INTL FCStone Q2 Operating Revenues Drop as Net Income Rises

Net income rose as INTL FCStone's revenues dropped during the quarter.

New York-headquartered INTL FCStone Inc., listed on the Nasdaq under ticker INTL, and operating a diverse set of financial services businesses catering to clients globally, has reported its fiscal 2016 second quarter (Q2) results for the three months that ended March 31, 2016, according to a company press release.

INTL FCStone’s total operating revenues were $3.7 billion yet 74% lower from over $14.4 billion compared to Q2 2015 year-over-year, while the company’s cost of sales of physical commodities also decreased from $14.28 billion to $3.54 billion over the same period. Consequently, and after adjusting for costs related to clearing, interest, and IB expenses, the total net operating revenues were $112.9 billion, compared to $107.9 billion year-over-year.

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From these totals, the company realized net income of $14.5 million, up 12% over the same period from last year, from across its various segments including financial products, advisory, and execution services, among other business lines reported in its top-line figures. The news follows after Finance Magnates wrote about INTL FCStone’s expanded credit facility announced earlier last quarter.


FX volatility helped

From the firm’s clearing and executions services segment, operating revenues from INTL FCStone’s customer prime brokerage product line had increased 14% to $5.7 million during Q2, up from $5 million during the same period a year ago, attributed to a 43% increase in foreign exchange volumes driven by higher market volatility.

OTC revenues decreased 42% to $16.8 million in the second quarter, primarily driven by lower customer volumes in Latin America as well the effect of low energy prices and volatility which drove a decline in energy and renewable fuels OTC revenues.  Overall OTC volumes decreased 33%, particularly in agricultural commodities, while the average rate per contract declined 14% compared to the prior year.

Revenues from its exchange-traded activities were up 7% to $32.4 million in Q2 and driven by growth in agricultural commodity revenues including in the domestic grain markets and from the company’s London operations. The overall exchange-traded contract volume rose 18% while the average rate per contract decreased by 10% to $5.62, according to the update. The amount of average customer equity dipped to $941.9 million and was lower by 12% year-over-year.

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An excerpt from the company’s press release below depicts the volumes from related segments compared with prior periods.

Source: INTL FCStone Fiscal Year 2016 Q2 Financials
Source: INTL FCStone Fiscal Year 2016 Q2 Financials

OTC volumes dipped

Despite the dip in OTC volumes, the company reported that its operating revenues from its physical commodities business increased 23% to $7.9 million in Q2 , up from $6.4 million in the prior year period. In addition, precious metals operating revenues rose 28% to $5 million in Q2 compared to $3.9 million in Q2 2015.

INTL FCStone said its operating revenues in the precious metals segment had increased year-over-year despite a 43% decline in the number of ounces traded as spreads had widened in that segment and caused a 130% increase in the average revenue per ounce traded, according to the release.

In the firm’s physical agriculture and energy segment, the operating revenues increased 16% to $2.9 million for Q2, compared YoY and driven by an increase in customer volumes in the feed ingredient industry.

Commenting in the company’s press release, INTL FCStone CEO Sean M. O’Connor said: “Our diversified business generated solid core operating results for the quarter which stands in strong contrast to the industry overall.  A strong performance from our Securities segment was offset by a weaker performance in our Commercial Hedging segment.  We saw a reversal of the immediately preceding quarter’s marked-to-market losses on investments held in our interest rate management program.  For the six months to date we achieved an ROE of almost 12%, which we believe is a best in class performance, but still below our long term target of 15%.”

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An excerpt from the INTL FCStone 2016 fiscal year financials for Q2 can be seen below alongside prior periods.

Source:  INTL FCStone Q2 2016 fiscal year financials
Source: INTL FCStone Q2 2016 fiscal year financials
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