Trafigura, one of the world’s largest commodity trading houses, made so much money off the oil price crash, it is going to pay staff more than half a billion dollars in bonuses.
Oil prices are over 50% lower than they were last year and it is killing energy and commodity firms across the globe.
However, unlike firms involved directly in the mining and extraction of commodities, trading houses like Trafigura have been able to take advantage of the collapse in commodity prices and grow their profits in the past year.
Profits at the trading house, which is headquartered in Switzerland, are up 6.5% to £720 million ($1.1 billion), according to its annual report released today.
The FT reported that the profit hike allows the firm to pay its 600 employees a total of $775 million (£500 million) as part of a share buy back scheme.
The profit increase which enabled the big pay out is due to Trafigura’s performance in the oil market, where it has taken advantage of its oil storage capabilities to turn a big profit, using the pricing pattern known as contango.
Trafigura also arranged a series of deals with government owned Russian oil company Rosneft, making it one of the largest exporters of Russian oil. Rosneft has been hit by international sanctions, truncating its operations.
Speaking about the company’s results, CEO Jeremy Weir said “The year provided ample opportunities for Trafigura to demonstrate the strength and robustness of a business model built to thrive in turbulent market conditions,” adding that “Trafigura is well positioned to cope with distressed markets and to seize new opportunities, thanks to our focus on both oil and metals and minerals trading, our sound finances, strong liquidity and careful risk management.”
“Performance was especially strong in crude oil,where we saw an increase in volumes sourced from Russia among other producing nations,” Weir added.
Other headline numbers in Trafigura’s annual report included:
- Overall revenues down 23% to £64 billion ($97.2 billion), reflecting the big drop in commodity prices, particularly that of oil.
- Trading of oil and petroleum products up by 22% to 146.3 million metric tonnes.
- This is more than 3 million barrels of oil per day, compared to around 2.5 million in 2014.
- 52.1 million metric tonnes of minerals and metals traded over the year.
- EBITDA up to £1.23 billion ($1.86 billion), a rise of 43%. Trafigura believes that this is the most accurate measure of its performance.
While trading houses like Trafigura have managed to turn the commodity price crash to their advantages, virtually all of the big commodity mining firms have been hit hard by the impacts of the crash. The world’s largest platinum miner, Anglo American last week announced that it will cut nearly two thirds of its staff, and shares in miners are almost all down heavily over the course of 2015.