Noble's Q3 profit falls 84% even as cash flow, margin improve

Wider losses at joint ventures, associates are biggest drag on commodity giant's earnings

Heavier losses from joint ventures and associates hammered third- quarter profit at commodity giant Noble, although the company said its financial position improved in the period.

Net profit was down 83.9 per cent to US$24.7 million (S$35 million) compared with the same peroid a year ago.

Revenue took a smaller hit, falling 19.8 per cent to US$18.7 billion in the three months to Sept 30.

This followed the 5 per cent year-on-year profit drop reported for the second quarter.

Net asset value was 78 US cents per share, up from 75 US cents as at Dec 31, while earnings per share was 0.29 US cent, down from 2.24 US cents a year ago.

  • AT A GLANCE

  • REVENUE

    US$18.69 billion (-19.8%)


    NET PROFIT

    US$24.7 million (- 83.9%)


    NET DEBT

    US$4.18 billion (-3.6% q-o-q)

The main drag on the earnings was a US$65.7 million loss - up 225.24 per cent year on year - incurred via its joint ventures and associates, such as Noble Agri, which was in turn hit by weak sugar and ethanol prices.

Meanwhile, Noble's metal and mining segment continued to struggle, with losses widening by 11 per cent year on year to US$72.1 million.

Despite the tepid results, there were plenty of bright spots in the third quarter, chief executive Yusuf Alireza said in a conference call following the results announcement.

"In the third quarter, cash flow from operations was a positive US$318 million, with net debt also having fallen US$155 million. We have also seen a recovery in gross margin, increasing to 1.92 per cent for the nine months to Sept 30, 2015, compared to 1.75 per cent in the same period last year."

Achieving a positive cash flow by the end of the year was one of the targets Noble set during its investor day event in August, when the company addressed concerns triggered by a spade of criticisms by Iceberg Research.

There are signs that the struggling firm is finding its footing.

"Tonnage (of commodities) for the nine months was up 44 per cent year on year to a record 206 million tonnes, while tonnage for the (third quarter) was up almost 50 per cent year on year," Mr Alireza said, adding that profit of the energy segment was up 416 per cent to US$143.4 million.

This followed Noble's recent moves to scale back its metal and mining businesses to focus more on the still-profitable energy segment. Together with other cost reduction measures - such as a 15 per cent cut in headcount - Noble is now "well under way" to achieving a US$70 million annual cost-saving, noted Mr Alireza.

The company also plans to raise over US$500 million via asset disposals or other financial transactions, he added, but no further details on the discussion were provided.

Meanwhile, Noble announced yesterday that chief financial officer Robert van der Zalm has stepped down due to health-related reasons. Mr Paul Jackaman will step in as the acting CFO.

Mr Alireza refuted claims that Mr van der Zalm's departure was linked to the Iceberg saga.

Noble shares closed 1.5 cents, or 2.91 per cent, down at 50 cents ahead of the results announcement yesterday.

A version of this article appeared in the print edition of The Straits Times on November 13, 2015, with the headline 'Noble's Q3 profit falls 84% even as cash flow, margin improve'. Print Edition | Subscribe