Noble Group shares crashed to their lowest point in 15 years as the ailing commodity trader reported a massive first-quarter loss owing to disruptions in the coal market.
And the company may be a long way from returning to profitability, founder Richard Elman hinted as he stepped down from his post as chairman.
The turbulent day followed Noble's warning on Tuesday night that it may suffer a US$130 million (S$183 million) loss. In the first trading session since then, investors wasted no time dumping Noble shares, which plunged 32.4 per cent to 87.5 cents on 103 million shares traded.
This was the lowest level since 2002. Noble shares just completed a 10-to-one consolidation this week which adjusted the share price upwards. Prior to yesterday's plunge, the shares had been trading at above $1.20 this month.
The actual loss turned out to be US$129.3 million (S$182 million), Noble announced after the market closed, marking a shocking reversal from the US$40.5 million net profit a year earlier.
Even as revenue gained 10 per cent to US$12.6 billion, the earnings were severely affected by what the management called a "market dislocation and decoupling of key indices" in the coal market.
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AT A GLANCE
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NET LOSS: US$129.3 million (down from US$40.5 million profit)
REVENUE: US$12.6 billion (+10%)
NET ASSET VALUE: 29 US cents per share
"From the volume viewpoint, everything looked normal in the first quarter. What was not normal is the changing relationship between the markets, for example, the Chinese domestic market and the price of Newcastle," co-chief executive William Randall told a briefing.
Noble used the Newcastle index as a reference to anchor its supply- chain contract prices in advance, but Mr Randall said the first quarter saw abnormal divergence between the anchor prices and domestic prices. "This extreme movement hurt us, as we executed our supply contract," he said, adding that the index can no longer be used as a hedging tool.
As a result, supply-chain operating income dipped to just US$5.8 million, down 98 per cent from US$249.6 million a year earlier.
In March, Noble issued a US$750 million note offering, but there was no mention of the coal-market issues then and at the special general meeting late last month seeking approval for the share consolidation.
When asked why the management did not disclose this issue earlier, chief financial officer Paul Jackaman said the answer to that was "not relevant". "We're a trading business, and what happens any given day or month is not something that will play into the strategic direction of the company, nor should it."
Shareholder Mano Sabnani said the latest announcements were "puzzling" after the annual and special general meetings in April.
"There were plenty of positive notes and the impression given was that the share consolidation was the last piece needed before a sustained turnaround."
KGI Securities Singapore strategist Nicholas Teo said: "It's not the fact that it was hit by a loss that's surprising - any commodity trader can lose money. But the magnitude of the loss, at a time when the company was supposed to be prudent instead of taking big bets, was what shocked the market."
In a separate statement yesterday, Mr Elman, who founded Noble about 30 years ago, said the position of chairman has been passed to Mr Paul Brough. Mr Elman will stay on as chairman emeritus.
He said Noble's turnaround will not be "some superficial overnight Botox fill-and-smile" undertaking.
"Rather it will be a long, hard slog with ups and downs along the way until we regain profitability, a goal that we are most likely to achieve in financial year 2018/19."
