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Profits at Swiss trading house Trafigura have dropped to a four-year low as the company deals with a $1.1bn fraud in its Mongolian oil division and the end of bumper earnings fuelled by the energy crisis.
Incoming chief executive Richard Holtum, who is due to take the helm on January 1, will be facing a new “more normalised” level of revenue and profit, which caused the privately held company to cut dividend payouts this year.
Profits at rival trading houses Vitol, Gunvor and Mercuria have also fallen due to lower volatility after a period of disruption triggered by Russia’s full-scale invasion of Ukraine led to a surge in energy prices.
Trafigura’s chief financial officer Stephan Jansma said 2024 had been “a more normalised year” compared with the previous two years, which were “very exceptional”. But performance in the first few months of the current financial year, which started October 1, had been better than a year earlier, he added.
Net profit dropped to $2.8bn in the financial year ending on September 30, compared with $7.3bn the previous year, and the lowest level since 2020. Trafigura slashed payouts to its 1,400 employee shareholders by almost a third to $2bn compared with $5.9bn the previous year.
Earnings profits at the powerful trading company were also hit by a series of fines and scandals that came to light this year.
These include a $100mn fine paid to the US Department of Justice related to bribery allegations in Brazil; and $55mn paid to the US Commodity Futures Trading Commission over charges of fraud and manipulation, which Trafigura neither admitted nor denied.
Meanwhile, the fraud perpetrated against Trafigura in Mongolia, in which the company says its own staff colluded with one of its trading partners, forced it to book a $358mn loss this year and restate results for the two previous years, with total losses of $1.1bn.
Trafigura employees in Mongolia forged documents and concealed bills that had come due related to oil products trade over a period of five years, according to the company.
Outgoing chief Jeremy Weir said the company had tightened its compliance practices and undertaken an extensive review of its global operations, which showed that the situation was “isolated” to Mongolia.
Swiss prosecutors have also charged Trafigura with compliance failures related to alleged corruption in Angola between 2009 and 2011, and demanded a $156mn penalty, in a high-profile court case that held hearings this week.
Trafigura rejects the charges and says that the prosecutors are on a “crusade”.
The decline in net profits will make it harder for the group to afford to buy back the shares of departing executives, according to two people close to the company.
Trafigura is owned by 1,400 senior employees, and when one leaves, the company normally buys back their shares over a period of several years.
However, the simultaneous departure of several senior executives this year, coinciding with a big drop in profits, has forced the company to extend the timeframe for its buyback programme.
The company said it had full discretion over the timing of any buybacks and had not changed its policies.
https://www.ft.com/content/40a7a4ec-c0ef-4db9-a067-dec3ac63557c
