2018 Annual Report
Singapore, 10th December 2018
Trafigura Group Pte Ltd (“Trafigura”), one of the world’s leading independent commodity trading companies, has today announced another year of strong trading and financial performance.
During a year characterised by great volatility across the commodity sectors and intense competition in energy markets Trafigura achieved a strong financial performance in aggregate. Net profit for the financial year was USD873 million, a decrease of less than 2 percent from the figure of USD887 million in 2017. Gross profit was 6 percent higher at USD2.4 billion, compared to USD2.2 billion in 2017, again underlining the benefits of a business model built on trading two different and largely uncorrelated groups of commodities.
The largest component of profit was generated by the Metals and Minerals Trading division in one of its best years, generating gross profit of USD1.4 billion, up 24 percent from USD1.1 billion in 2017. Oil and Petroleum Products Trading’s contribution to gross profit fell by 10 percent to USD1 billion as a result of the switch from the contango to backwardated oil pricing structure. A timely and radical restructuring of the Oil and Petroleum Products Trading books enabled a material improvement in this division’s profitability by the final quarter.
In addition to the trading performance, a further contributor to pre-tax profit was a gain on divestment of subsidiaries, amounting to USD191 million, following the investment by global fund manager IFM Investors in a newly formed joint venture holding a collection of infrastructure assets previously wholly-owned by the company’s subsidiary Impala Terminals. This showed the company’s ongoing capacity to generate returns from investment in infrastructure assets related to commodities flows.
“During Trafigura’s 25th anniversary year the company once again demonstrated the resilience of its business model, while expanding the provision of services to its global roster of clients,” said Jeremy Weir, Trafigura’s Executive Chairman and Chief Executive Officer. “Benefiting from our global scale and disciplined approach, we increased overall volumes traded and generated a profit comparable with the previous year from trading and from our asset investment strategy.”
2018 Responsibility Report
Trafigura also published its fourth annual Responsibility Report today, coinciding with the Annual Report for the first time in a move towards integrated reporting. Like its predecessors, it marks progress in meeting the commitments as well as the challenges of operating a responsible business.
The company continues to lead the industry in transparency by reporting its payments to National Oil Companies in EITI countries for purchases of oil and gas. Also included in the Responsibility Report is improved environmental disclosure due to more accurate measuring of greenhouse gas emissions; the company’s recently defined Climate Change Strategy; and an account of Trafigura’s Responsible Sourcing initiatives of minerals from high-risk locations.
“It is our declared intent to take a leading role in corporate responsibility appropriate to our position as one of the world’s largest independent traders,” said Jeremy Weir.
2019 Market Outlook
Trafigura expects the market environment in 2019 to remain challenging with increased interest rates and a likely slowdown in global economic growth, though the structural factors propelling demand for energy and industrial raw materials – population growth, industrialisation, urbanisation, infrastructure development and electrification – are still in place and becoming more evident.
It is also clear that commodities market volatility is on a rising trend. Supply-demand balances have tightened as a consequence of recent under-investment in new production, while markets are also prone to major geopolitical dislocations that will continue to create trading opportunities for the nimble.
The company’s key strategic assumptions are that demand for the commodities it trades will continue to grow for some years, even as the world embarks on the transition towards a lower-carbon economy; and that in a consolidating industry there will be a growing market need for well-resourced companies providing the logistical and supply chain services it delivers.
“Trafigura’s organisational structure is robust and efficient. We are positioned to perform well in 2019,” concluded Jeremy Weir.
Trafigura Beheer B.V. press release