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Business Times
5 days ago
- Business
- Business Times
Trafigura's buyback headache grows amid fresh wave of exits
[LONDON] A fresh wave of senior executive departures is heaping pressure on Trafigura Group's commitment to buy back its employees' shares, just as a profit boom shows signs of faltering. Trafigura has deferred about 30 per cent of the buybacks that were scheduled for this year, according to sources familiar with the matter. Among current and former Trafigura traders, many of whom have the majority of their wealth tied up in the company, conversations have turned to whether the commodity trading giant will delay part of next year's planned repurchases as well, the sources said. Share buybacks are the main way that Trafigura rewards the roughly 1,400 employees that own the company, and have been a conduit for vast riches in recent years. The deferrals mean its current generation of traders face a less certain future, at the same time as some of its rivals are going on aggressive hiring sprees. The departure of a large number of longstanding top executives has piled pressure on the company because it commits to buy their shares back in instalments when they leave. The departures are also coming after a period of extraordinarily high profits, which has inflated the value of the shares due to be bought back. Already in the six months to March, Trafigura spent more money on buybacks than it made in net profit. Trafigura does have wide discretion about how much to spend on buybacks, and a source close to the company said that any decision about next year's buyback would only be made after the end of Trafigura's financial year in September. The source highlighted that the company's group equity of US$16.2 billion at the end of March was well above a self-imposed minimum of US$15 billion, and represented nearly 20 per cent of its total assets, also well above a ratio of 15 per cent that the company considers to be comfortable. Over the past two years, Trafigura's three top executives all retired from their jobs, culminating in only the second CEO transition in the trading house's history. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up The departures have continued this year with a fresh wave of senior exits, including Hadi Hallouche, head of Trafigura's downstream oil division, Julien Rolland, head of strategic projects, and Ignacio Moyano, the chief risk officer. More are leaving from the middle ranks of the trading house: former crude trading head for Asia and Europe Daniel Yuen is joining Millenium Management, while head of Asia carbon trading Rushan Pandya is leaving to join Mercuria Energy Group, according to sources familiar with the matter. At the same time, the company's profits are also under pressure. While Trafigura continues to report earnings far higher than any time before 2020, its profits have fallen from the highs of 2022 to 2023 when the market fallout from Russia's full-scale invasion of Ukraine helped lift earnings across the industry. When Trafigura reported half year results in June, it warned of trading headwinds. Sources familiar with the matter said that the company took a hit earlier this year in gas, where prices have tumbled since February. Meanwhile, its sprawling zinc smelting business Nyrstar remains under severe pressure from a tight market for raw materials. The company is also still trying to rebuild its reputation after a series of scandals, ranging from alleged frauds against it in nickel and Mongolia that have cost it more than US$1.5 billion, to a corruption conviction earlier this year in Switzerland. The situation has made for a challenging first few months in the job for Richard Holtum, who took over as the third chief executive officer in Trafigura's history in January. Bloomberg reported last year that he had told staff he wanted Trafigura to focus on making money, and since taking the job, he has expounded a mantra of making the company 'simpler', 'smarter' and 'sharper'. Still, the large buyback bill has not stopped Trafigura investing, with the company forming part of a consortium to buy an oil refinery in France, as well as striking large prepayment deals in copper and iron ore. The trading house also recently returned to the bond market, raising US$500 million earlier this month. 'Trafigura's key financial metrics are at historically high levels, and shareholder returns do not constrain its ability to invest and grow,' the company said in a response to questions. 'In addition, the group maintains near-record liquidity, and its trading performance remains strong.' BLOOMBERG
Reuters
27-03-2025
- Business
- Reuters
Trafigura's Puma Energy posts higher net profit, lower EBITDA, in 2024
LONDON, March 27 (Reuters) - Trafigura-owned refined products business Puma Energy reported a 5% rise in net profit in 2024 financial results released on Thursday, the third straight year the once struggling business has turned a net profit. Global commodity trading house Trafigura bought out Angolan state-owned oil company Sonangol 's stake in then loss-making Puma Energy in 2021, taking full control and integrating it into the company in a push to expand its downstream market share. Net profit was $39 million, the company said in a statement. It will not pay a dividend, and, as a result, its equity value reached $476 million, its highest level since 2018. Stable performance in core segments and regions helped counterbalance lower demand for bitumen, which is used to pave roads, and weaker refining margins over the last year, it said. "Our presence across multiple regions, segments, and products has proven to be a key strength," Puma's chief financial officer Carlos Pons said in the statement. Puma said its fuel retail network grew by 6% last year to 2,106 sites, around 62% of which are in Latin America. However, in addition to weaker bitumen demand, deconsolidation in its Tanzania operations and downsizing of its Papua New Guinea business caused earnings before interest, taxes, depreciation and amortisation (EBITDA) to fall by 16% on the year to $338 million. Its operating cash flow, meanwhile, fell 64% on the year to $139 million due to a $38 million outflow from exiting its UK fuels business in July and $90 million in outstanding 2023 cargo payments that rolled into January 2024, the firm said. Puma's chief executive Hadi Hallouche will step down at the end of June, Trafigura announced earlier this month, to be replaced by Mark Russell, currently Trafigura's head of energy for the MENA region. Trafigura last year reshuffled its organisational structure with the creation of an operational assets division, bringing its portfolio of cross-commodity assets together under a separate pillar headed up by Jiri Zrust. As part of that drive, Zrust was made chairman of the board of Puma Energy this month.
