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World’s largest independent crude trader rebounds from first-quarter plunge as net income soars to almost $3bn

Vitol made record profits in 2020 as the gyrations in global energy markets triggered a windfall for the world’s largest independent oil trader.

Despite being blindsided by crude’s sharp fall at the beginning of the pandemic, the group earned a gross profit of $5bn in 2020 and net income of almost $3bn, according to figures shared with the Financial Times by people in the industry who have seen the privately held company’s accounts.

That was up from $2.2bn of net income in 2019, which had been a near-record year for the group.

The figures are the latest evidence that traders were the big winners from last year’s oil slump, when crude prices collapsed as the pandemic created demand-sapping lockdowns around the world 12 months ago.

Vitol, which declined to comment on its results, separately on Tuesday said it traded an average of 7.1m barrels a day of crude and refined products last year, down from 8m b/d in 2019.

The group’s turnover, which is heavily influenced by the price of oil, was $140bn in 2020 compared with $225bn in 2019.

Commodity trading houses stood to profit after the price of Brent crude fell to less than $20 a barrel last April, as it presented an opportunity for those with access to storage, both on land or at sea through idled tankers, to buy up cheap barrels and hold them until prices recovered.

Vitol had initially struggled in the early stages of the pandemic, after a large position betting on a recovery in oil prices soured. Vitol’s net income plunged 70 per cent in the first quarter to $180m, the Financial Times reported last year — a sharp decline from the $600m the company made in the same period in 2019.

But the latest figures suggest that from around the second quarter of 2020 the company’s trading results soared.

Vitol’s rivals such as Trafigura and the oil trading arms of supermajors BP and Royal Dutch Shell also had strong results in 2020. In the year to September, Trafigura posted net profit of $1.6bn, up from $867.8m in 2019.

In a statement accompanying its turnover and trading volume figures, chief executive Russell Hardy nodded to the price moves and dislocations in the market that would boost their earnings for the year.

“The extraordinary market conditions in the initial stages of lockdown and sudden drop in demand resulted in huge logistical challenges and market opportunities,” Hardy said.

“With stocks building by over one billion barrels in the early part of the year, the industry had to manage unprecedented circumstances, restructuring supply chains to handle the crude oil and products that neither producers nor consumers could contain.”

Hardy added that while demand was recovering, having slumped by almost 9 per cent globally last year, “the recovery has been slower than many anticipated and near-term uncertainties remain”.

The company said it was taking steps to reorientate its business given long-term concerns about growth in oil demand.

It said it has committed more than $1bn to “identified renewable projects”, though it indicated oil trading will remain a major part of its business for years to come, even as it grows gas and power trading.

“The energy transition requires our business to change,” Hardy said.

“We continue to believe that demand for oil will not peak for another decade, but nonetheless we must position our business for a lower emissions world . . . we will steadily build our transitional and new energy offering and portfolio, serving our clients as their needs evolve.”

South Korean group benefits from huge demand for electronics and tight supply of semiconductors

Samsung Electronics has projected an almost 45 per cent jump in its first-quarter profits on strong sales of smartphones and home appliances, helping offset a hit to its chip production from storms in Texas.

Operating profit rose 44.2 per cent year on year to Won9.3tn ($8.3bn) in the January to March quarter, the South Korean technology group estimated on Wednesday. That would mark its biggest first-quarter increase since 2018, in line with the projections of analysts polled by Refinitiv. Samsung forecast that sales rose by 17.5 per cent year on year to Won65tn.

Earnings at the world’s largest maker of memory chips, smartphones and electronic displays should improve in the coming quarters as chip prices continue to rise on tight supply, analysts believed. The global supply of semiconductors has been slammed by booming demand for electronic devices during the coronavirus pandemic and shortages caused by production shutdowns in the US and Japan.

Analysts pointed to the strong performance by Samsung’s mobile division in the first quarter after the group launched a flagship smartphone and mid-priced models in January, about a month earlier than usual. Sales of premium TVs and other high-margin consumer electronics also jumped as housebound consumers splashed out on home appliances.

The robust earnings also highlighted a full recovery for Samsung from the economic fallout of the pandemic, even if its operating profits were still about half the level of its peak of the semiconductor cycle in 2018. 

Samsung is estimated to have garnered about 23 per cent of global smartphone sales between January and March. That compared with 16 per cent in the preceding quarter, when US rival Apple was boosted by the launch of its new iPhone, according to Counterpoint Research.

Kim Young-woo, an analyst at SK Securities, estimated that operating profits at Samsung’s mobile division rose 66 per cent to about Won4.4tn as the group continued to benefit from US sanctions against Chinese competitor Huawei.

On Monday, Seoul-based rival LG Electronics announced it would close down its lossmaking smartphone business after years of struggling to compete against Samsung, Apple and low-cost Chinese upstarts.

“Samsung’s results from the mobile and home appliance divisions were very strong thanks to the early releases of its phones and lower production costs,” said Kim. “Its foundry business suffered losses due to a power failure in the Austin plant. But chip prices began to rise in March and will increase further in the second quarter.”

A massive snowstorm in Texas in February that caused widespread power outages forced Samsung’s Austin chip plant offline for more than a month. Analysts estimated the losses from suspended production to be Won300bn-Won400bn. The company said the plant’s operations had almost returned to normal as of late March.

Last month, Samsung sounded the alarm over a “serious imbalance” in the semiconductor industry as a chip shortage that has disrupted carmakers threatened to spill over into the broader technology sector.

Separately, LG forecast record quarterly results on Wednesday, following robust sales of premium home appliances. Its operating profit rose nearly 40 per cent year on year to Won1.5tn as sales grew 28 per cent to Won18.8tn, according to the company’s preliminary estimates.

06-Apr-2021 21:24:27

PARIS, April 6 (Reuters) - France said buying out EDF's EDF.PA minority shareholders would roughly cost it 10 billion euros ($11.87 billion), a move the government is mulling within the planned restructuring of the power group, two union sources told Reuters.

This restructuring, currently under discussion between Paris and the European Commission, would entail the creation of a holding company, EDF SA, that would be fully state-owned whereas the French government's ownership of EDF is at present 83.7%

"We are told the state will invest 10 billion euros to buy back the shares held by minority shareholders in order for EDF SA to become 100% state-owned", Sebastien Menesplier, executive of CGT union, told Reuters.