Moves to improve balance sheet hit Noble's earnings

Troubled commodity group posts $74m loss in Q2 as it struggles to raise liquidity under new co-chief execs

Moves by embattled commodity trader Noble Group to improve its balance sheet meant earnings took a hit in the second quarter.

It recorded a loss of US$54.9 million (S$73.7 million) for the three months to June 30, compared with earnings of US$62.6 million in the same period last year.

Revenue fell 32 per cent to US$12.5 billion in the quarter, the company reported yesterday in its first report under new co-chief executives Jeff Frase and William Randall.

"Our focus on generating additional liquidity, especially in the latest quarter, has directly impacted our ability to generate operating profit," the company said in a statement yesterday, adding that it had constrained working capital to all its businesses.

  • AT A GLANCE

  • REVENUE: US$12.5 billion (-32%)

    NET LOSS: US$54.9 million (compared with net profit of US$62.6 million)

Its moves to raise liquidity included the sale of its 49 per cent stake in Noble Agri to raise US$750 million and its raising of US$500 million in an oversubscribed rights issue.

Noble said it has raised US$1.9 billion this year, including these two transactions.

In May, the firm secured a US$2 billion borrowing base facility to fund its United States businesses, as well as a $1 billion unsecured revolving credit facility.

The firm has had a roller-coaster ride since its share price collapsed and its debt ratings were downgraded to junk status after a research firm began questioning its accounts in February last year.

This year has proven no less volatile for shareholders. In late May, chief executive Yusuf Alireza resigned, while founder Richard Elman stepped down as executive chairman.

The company emphasised yesterday that it was concentrating on improving the balance sheet. "We continue to rationalise our businesses in order to focus on liquidity and to re-allocate capital to the franchise businesses that offer strong immediate returns," it said in a statement.

It expects that the sale of Noble Americas Energy Solutions will close in the next few months.

The firm noted that despite challenges, its oil liquids unit grew in volume by 23 per cent, while the energy coal business expanded 6 per cent.

It said it will split earnings across its businesses for the next 18 months, giving between 40 and 50 per cent to the oil liquids units.

While oil liquids revenues declined compared with the first quarter of last year, its volume increases "reflect the underlying growth across our businesses", Noble said, adding that it seeks to expand its presence in the Middle East.

Loss per share was 0.94 US cent, compared with earnings per share of 0.86 US cent a year ago. Net asset value per share was 52 US cents as at June 30, up from 50 US cents as at Dec 31. Shares closed up 0.7 cent or 4.7 per cent at 15.5 cents yesterday.

A version of this article appeared in the print edition of The Straits Times on August 12, 2016, with the headline 'Moves to improve balance sheet hit Noble's earnings'. Print Edition | Subscribe