Trafigura Paid Out Record $3 Billion To Its Traders From $5.5 Billion Net Profit for First Half of 2023

Swiss-Singapore trading giant Trafigura Group reported record half-year results on the back of volatility in commodity and shipping markets. The trader said it earned $5.5 billion in net profit in the six months through March, more than double its earnings in the same period a year earlier. Of that profit Trafigura has paid out a record $2,985 million dividend in March 2023to its top traders and staff The payout is the highest in Trafigura’s 30-year history and works out at about $2.7m for each of the top 1,100 employees in the staff-owned company.

The result compares to the record $7 billion Trafigura made in its full 2022 financial year, which ended in September. The dividend is shared among employees who own Trafigura, which is around 1,200, according to a company spokesperson, meaning they would receive an average of about $2.5 million each.

For comparison rival, Vitol, the world’s largest independent commodity trader made a $15bn net profit in 2022, according to the FT.

Trafigura did warn of the exceptional circumstances for the record earnings and that they were unlikely to be sustained in the remainder of the year as the energy crisis that gripped Europe last year begins to ease.

“We do not expect the extraordinary conditions that have characterized global commodity markets in 2022 and the first half of 2023 to continue in the remainder of this year,” said Chief Executive Officer Jeremy Weir. “The impact of tighter monetary policy on the global economy, a less stressed environment for commodity supply chains and seasonal factors that affect demand for commodities such as gas, are all helping to moderate volatile conditions and are likely to see the pace of our growth slow compared to the previous 12 months.”

H1 2023 Earnings Highlights

Trafigura’s record profits came with only a modest increase to its tax bill: the company reported income tax costs of $627 million for the period, representing an effective tax rate of just over 10%. The bulk of Trafigura’s profit is made by traders sitting in low-tax hubs such as Switzerland and Singapore.

The overwhelming majority of the company’s profit came from its energy division. The metals and minerals segment represented just 10% of Trafigura’s overall operating profit before depreciation and amortization for the period, which the company described as “robust performance overall in challenging market conditions.”

  • Revenue fell 23% year-on-year due to lower trading volumes and weaker commodity prices.
  • Operating profit before depreciation and amortisation was up 74% to USD8,088 million, compared to USD4,648 million a year ago, as a result of strong demand for Trafigura supply chain services
  • Energy segment, which also includes gas and power businesses, contributed USD89,162 million in Revenue, 21% less than the USD112,903 million generated in first half of 2022. Operating profit before depreciation and amortization in Energy segment USD7,284 million, compared to USD2,889 million in same period a year earlier.
  • Metals and Minerals, revenue dropped 27% to USD42,173 million from USD57,706 million, and divisional operating profit before depreciation and amortization fell 54%to USD813 million mostly due to the USD590 million charge taken in relation to the nickel fraud.
  • Lower traded volumes and prices resulted in the cost of materials, transportation and storage falling to USD121,597 million from USD164,191 million.
  • Net finance expense increased to USD995 million, from USD689 million because of sharp rise in base rates. However, it is important to note that these costs are passed through to their supply chain services

$590 million charge on alleged nickel fraud

Even more impressive is the result absorbs the charge o $590 million charge in relation to the alleged nickel fraud up slightly from the $577 million loss it announced in February

$577 million in a fraud involving nickel and companies it believed were controlled by the metal’s trader Prateek Gupta. The trading group believed they were buying containers full of nickel. However, that was not the case and Trafigura said they were the victim of a “systemic fraud” that could cost it more than half a billion dollars. The Gupta companies included TMT Metals and subsidiaries of UD Trading Group. TMT and UD. When Trafigura began to examine some of the containers in December, they didn’t contain the metal. Trafigura has launched legal proceedings against the alleged perpetrators in London, which are ongoing.

About Trafigura

Trafigura is an independent, employee-owned physical trading and logistics business established 30 years ago. Trafigura relocated its global headquarters to Singapore in 2012 to save millions in tax. They are among the market leaders in energy, metals and minerals with 61 offices globally. The companies says; “We forge robust connections through our global network, efficient logistics and unparalleled market understanding. Our end-to-end services connect producers, processors and consumers worldwide. We invest hundreds of millions of dollars in infrastructure.”

Source: Trafigura

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