December 20, 2012 9:30 pm

Trafigura earns nearly $1bn twice in a row

Trafigura, the commodities trader, earned about $1bn for the second year running in 2012, indicating that the profitability of the world’s top houses that dominate raw materials has remained high in spite of slower economic growth in China.

The privately held company, based in Geneva and Singapore, has told its lenders and bondholders it made profits of $991.9m in the year to September, down 11 per cent from last year’s record $1.11bn.

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Trafigura is the world’s second-largest independent metals trader, after Glencore, and the third-largest oil trader behind Vitol and Glencore. The company does not release its accounts publicly.

Trafigura has expanded aggressively and has built a new subsidiary of petrol stations, oil terminals and storage sites. That expansion helped lift profits from just $31m in 2002 to 2012’s figure.

Executives have said they are aiming to establish that net income level as Trafigura’s base level of profitability.

The drop from 2011 was due to higher staff costs and expenses related to new investments and business purchases, it said in its annual report, seen by the Financial Times. Gross profit, a rough measure of underlying profitability, was up on the year. Revenues fell 1.6 per cent to $120bn.

The trading house was founded in 1993 after a group of senior traders, including current chief executive Claude Dauphin, left Marc Rich & Co, which, after a management buyout, transformed itself into the company that is Glencore today. Trafigura told bondholders in 2010 that Mr Dauphin owns “less than 20 per cent” of the trading house while “over 500 senior employees” control the rest.

In spite of its success within the commodities industry, Trafigura is better known outside the sector because it was embroiled in a controversy about the disposal of oil products waste in Ivory Coast in 2006. Trafigura has denied wrongdoing, although the company later reached a settlement with those affected.

This year, Trafigura moved the legal headquarters of its key trading division from Switzerland to Singapore, highlighting the attractions of its low-tax regime and proximity to China. In a further setback to Switzerland, it is halving its historic Lucerne office, where the firm first established itself two decades ago, relocating staff to Geneva, Singapore and Mumbai.

The company has ruled out following rival Glencore, which sold shares in a near-$10bn initial public offering in London and has vowed to remain privately held. But Trafigura is bringing in outside investors through its subsidiary Puma Energy, which focuses on petrol stations and oil terminals in Africa, Central America and Asia. Last year it sold a 20 per cent stake to the Angolan state oil company and has indicated it could float that business in 2014 at the earliest.

Additional reporting by Jack Farchy

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