe Salmon said the net profit was the highest ever, barring 2013, when exceptional, noncash items boosted the figure.

Its oil division, as well as its metals and minerals division, benefitted “from extraordinary volatility and the emergence of contango forward price curves during the year.”

The oil market moved into a steep contango in April when oil demand crashed as half the world’s population was under some form of lockdown to stop the spread of the novel coronavirus.

Contango is a market structure whereby prompt prices are lower than later months, which traders can use to store cheap product and re-sell at a higher price later.

While the volatility helped trading, low prices and demand weighed on its refining and retail arms.

Trafigura suffered major impairments in its industrial assets that were nearly as large as its profit at $1.57 billion. The main losses were related to its Impala terminals business in Colombia, its stakes in the major Indian refiner Nayara Energy as well as Puma Energy.

Indian refiner Nayara Energy, in which Trafigura holds a major stake, had a writedown of $322 million.

Trafigura recorded an impairment of $191 million for its major stake in midstream and retail firm Puma Energy. Trafigura lowered the value of its 55.5% interest in Puma to $1.12 billion. Puma has been loss-making for several years.

The pandemic exacerbated the already delayed dredging of Colombia’s Magdalena River, triggering an impairment of $392 million on Trafigura’s major inland port and logistics project.

Traded oil and oil products volume fell to 5.6 million barrels per day (bpd), due to lower global demand, from 6.1 million bpd in 2019. Traded liquefied natural gas (LNG) volumes rose to 12.9 million tonnes from 10.2 million tonnes.

Traded 97.6 million tonnes of metals and minerals was up from 97.2 million tonnes with Trafigura surpassing mining and trading giant Glencore (LON:GLEN) as the biggest copper trader this year.

Trafigura continued to develop its power and renewables division, set up in 2019, which is expected to become a third core pillar. The firm set up a venture, Nala Renewables, with the aim of adding 2 gigawatts of renewable energy capacity and made a new investment in hydrogen.