Q1 net profit at Noble plunges 62 per cent

Mr Alireza said Noble's priorities for the rest of the year will be to deliver at least an additional US$1 billion in liquidity. The commodity trader yesterday said it had secured US$3 billion in two credit facilities.
Mr Alireza said Noble's priorities for the rest of the year will be to deliver at least an additional US$1 billion in liquidity. The commodity trader yesterday said it had secured US$3 billion in two credit facilities.PHOTO: NOBLE GROUP

Focus on liquidity limited trading opportunities, it says

Noble Group posted a 62 per cent fall in net profit in the first quarter, as the junk-rated commodity trader focused on managing liquidity ahead of a major debt refinancing.

Net profit in the three months to March 31 was US$40.5 million (S$55.5 million) as revenue fell 32 per cent from a year earlier to US$11.39 billion.

"The group's focus on liquidity limited the trading opportunities of our businesses during the quarter, particularly oil liquids and gas and power," Noble said in a statement yesterday.

"But despite these constraints, we focused on commercial opportunities during the period, and all major segments returned to profitability in the first quarter," it added.

In February, Noble reported its first full-year net loss in almost two decades, after a massive US$1.2 billion write-down, owing to the fact that its coal portfolio was not sufficiently hedged.

Noble also said yesterday that it had secured US$3 billion in two credit facilities.

  • AT A GLANCE

  • REVENUE: US$11.39 billion (-32%)

    NET PROFIT: US$40.5 million (-62%)

    DIVIDEND: Nil

The move aims to assure investors and repay debt that will mature this year after two ratings agencies - Standard & Poor's and Moody's - cut the group's ratings to "junk".

Of the US$3 billion, US$1 billion comes from an unsecured 364-day revolving loan facility, a transaction which was supported by 25 global banks.

The other US$2 billion allows for the issuance of trade finance instruments such as letters of credit, as well as for loans, and will be used to fund Noble's business requirements in the United States, the company said.

First-quarter operating income from supply chains fell 40 per cent to US$249.6 million from the same period a year earlier as the group prioritised liquidity ahead of the refinancing.

But compared with the preceding quarter, operating income from supply chains rose 80 per cent, due largely to a swing back to profitability for the mining and metals segment, even as contributions from the energy, power and gas segments fell.

In the energy segment, the volume of oil liquids traded rose more than 30 per cent from the first quarter last year, though revenues fell as a result of lower prices.

Chief executive Yusuf Alireza said Noble's priorities for the rest of the year will be to deliver at least an additional US$1 billion in liquidity by redeploying capital employed from low-return businesses, non-core asset sales and other capital-raising initiatives.

Noble will continue deleveraging to reach a target net debt to capitalisation of 45 per cent, from 52 per cent as at March 31, which is down from 54.7 per cent as at Dec 31.

Earnings per share was US$0.0054, down from US$0.0154 a year earlier, while net asset backing per share was US$0.52 as at March 31, up from US$0.50 as at Dec 31.

Earnings were posted after markets closed. The counter closed up a cent at $0.36 yesterday.

Earlier yesterday, Reuters reported that five oil product traders had resigned from Noble Group, with three of them moving to rival firm Glencore.

A version of this article appeared in the print edition of The Straits Times on May 13, 2016, with the headline 'Q1 net profit at Noble plunges 62 per cent'. Print Edition | Subscribe