Global commodity trading giant Trafigura has reported a sharp decline in profits for its 2024 fiscal year, largely due to a $1.1 billion loss tied to alleged employee misconduct in its Mongolian oil operations. The company’s net profit fell to $2.8 billion—a 62% drop compared to the previous year and the lowest in four years.
Unpacking the Mongolian Fraud
Over a period of approximately five years, Trafigura’s Mongolian oil business faced internal wrongdoing that led to significant financial losses. An internal investigation uncovered that employees engaged in fraudulent activities, including potential mismanagement of resources and falsification of operational data. These actions inflated costs and disrupted the company’s financial reporting, forcing Trafigura to restate its accounts for several prior years.
The fraud has been described by Chief Financial Officer Stephan Jansma as a “massive problem.” To address the issue, Trafigura has taken a $357.5 million charge in its 2024 accounts, with the remainder allocated to earlier periods. As a corrective measure, the company has pledged to implement stricter internal controls, which will undergo external review to ensure accountability.
A Challenging End for CEO Jeremy Weir
This scandal has marred the final months of Jeremy Weir’s tenure as CEO. Weir, who has led Trafigura for over a decade, will step down at the end of 2024, handing the reins to Richard Holtum, head of the gas and power division. Despite the controversy, Weir expressed confidence in the company’s resilience, calling Trafigura a “powerhouse in the global commodity supply chain.”
Other Financial Setbacks
Trafigura also faced additional impairments, including a $297 million write-down on its zinc smelting subsidiary, Nyrstar, and smaller losses from its fuel retailer Puma Energy and Colombian logistics business. Meanwhile, the company’s tax rate dropped significantly to 2.8% in 2024, compared to 8% the year prior, due to adjustments related to the fraud.
Despite these setbacks, Trafigura highlighted strong performance in its metals trading division, particularly copper trading, as a bright spot in an otherwise challenging year.
Reduced Dividends and Management Shakeups
The company paid $2 billion in dividends for 2024—a 66% reduction from the prior year. This reduction reflects efforts to maintain financial stability amid the fraud investigation and other challenges. Additionally, several senior executives, including former CFO Christophe Salmon and oil division head Jose Larocca, left the company during this turbulent period.
Looking Ahead
Trafigura is focused on recovering from these financial and reputational blows. It has promised stronger governance and oversight across its global operations while navigating ongoing legal challenges. These include investigations into corruption and price manipulation in other regions, adding further pressure to the company as it transitions to new leadership.