Commodity trader Noble's Q2 net loss blows out to US$1.75b

Noble saw revenue slide 19 per cent year on year to US$10 million in the three months to June 30.
Noble saw revenue slide 19 per cent year on year to US$10 million in the three months to June 30.PHOTO: REUTERS

SINGAPORE - Noble Group has posted a net loss of US$1.75 billion (S$2.39 billion) in the second quarter, owing to a huge allowance for exceptional items. The loss blew out from a net loss of US$54.9 million in the same period last year.

In the three months to June 30, 2017, Noble took a US$1.25 billion allowance for exceptional items relating to adjustments to the commodity trader's net fair value gains on commodity contracts and derivative instruments to take into account of added uncertainty in its operating environment, as well as the impact of credit rating downgrades on the discount rates it used in its calculations.

Noble saw revenue slide 19 per cent year on year to US$10 billion in the three months to June 30.

"Conservative liquidity management, scaling back of risk positions and constraints placed on the group's access to trade finance lines led to disruption costs and prevented the group from taking advantage of profitable opportunities," the Hong Kong-based and Singapore-listed commodity trader said in an exchange filing on Thursday (Aug 10).

Noble commenced a strategic review in May under new chairman Paul Brough, who replaced group founder and largest shareholder Richard Elman.

Debt reduction remains a priority under the review.

Noble plans to pare debt by selling its capital-intensive global oil liquids business. It will also cut headcount from 900 now to 400, and intends to raise net proceeds of between US$800 million and US$1 billion over the next two years by disposing of other assets outside of North America.

Meanwhile, it wants to recapitalise its hard commodities business in Asia, where volumes have remained fairly steady.

Noble continues to search for a white knight investor and seek further strategic alliances, including with trading house Mercuria, which has agreed to buy Noble's North American gas and power business for US$248 million by the end of this year.

At the end of June, Noble had total debts of US$2.55 billion repayable in one year or less, and another US$2 billion repayable after one year.

Second-quarter loss per share was US$1.3415, widening from a restated loss of US$0.0651 in the same period a year earlier.

The results were posted after the market closed. The counter fell one Singapore cent or 2.78 per cent to 35 Singapore cents on Thursday. The group had issued a profit warning last month.