Gunvor reports highest annual profit since 2015

Gunvor announced it had more than doubled its full-year profits, becoming the latest commodities trader to reveal windfall profits for 2021 when it took advantage of growing energy demand as lockdown restrictions eased.

The Geneva-based company controlled by billionaire Torbjorn Tornqvist said on Tuesday its net profit reached $726 million in the year to December, with trading volumes jumping 25% to 240 million tonnes.

It is the highest profit the company has recorded outside of 2015, when it made a large gain on the sale of a majority stake in a Russian oil terminal. Gross profit was $1.54 billion.

“Underlying earnings drivers included natural gas and LNG, which generated sustainable earnings throughout the year,” the company said in a statement. “Gunvor has continued to strengthen its balance sheet and maintains a healthy liquidity position.”

Revenue hit $135 billion, up sharply from $50 billion, as oil and gas prices rebounded from the pandemic and Gunvor shipped more raw materials globally. Brent crude rose more than 50% in 2021, while gas prices rose sharply in the second half of the year amid an energy crisis in Europe.

Gunvor joins rivals Vitol, Mercuria, Trafigura and Glencore in reporting huge profits for 2021 due to the explosion in demand for raw materials and supply chain disruptions created by the coronavirus pandemic.

Analysts believe 2022 could be another strong year for the sector, but only for traders who have access to deep lines of credit and can handle the volatility caused by the war in Ukraine and sanctions against Russia.

The hard-hitting measures imposed on Moscow have created lucrative arbitrage opportunities and a reorganization of global trade flows, but financing trade positions has become more capital intensive.

Gunvor reduced its trading positions in the fall after a spike in gas prices triggered margin calls – requests for additional cash to cover its hedge positions – from brokers and exchanges.

However, in the past five months it has secured more than $3 billion in credit facilities and loans and has continued to trade normally despite “erratic” price movements.

Gunvor has withdrawn from Russia since 2014, when the United States imposed sanctions on Gennady Timchenko, its Russian co-founder, for his alleged ties to President Vladimir Putin.

Timchenko sold his stake to Tornqvist just before the sanctions announcement and left the company.

Over the past five years, raw materials of Russian origin have accounted for only 6-11% of Gunvor’s business activities.

Like many of its rivals, the company said it was legally bound to honor existing commercial contracts, which are not subject to sanctions, with Russian oil and gas producers. However, he decided not to open a new business.

Speaking at the FT Commodities Global Summit last month, Tornqvist said he was open to the idea of ​​selling a stake in the company, founded in 2000, to expand its business.

“For us to really, shall I say, exploit the potential of the business, it would be desirable to explore additional equity,” he said. “We are open to finding an alliance that could increase the size of the company.”

Tornqvist owns nearly 89% of Gunvor and held talks in 2019 about selling a stake to state-owned Algerian oil and gas producer Sonatrach.