Trafigura profit doubles in H1 as oil-trading rebound offsets metals

Bloomberg

Trafigura Group Ltd. racked up a 92 percent gain in profit in the first half of its financial year, taking advantage of price swings in the petroleum market and a dominant position exporting crude from the US.
Joining peers in a strong performance, the third-biggest independent oil trader’s net income jumped to $426 million in the six months to March 31, up from $222 million a year earlier. That’s the Singapore-based company’s first profit gain for the period since 2015.
A solid performance from Trafigura’s crude oil, gasoline, wet freight and liquefied natural gas trading desks offset a weaker outing from metals and minerals, where gross profit fell by about a third.
Trafigura joins competitors including Vitol Group, Gunvor Group Ltd. as well as energy majors BP Plc and Royal Dutch Shell Plc and the oil trading divisions of some of Wall Street’s biggest banks in posting their best start in years. Crude and products traders took advantage of a steady upward trend in prices driven by output cuts from Saudi Arabia and Venezuela.
The rebound follows a dismal performance in the first half of the 2018 financial year, which prompted Trafigura to implement a “radical restructuring” of its oil-trading books. After four years of chasing volume growth it reduced storage commitments, exited unprofitable term positions and halted some blending activities. The surge in first-half oil trading profit came despite a decline in volumes of about 7 percent to an average 5.5 million barrels a day.
SHARP REVERSAL
“In commodity markets that remained fiercely competitive, Trafigura prioritised profitable business over further volume growth and maintained a very robust financial position with ample access to liquid-
ity,” Christophe Salmon, Trafigura’s chief financial officer, said in a statement.
Gross profit margins increased to 1.7 percent from 1.13 percent a year earlier. While gross profit in oil trading spiked to $1.04 billion, almost 3 1/2 times higher than a year ago, metals and minerals gross profit fell to $437 million from $680 million. That’s a sharp reversal from the first half of 2018 when strong metals profits offset the weaker oil trading performance.