Commodities trader Trafigura earnings fall, sees challenging conditions

[LONDON] Commodities trading firm Trafigura reported on Wednesday a 13 per cent slide in core earnings in 2016 after a record beating previous year citing more challenging trading conditions and the writedown of assets in Colombia and Brazil.

"We expect challenging conditions to persist in commodities markets through 2017, with pressure increasing on producers and other players with large asset footprints," chief financial officer Christophe Salmon said in a statement.

The company said core earnings (earnings before interest, tax, depreciation and amortisation) were US$1.628 billion in 2016, down from US$1.861 billion in 2015, which was a record year.

Net profit was down 12 per cent at US$975 million compared with US$1.103 billion in 2015, while revenue was flat at US$98.098 billion compared with US$97.237 billion in 2015.

"Competition remained intense in all the markets in which the company operates, which was reflected in a reduced gross margin of 2.3 per cent from 2.7 per cent in 2015," it said.

Trafigura competes with the likes of Vitol and Glencore in selling commodities from oil to metals. During low volatility years of 2013 and 2014 margins for many commodities traders stood below one per cent.

Trafigura, which vies with Glencore for the position of the world's second largest oil trader, said traded volumes grew to a daily average of 4.3 million barrels, up 42 per cent on 2015 on the back of growing Russian business.

It also grew volume across its metals and minerals book by 13 per cent to 59 million tonnes.

The company said its core earnings were affected by a US$43 million write-off of subsidiary Impala's investment in the FDP rail project in Colombia and a US$250 million write-down of the Porto Sudeste iron ore export terminal in Brazil.

The impairments were partially offset by the reversal of a US$244 million impairment taken in 2015 on the value of the AEMR iron ore mining project in Angola.

REUTERS