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Macquarie posts record profits on higher income from commodities arm

Praveen Menon and Roushni Nair
Updated ·2-min read
FILE PHOTO: The logo of Australia's Macquarie Group adorns a desk in the reception area of its Sydney office headquarters

By Praveen Menon and Roushni Nair

(Reuters) -Australia's Macquarie Group on Friday forecast higher short-term income from its lucrative commodities trading business as price volatility and increased hedging boosted the company's annual profit to a record high.

The Ukraine war and unpredictable weather in North America have turned Macquarie's oil, gas and power trading unit into a strong profit-making segment, even if prices fall, due to elevated risk management levels and improved trading.

The Sydney-based firm's Commodities and Global Markets (CGM) segment posted net profit of about A$6 billion ($4 billion), 54% higher than last year, as more customers hedged against volatile energy markets.

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In the short term, the company expects consistent contributions from client and trading activity in the financial markets platform.

Shares of Macquarie were down 1.36%, compared to a broader market decline of about 0.2%.

"Record result, CGM THE standout but question marks on its sustainability," UBS analyst John Storey said in a note.

Earnings at Macquarie Capital, which runs capital raisings for other businesses, tumbled 47% as the unit logged lower fees due to bleak market activity.

Macquarie said in a statement that the earnings were primarily driven by a strong performance from its CGM’s businesses.

Chief Executive Shemara Wikramanayake said the company remained "cautious", adding that Macquarie's diversified global operation across annuity-style and markets-facing businesses set the stage for "superior performance" in the medium term.

The company's broader international business generated 71% of the group's profit.

The financial conglomerate's profit attributable for the year ended March 31 came in at A$5.18 billion, up from A$4.71 billion a year ago, and beating a Visible Alpha consensus estimate of A$4.96 bln.

It also bumped up its final dividend to A$4.50 per share from A$3.50 per share a year earlier.

Speaking at an investor briefing, Wikramanayake said the company was "very comfortably capitalised" with a group capital surplus of $A12.6 billion, up from $A10.7 billion in the previous financial year.

($1 = 1.4932 Australian dollars)

(Reporting by Roushni Nair and Rishav Chatterjee in Bengaluru; Editing by Arun Koyyur and Stephen Coates)