Noble Group's woes deepen, posts Q3 loss of US$1.2b

By Anita Gabriel

DISTRESSED commodity trader Noble Group's losses deepened with the Hong Kong-based firm reporting a US$1.17 billion (S$1.59 billion) net loss for the third quarter from a much narrower loss of US$28 million a year ago, owing largely to non-cash items - much in line with what it had flagged a month ago.

A non-cash loss related to the loss on sale of the North American Gas & Power business and an impairment loss on the Global Oil Liquids business as a result of the proposed sale of Noble Americas Corp (NAC) plus certain provisions were the chief culprit for the group sinking deeper into the red.

This brought net losses for the nine-month period to US$3.05 billion on the back of a 23 per cent drop in revenue to US$5.03 billion.

The group said that a challenging operating environment due to liquidity constraints continues to impact profitability.

For the three months to September, the troubled Singapore-listed firm that has shrunk its business, sold assets (and continuing) to tackle debt and targets to slash headcount to 400 from over 1,000 at the end of last year to cut cost, saw revenue slip 18 per cent to US$1.46 billion.

Loss per share over the quarter widened to 89.8 US cents from 2.93 US cents per share in the previous period. No dividend was declared, the same as the previous year."As we dispose further assets, we may incur additional non-cash losses," said Noble's chairman Paul Brough at an earnings briefing on Thursday.

Under a strategic review aimed at tackling the group's debt woes and steered by Mr Brough who in May this year succeeded the company's founder Richard Elman as Noble chairman, the group has monetised its global oil liquids business and the US gas and power business over the past several months and plans to sell more assets. It has also been in discussions with lenders for its working capital and trade financing needs.

While Mr Brough was reluctant to give a time line for the sale of certain assets which is expected could raise another US$800 million to US$1 billion given that it could "prejudice the 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 located in Asia either but involves "fairly chunky" assets including its aluminium operations. "We have a number of investments and investments in joint ventures that we are readying for sale. Although we have't put any principal assets up for sale, they are ready...we have done the appropriate diligence over the those assets. This will support one element of our repayment plans," he added.

The group's net debt decreased by US$112 million from end-June 2017to $3.7 billion in the third quarter. But it has risen by US$833 million over the nine months to September 2017 from end-2016 primarily driven by negative cash flow from underlying activities due to the challenging operating environment and its reinvestment in Harbour Energy in January.

On the progress of the group's plan to seek a new investor to recapitalise its hard commodities businesses, Mr Brough said discussions with possible strategic investors was "live and ongoing and frequent in terms of meetings" but may or may not result in an actual investment.

The latest earnings score card should not surprise. Last month, Noble had warned that it expects to suffer potential net losses of some US$1.1 billion to US$1.25 billion for the quarter.

Concurrently, the struggling firm had also disclosed that it was selling its oil-liquids business to Vitol Group that could net as much as US$582 million based on first-half year accounts which analysts had largely viewed as a positive step to lessening its debt burden. Still, it needs to do a great deal more to alleviate the debt stress.

This latest asset sale followed a month after it completed another sale of its North American gas and power business to Mercuria.

Noble's shares ended 1.8 per cent lower at 27 Singapore cents on Thursday ahead of the results announcement. The stock is trading at the lowest since 1999 and year-to-date has lost over 80 per cent of its value.