Trafigura reports record year in oil and metals

[GENEVA] Trafigura Group reaped record profits from oil and metals trading this year, helping the commodities trader start paying down its heavy debt load and clean up its balance sheet.

Gross profit from oil trading surged to a record US$1.7 billion in the year ended Sept 30 as the Singapore-based trading house exploited price swings and a strong position in US oil and LNG exports. Metals and minerals matched last year's performance in what chairman and chief executive officer Jeremy Weir called a "knockout year" for trading.

The strong trading results gave Trafigura the cash needed to tackle its debt burden, which has been criticised by short-seller Iceberg Research, and softened the blow of asset writedowns.

The company cut the value of its investment in an iron ore port in Brazil, fuel distribution business Puma Energy and zinc smelter Nyrstar.

Another sign that Trafigura is tightening its purse strings: employee share buybacks, the principal way the firm returns capital to its shareholders, fell to the lowest in at least eight years.

The trading house is already off to its best-ever start to a fiscal year, said chief financial officer Christophe Salmon. He expects Trafigura's equity value, which rose by about 9 per cent to US$6.8 billion during the year, to continue increasing.

"I'm expecting the equity base of Trafigura to go through the US$7 billion bar in the course of 2020," he said in an interview.

The CFO expects the trading house to tap the debt markets again in 2020, probably through the sale of so-called Panda bond denominated in Chinese yuan or a perpetual bond.

BLOOMBERG