Commodity trader Trafigura reported record net profit of $5.5 billion in the first half of its fiscal year – more than double the same period 12 months ago – underlining the huge revenue these groups have reaped from the energy crisis.
It also paid a record $3 billion dividend that was distributed to approximately 1,200 shareholders of the private company, nearly all of whom are traders and executives of the company. That was an increase from $1.7 billion in the previous year.
The numbers cushion the blow of the nearly $600 million impairment charge Trafigura took this year after it exposed alleged nickel fraud by a counterparty, one of the metals trading industry’s biggest scandals.
The company said it was still determining the extent of the fraud, prosecuting the alleged perpetrator, Indian tycoon Prateek Gupta in London’s High Court, and investigating whether the 1,100 containers involved contained nickel.
Chief financial officer Christophe Salmon said Trafigura was pursuing legal action against the alleged perpetrator in “multiple jurisdictions”, the first time the group has indicated it will file charges outside the UK.
Trafigura also increased the size of the impairment related to the nickel case to $590 million, up from $577 million previously, due to additional costs incurred.
The results show how the largest commodity trading houses, the powerful companies that move commodities around the world, continue to benefit from the disruptions caused by Russia’s invasion of Ukraine.
Trafigura’s financial year runs from September and the half-year results cover the period up to the end of March.
“Any disruption to the supply chain means that our (logistics) services gain more value,” said Salmon. “Our services were much needed in the supply chain and we played a key role in ensuring security of supply, particularly in Western Europe.”
For the six months ended March 31, 2023, the group reported net income of $5.5 billion and earnings before interest, taxes, depreciation and amortization of $8.1 billion.
That period also includes last winter, when Europe’s post-war fears of blackouts and gas shortages led to large swings in energy prices and a race to secure gas supplies.
One result was Trafigura’s four-year, $3 billion deal to supply gas to Germany, which was partially underwritten by German export credit agency Euler Hermes.
The great half-year earnings will almost certainly contribute to another round of big bonuses at the end of the fiscal year.
Equity attributable to the company’s owners increased from $14.9 billion at the end of September 2022 to $17.5 billion at the end of March.
Other major trading houses such as Vitol and Glencore have also benefited from the volatility and disruptions, with all major traders reporting record profits last year.
However, Trafigura indicated that the revenue bonanza was unlikely to continue and said calmer market conditions lay ahead.
“We are seeing a return to more normalized market conditions,” said Salmon. “Profitability in the second half of the year, which is still very solid, will be lower than what we saw in the first half.”
During the first half of the financial year, Trafigura said lower overall commodity prices led to lower total sales of $131.3 billion, which is 23 percent lower than the same period last year.
Margins increased, however, with net profit of 4.2 percent of sales in the first half, compared to 1.6 percent in the same period 12 months earlier.