Noble posts $2.3b loss, its first in two decades

Commodity crunch and attacks from Iceberg Research take a toll

Noble Group suffered a US$1.67 billion (S$2.3 billion) net loss last year as its core earnings were wiped out by large impairments made to take account of plunging commodity prices.

But the embattled commodity giant stressed that its cash and liquidity position has continued to improve, with the management close to securing refinancing from banks.

Noble's deep slide into the red, announced after the market closed yesterday, marks a stark reversal from 2014's US$132 million net profit.

The loss was Noble's first in almost two decades, and resulted from a US$1.2 billion exceptional non-cash loss flagged in a profit warning earlier this week to account for the impact of weak coal prices on asset value.

Excluding the exceptional losses, Noble's adjusted net profit was US$244 million last year, still down 58.4 per cent from 2014's adjusted profit of US$586 million. Revenue was US$66.71 billion, down 22.3 per cent year-on-year.

At a results briefing yesterday, chief executive Yusuf Alireza noted that the management's initiatives last year - such as the sale of Noble Agri shares and scaling down of its metals and mining businesses - have strengthened Noble despite the difficult market conditions.

With US$750 million cash proceeds from the Noble Agri deal - which is set to be completed next Thursday - Noble would reduce its net debt to US$3.22 billion, according to pro forma calculations. This would be 22.9 per cent lower than the US$4.18 billion level as at Sept 30. The company's total liquidity - including bank facilities and marketable inventories - stood at US$3.9 billion at end-2015, and a further US$1 billion will be available by end-March due partly to the Noble Agri deal, Mr Alireza said.

  • AT A GLANCE

  • REVENUE:

    US$66.71 billion (2014: US$85.82 billion)

    NET LOSS:

    US$1.67 billion (2014: Net profit of US$132 million)

Noble is close to reaching refinancing agreement with its banks, he added. "I can announce that we have an agreed term sheet with a number of our core banks and we'll move quickly towards closing the transaction as soon as possible."

Meanwhile, Noble still saw earnings growth in segments of its core businesses. The energy business, including oil liquids and energy coal, delivered US$646 million in profit before tax in 2015, up 21.4 per cent year-on-year. And while the gas and power business saw a 29.8 per cent year-on-year drop in profit to US$214 million, the performance in the United States market was strong, Mr Alireza said. But the mining and metals segment incurred a loss of US$229 million, reversing 2014's US$282 million profit.

These figures reveal the struggle Noble faced last year amid the global commodity crunch, all the while battling allegations of accounting and governance issues from critics such as the Iceberg Research blog.

An hour before the 2015 results were out, Iceberg released its fourth full report, again alleging that Noble manipulated its asset fair value and that the management has lost its credibility.

During the briefing, Mr Alireza was asked whether Noble was too aggressive with its mark-to-market gains. He said: "The fact that we presented is that our long-term assumptions have always been within market consensus… I'm not sure where you would've come from in terms of us being too aggressive with our balance sheet."

Noble shares closed half a cent or 1.47 per cent lower at 33.5 cents.

A version of this article appeared in the print edition of The Straits Times on February 26, 2016, with the headline 'Noble posts $2.3b loss, its first in two decades'. Print Edition | Subscribe