Metals Trader Concord Doubles Profit Due to Aluminum Chaos

(Bloomberg) -- Concord Resources Ltd.’s profit doubled last year as the metals trading startup benefited from the turmoil in aluminum and alumina markets following sanctions on Russian producer United Co. Rusal.

“It was a year of exceptional opportunities,” Chief Executive Officer Mark Hansen said in an interview in London. “The sanctions on Rusal created disruptions across the aluminum and alumina supply chain and we were able to execute on those opportunities outstandingly well.”

Concord, which was founded in 2015 by a group of former Noble Group Ltd. traders with private equity backing, saw net income rise to $43.4 million last year. After the U.S. sanctioned Rusal in April, alumina prices doubled to a peak of more than $700 a ton within a few weeks. Concord has a long-term contract to buy alumina from a plant in Louisiana, and last year bought a stake in the parent company of the plant, New Day Aluminum Holdings LLC.

While the company benefited from the wild ride in the aluminum market, other commodities traders and miners were hurt. Glencore Plc was wrong-footed by the move in alumina, and Rio Tinto Group also suffered.

Metals Trader Concord Doubles Profit Due to Aluminum Chaos
Concord’s results for last year
  • Operating profit, a closely watched metric in trading houses, rose 77 percent to $106 million, according to the company’s accounts.
  • Net profit excluding a non-cash interest charge on redeemable shares was $57 million, up from $32 million the previous year.
  • Revenue climbed to $4.2 billion from $3.4 billion a year earlier.
  • It met its target of almost doubling deliveries, with metal and ore volumes up about 65 percent to 2 million tons.
  • About half of that was concentrated in aluminum and alumina, followed by copper concentrate and metal, as well as zinc concentrate. 

After three years of strong expansion, Hansen said the metals trader’s growth will moderate in 2019, with fewer trading opportunities as the aluminum and alumina market stabilize following the removal of sanctions on Rusal.

The CEO said the company is exploring ways to reward its early backers -- which include Pinnacle Asset Management LP, Pala Investments AG, MKS PAMP Group and the partners of Ospraie Management LLC-- potentially via a dividend or a share buyback later this year. It’s also working on raising more capital and expanding its shareholder base.

While Concord has had informal discussions with banks about a potential initial public offering as soon as next year, Hansen indicated the focus for now is on raising funds via private deals.

“We are pursuing a plan to raise fresh capital and reward our existing holders after meeting our three-year goals, perhaps after the spring,” he said. 

Outlook for metals
  • Hansen warned of a cyclical slowdown in the auto industry, particularly in Europe and some emerging markets like China, which will hurt non-ferrous metals.
  • Aluminum will likely be pressured by rising output in China, where some producers are subsidized.
  • The North American copper market is in deficit, but is being offset by small surpluses in Europe and Asia.

©2019 Bloomberg L.P.