UPDATE 1-Trader Mercuria reports lower net profit, core earnings

Fri May 9, 2014 10:36am EDT

(Adds more figures, details)

By Dmitry Zhdannikov

LONDON May 9 (Reuters) - Trading house Mercuria reported lower core earnings and net profit for 2013, citing a tougher trading environment and higher one-off investments to help accommodate the trading business of Wall Street bank JP Morgan .

Core earnings declined 7 percent to $562 million and net profit fell 11.7 percent to $273 million on revenues of $112 billion, up 14 percent on 2012.

Most trading houses have been reporting weaker financial results and weaker margins in the past couple of years. The world's largest trader Vitol's annual profits slid to the lowest level in nearly a decade.

"Trading conditions were tougher, let's face it," Mercuria Chief Financial Officer Guillaume Vermersch said. "There was very little volatility in our markets."

The company has seen one-off investments of $370 million as it accelerated investments in IT, risk management and compliance and hired 100 new staff, he said.

"We made a strategic choice to spend capital to reinforce our operations and prepare for the JP Morgan's business arrival which we expect to happen in Q3," he added.

JP Morgan is selling its physical commodities business to the Swiss firm for around $3.5 billion, in a move that will help sweep Mercuria into the top league of commodities traders as Wall Street banks are exiting trading amid regulatory pressure.

Mercuria traded 195 million metric tonnes of oil or oil equivalent in 2013, its gross profit increased by 10 percent and shareholder equity also rose by a tenth to $2.7 billion.

The company is looking to sell a stake of up to 20 percent to a strategic investor, probably from Asia, the company has said. (Reporting by Dmitry Zhdannikov; Editing by Jason Neely and Pravin Char)

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