Trafigura Weighs Sale of Stake in Impala Amid Squeeze on MarginsAndy Hoffman
Trafigura Beheer BV, the closely-held commodities trader, will consider selling a stake in its Impala warehousing and logistics unit as it looks to reap gains from its investments in infrastructure.
Trafigura may sell a stake in Impala or merge the metals warehousing, port and terminal operator with another company, Pierre Lorinet, Trafigura’s chief financial officer, said in a Dec. 13 interview as the Amsterdam-based firm reported fiscal full-year profit that more than doubled from 2012.
The world’s second-largest metals trader and third-largest independent oil trader is seeking to sell stakes in, or take on partners to fund, its commodities-infrastructure units, where revenue is growing faster than its trading business. The company had a $1.43 billion one-time gain in 2013 after cutting its stake in Puma Energy, an oil storage and retail fuel company.
“We started with Puma because it is probably the more mature one,” Lorinet said. “Over time, we will consider, as businesses mature, opening up the capital of these other businesses.” The company still wants a group of 700 employees to retain ownership of the closely held trading operation.
The Puma stake reduction helped to boost net income in the 12 months through Sept. 30 to $2.03 billion from $865.1 million in the year-earlier period. Profit before gains from divestments slipped 2 percent to $1.19 billion. Revenue increased 10 percent in 2013 to $133 billion.
Trading volumes in oil and petroleum products rose 15 percent to 117.8 million metric tons. Trading volumes in bulk commodities and metals fell 5.9 percent to 32.9 million tons. Lorinet said the decline was mainly due to lower volumes in iron ore and was expected to rebound in 2014. Gross profit margin, a key measure of profitability for trading houses, was unchanged at 2.2 percent in the fiscal year.
The Dow Jones UBS Commodity Total Return Index, which reflects returns of a basket of commodity futures contracts, has declined 9.3 percent this year.
“We see the developments of the past year as an inevitable adjustment in a market that had become overheated,” Claude Dauphin, Trafigura’s chief executive officer and one of its six co-founders, said in the company’s annual report. “We see the fundamentals of the market to be still strong and likely to remain so for many years to come” as urbanization in China and developing countries supports demand.
Lorinet said Trafigura’s investments in infrastructure assets had been crucial to maintaining margins. They have been squeezed in recent years because of reduced swings in commodity prices and fewer opportunities to exploit price variations in different geographical markets. That’s prompted Trafigura and its competitors to buy so-called hard assets such as commodity storage facilities, terminals, ports and mines, and wring efficiencies from them when combined with their trading units.
Impala’s 2013 revenue climbed 87 percent to $441.4 million from $235.6 million in 2012, Trafigura said. The division has more than 50 refined metals and bulk storage warehouses in Europe, Asia, the Middle East and North America.
The unit is spending $250 million expanding its Burnside coal and bulk terminal in Ascension Parish, Louisiana and $800 million on bulk storage and oil facilities on the Magdalena River in Colombia.