Trafigura Profit Climbs 24% to $470 Million

Trafigura Beheer BV, the world’s second-largest metals trader, said half-year profit climbed 24 percent as gains in its oil business combined with volume growth and “healthy” trading margins.

Net income was $470 million in the six months through March 31, the company said in a statement on its website. Revenue rose 3 percent to $63.8 billion, while bulk-commodities trading volume jumped 67 percent from a year earlier.

The results are the last for the 21-year-old commodity trading firm with co-founder Claude Dauphin at the helm as chief executive officer. Dauphin, 63, stepped down as CEO in March for medical reasons. He remains executive chairman and said today his successor, Jeremy Weir, a 50-year-old Australian, is “well suited” to run Amsterdam-based Trafigura. Weir formerly was head of Trafigura’s mining unit and its hedge fund business.

“Growth in some emerging markets may have slowed substantially, but others are picking up momentum, notably in Africa where urbanization and industrialization are creating a growing middle class and new resource needs,” Dauphin said in the statement. China’s slower growth “still translates into a need for ever-higher volumes of raw materials and energy.”

Softening economic growth will likely lead to lower prices and less market volatility, as opposed to less consumption, and that bodes well for Trafigura, Dauphin said. Trafigura’s gross margin was 1.5 percent, the same as last year, the company said.

Oil Volumes

Trading volumes in oil and petroleum products rose 7 percent from the same period last year and Trafigura said it regularly trades more than 2.5 million barrels a day, equivalent to the maximum daily output of Nigeria, Africa’s largest producer.

The 67 percent gain in non-ferrous and bulk trading volumes was driven by an “especially pronounced” advance in coal, Weir said in the statement. Bulk and metals trading gross profit margins recorded a slight decrease while oil trading profit margins increased, Trafigura said on its website.

The third-largest independent oil trader, Trafigura has purchased stakes in pipelines, mines, smelters, ports and storage terminals to diversify its business and wring efficiencies from its trading operations.

The 2014 half-year results included a $93.6-million one-time gain on the sale of its bitumen business to Puma Energy, the oil storage and retail fuel company. Trafigura had a $1.43 billion one-time gain in 2013 after cutting its stake in Puma to 49 percent from 62 percent.

Banks Exit

While trading margins are under pressure, commodity trading houses such as Trafigura, Vitol Group and Mercuria Energy Group Ltd. are benefiting as banks including Barclays Plc, Morgan Stanley and Deutsche Bank AG exit or reduce their commodity operations because of increased regulatory scrutiny. Mercuria agreed in March to buy JPMorgan Chase & Co.’s commodity unit for $3.5 billion.

Noble Group Ltd., a Hong Kong based commodity trading firm, said first-quarter profit more than tripled this year partly due to banks exiting commodity trading.

The withdrawal of investment banks from commodities has shifted regulatory attention to trading houses and prompted some to ask whether the failure of a major commodity trader would jeopardize markets and banking systems. In February, the U.K.’s Financial Conduct Authority produced its first report on the commodity sector in half a decade while vowing to pay close attention to trading houses.

Trafigura commissioned a report released in April that concluded that commodity trading firms probably don’t pose systematic risks to the global economy.

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