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Marex returns to profit, despite 'very challenging' times

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Marex Spectron highlighted the "very challenging" times for commodity trading houses, and "extraordinary" changes in the industry, even as the broker unveiled a return to the black.

John Wall, chief executive of Marex Spectron, said that "the competitive and operating environments were very challenging in 2014", a factor which had driven mergers and closures in the sector.

Jefferies Group, last month unveiled the sale of most of its Bache division's commodities and financial derivatives accounts to Societe Generale, with high profile mergers last year including the takeover by Ecom of the Armajaro Trading business.

Analysts at Oliver Wyman Group last year forecast independent players in commodity trading shrinking to two or three per asset class, ironically citing increasingly liquid markets, in which there is greater transparency.

Mr Wall said: "We saw consolidation across our industry, many clients trimmed their broker lists and, indeed, their own activities as attention focused on falling demand and prices for many commodities."

The commodities industry over the past two years suffered a series of high profile fund closures,

'Extraordinary developments'

Headwinds had come from regulators, as well as markets themselves, marked by falling prices of many commodities in all three of Marex's core sectors - agriculture, energy and metals.

"The developments in market structure, regulation, legislation and commodity demand and supply dynamics of the past two years have been extraordinary," Mr Wall said.

Marex itself has undertaken a shake-up to improve its fortunes, including steps to "exit under-performing businesses, rationalise our property portfolio… and focus investment spend on areas where our market share and insight could be most effectively leveraged", Mr Wall said.

Marex Spectron last year closed businesses including its foreign exchange operation, and its London distillates desk.

"No broker can hope to build a successfully sustainable business on a model and cost base that has not undergone similarly transformative change" as Marex has, he added.

Biofuels boost

The changes helped the group report a pre-tax profit of $22.6m for calendar 2014, up from a loss of $6.2m the year before.

Revenues rose 3.0% to $368.8m, from $358.1m in 2013.

"We grew revenue across our core businesses, improved on our already robust financial strength and benefited from prudent cost control," Mr Wall said.

North American operations showed particularly improvement, reporting a 461% surge in pre-tax profits, led by metals and biofuels operations.

Marex Spectron launched expanded coverage of US ethanol prices, amid a revamp of its data offering in October 2014.


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