Statement from Jeremy Weir, Chief Executive Officer
In commodity markets characterised by upheaval, over-supply and volatile trading conditions, Trafigura Group delivered a very strong commercial and financial performance in the year to 30 September 2015.
The last day of Trafigura’s fiscal year, 30 September 2015, was marked by the sad news of the passing of our Group’s Founder and Executive Chairman, Claude Dauphin. He remains greatly missed by all who knew him and worked with him.
The company’s performance during 2015, however, is strong testimony to what Claude created over the last 22 years: a successful, fast-growing and highly profitable company built on excellent customer service and resilience through the economic cycle.
We grew volumes in both our core trading divisions, Oil and Petroleum Products and Metals and Minerals, recorded gross margins well above the industry average, and generated the strongest EBITDA in our company’s history. After taking account of investment gains, foreign exchange translation costs and write-downs, our net profit was USD1,103 million, compared to USD1,036 million in 2014.
Financial Review from Pierre Lorinet, Chief Financial Officer (until 30 September 2015)
The Trafigura Group recorded a strong financial result in its 2015 fiscal year, showing a healthy increase in net profit despite writedowns on some industrial assets to reflect the impact of adverse market conditions, and a sharp rise in EBITDA.
The Trafigura Group’s strong financial performance in 2015 reflected continued profitable volume growth in both trading divisions and gross margins well above the industry average. Net profit recorded for the year by Trafigura Group Pte. Ltd. (TGPL), the new, Singapore-based consolidated reporting entity, was USD1,103 million, an increase of 6.5 percent from the figure of USD1,036 million recorded by TGPL in 2014.** The increase in profit came despite a number of write-downs on industrial and logistical assets to reflect the impact on their value of adverse market developments in some specific commodity segments such as iron ore and coal.
Main highlights of the year included a strong increase in traded volume in the Oil and Petroleum Products Division, which handled a daily average volume of more than 3 million barrels compared with a daily average of 2.5 million barrels in 2014, and a significant gain on our investment in the MATSA mining complex in Spain following the sale of a 50 percent stake to Mubadala of Abu Dhabi. A number of our most important capital investment projects were completed during the year and started to ramp-up commercial operations, but they faced significant headwinds as a result of depressed market conditions.
Statement from Saad Rahim, Group Economist and Head of Analysis
Markets are constantly in motion, but by almost any standard the period from October 2014 to September 2015 was a year of pronounced volatility and movement.
Across our fiscal year, the economic narrative switched from a rapidly increasing commodity appetite from China, to a slowdown across emerging markets. This movement was reflected across asset classes and geographies, and across companies and countries large and small. For a decade now, commodity markets have felt the inexorable upward pull of two factors: surging Chinese growth and accommodative monetary policy by global Central Banks. The sustainability of these two factors was called into question over the year, leading to a weaker price environment for commodities. However, the fiscal year ended with interest rates broadly in the same place they have been for over seven years, with the US Federal Reserve looking set to continue to keep rates low for some time yet. While Chinese growth looked weaker in 2015 than it has at any time since 2008, structural economic forces should continue to drive commodity demand growth over the long term.
ECONOMIC SLOWDOWN IN CHINA
China’s slowdown had to some extent been expected as the economy matured, but the timing and the speed with which it would unfold were unknowns. While the government remains committed to a growth target somewhere between 6 and 7 percent per year, it became clear towards Q4 2014 that growth was in fact running below those levels. Although the headline GDP numbers were in line with the government’s objectives, other indicators such as freight traffic, electricity consumption and physical demand for key commodities were all weakening. Some of this is a natural result of the economy moving from an investment- and export-intensive growth model to a more consumption-led one. Investment in infrastructure in particular has been a material driver of China’s commodity demand growth, but as the country has entered the middle stages of development, the need for exponential expansion has slowed.