Noble awash in red ink after $1.6b loss

It blames impairments from asset sales and provisions, challenging operating environment for Q3 hit

Commodity trader Noble Group racked up a huge loss of US$1.2 billion (S$1.6 billion) for the third quarter.
Commodity trader Noble Group racked up a huge loss of US$1.2 billion (S$1.6 billion) for the third quarter. PHOTO: REUTERS

Troubled commodity trader Noble Group looks to be drowning in red ink after the firm racked up a huge loss of US$1.2 billion (S$1.6 billion) for the third quarter.

That brought its losses for the nine months of this financial year to an eye-watering US$3.05 billion.

Noble's disastrous 2017 can be seen in comparison with the last financial year when its third-quarter loss was just US$28.1 million while the nine-month deficit was a relatively paltry US$42.5 million.

Revenue for the third quarter fell 18 per cent to US$1.46 billion from US$1.79 billion a year ago.

The third-quarter hit was due mainly to impairments from asset sales and provisions, the Hong Kong-based trader said yesterday.

It added that the challenging operating environment affected its showing for the quarter.

It was also hindered by conservative liquidity management and constraints placed on the group's access to trade finance lines.

  • >80%

  • What Noble Group shares have lost in value this year. The stock is trading at its lowest since 1999.

This disrupted costs and prevented it from taking advantage of profitable trading opportunities, with volumes dropping 26 per cent year on year.

The firm slashed its business in the third quarter, selling assets and continuing to tackle debt. It also aims to cut staff to 400 from over 1,000 at the end of last year.

"As we dispose of further assets, we may incur additional non-cash losses," said chairman Paul Brough at an earnings briefing yesterday.

Mr Brough was reluctant to give a timeline for the sale of certain assets, a move that could raise another US$800 million to US$1 billion, as it could "prejudice discussions".

He said the firm was "obviously aware of the impending debt obligations and deadlines".

These assets are primarily outside North America and are not in Asia either, but involve "fairly chunky" ones like its aluminium operations.

"We have a number of investments and investments in joint ventures that we are readying for sale. We have done the appropriate diligence over those assets. This will support one element of our repayment plans," he added.

Net debt decreased by US$112 million from the end of June to $3.7 billion in the third quarter.

But it rose by US$833 million over the nine months, primarily driven by negative cash flow from underlying activities due to the challenging operating environment and its reinvestment in Harbour Energy in January.

Loss per share came in at 89.9 US cents compared with a loss of 2.93 US cents per share in the previous period. The latest earnings score card should not surprise. Last month, Noble had warned that it expects to suffer potential net losses of US$1.1 billion to US$1.25 billion for the quarter.

It had also disclosed that it was selling its oil-liquids business to Vitol Group, a deal that could net as much as US$582 million based on first-half year accounts.

Analysts had largely seen this as a positive step to lessening debt but still more needs to be done.

The chief concern, however, is how Noble plans to deal with its over US$3 billion debt.

Noble shares closed 1.8 per cent down at 27 cents yesterday ahead of the results announcement.

The stock is trading at its lowest since 1999 and has lost over 80 per cent of its value this year.

A version of this article appeared in the print edition of The Straits Times on November 10, 2017, with the headline 'Noble awash in red ink after $1.6b loss'. Subscribe