Noble reports second straight quarterly loss

HONG KONG • Noble Group, the commodity trader that is backed by China's sovereign wealth fund, reported a net loss for a second straight quarter after pledging to prioritise boosting cash flow ahead of earnings.

The net loss was US$28.1 million (S$39.4 million) in the three months to September compared with net income of US$24.7 million a year earlier as sales shrank 38 per cent to US$11.6 billion, the company said in a statement yesterday. 

Liquidity headroom expanded to US$1.2 billion at the end of September from about US$800 million in the previous quarter, as net debt dropped by more than $500 million.

The company lowered net debt by US$503 million to US$3.42 billion by Sept 30 from the previous quarter, and US$551 million over the first nine months.

Noble Group said it sees further deleveraging after the completion of capital-raising initiatives, including proceeds from the sale of a United States energy unit, which is expected to close next month.

  • AT A GLANCE

    REVENUE: US$11.6 billion (-38%)

    NET LOSS: US$28.1 million (not meaningful)

    NET DEBT: US$3.42 billion (-US$503 million)

Noble Group has been divesting assets and cutting costs to bolster its balance sheet after the company was roiled by a share price collapse, a full-year loss and a downgrade to junk. Chairman Richard Elman reaffirmed plans to regain profitability in the next one or two years when the trader secured approval from shareholders last week to sell the US energy unit, which largely caps a drive to raise US$2 billion. "We have made significant progress on our initiatives to raise capital and rationalise our businesses," Noble Group said in the statement.

"Our 2016 results have been significantly impacted by our conservative approach to liquidity management. Businesses continued to be constrained in the latest quarter and are operating well below optimal earnings capacity."

Between April and June, the company reported a loss of US$54.9 million. When announcing the second-quarter results, chief financial officer Paul Jackaman said that there had been an increased emphasis on liquidity over profitability, with a focus on deleveraging, and that has "had consequences on results".

Yesterday, Mr Jackaman said together with co-chief executive officers Jeff Frase and Will Randall that the company was in talks with lenders to decide how to divide the new liquidity between further debt payments and working-capital needs.

Banks remained supportive and Noble Group was in compliance with financial covenants during the quarter, he said during a call with analysts.

Noble Group's shares advanced 13 per cent to close at 20.5 Singapore cents before the earnings report. While the stock has rebounded from a low of 11.2 cents in September, it remains 32 per cent lower this year after plunging 65 per cent last year.

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A version of this article appeared in the print edition of The Straits Times on November 11, 2016, with the headline 'Noble reports second straight quarterly loss'. Print Edition | Subscribe