Mercuria Net Said Unchanged on Provision for Possible China Loss

Mercuria Energy Group Ltd. posted unchanged profit after setting aside more than $100 million to cover potential losses from an alleged metals fraud in China, according to a person with knowledge of the matter.

Net income was unchanged at $273 million in 2014, according to the person, who asked not to be identified because the closely held commodity trader doesn’t publish its full financial results.

Mercuria set aside money to cover potential losses related to metal stored at the Chinese port of Qingdao, the person said. Mercuria is in a legal dispute with Citigroup Inc. over the ownership and liability for metal that may have been fraudulently sold to a number of banks and trading firms by a Chinese company, according to government officials.

Trading volumes soared 40 percent to 274 million metric tons last year, Mercuria said in a statement on its website on Wednesday. Revenue rose 22 percent to $106 billion after the trading house acquired part of JPMorgan Chase & Co.’s physical commodity unit for $800 million in October.

Mercuria and other commodity traders are enjoying the best trading conditions in more than four years amid increased volatility and as a slump in crude cuts financing costs. Companies are generating higher returns by storing cheap oil today to sell it at higher prices later, a market structure known as contango.

Ebitda Drops

Mercuria’s earnings before interest, taxes, depreciation and amortization fell 1.6 percent to $553 million last year, the person said. Gross profit fell 2 percent to $731 million, the Cyprus-registered company with major trading operations in Geneva, Houston and Singapore said on its website.

Following the JPMorgan deal, Mercuria’s net asset value climbed to more than $3 billion from $2.6 billion in 2013, the company said. The acquisition boosted the firm’s employees to more than 1,000 and means that gas and power trading in North America and Europe has become the company’s largest revenue contributor.

The company, founded 11 years ago by former Goldman Sachs Group Inc. traders Marco Dunand and Daniel Jaeggi, revised its 2013 revenue down to $87 billion from $112 billion, due to a change in accounting policy, the person said.

Mercuria Chief Executive Officer Dunand said in an interview on April 21 that the company is seeking a private-equity partner to invest as much as $1 billion in oil and gas production. Mercuria has also resumed the search for potential partners to buy an equity stake of as much as 20 percent in the trading house, he said.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE