Noble warns of loss for Q4 and full-year with US$1.2b writedown

The company logo of Noble Group is displayed at its office in Hong Kong, on Jan 22, 2016.
The company logo of Noble Group is displayed at its office in Hong Kong, on Jan 22, 2016.PHOTO: REUTERS

SINGAPORE - Singapore-listed Noble Group said early on Tuesday (Feb 23) morning that it expects to post a net loss for the fourth quarter and full year ending Dec 31.

The commodity trader expects to recognise US$1.2 billion (S$1.68 billion) of non-cash impairments and exceptional adjustments in the fourth quarter, in addition to the loss on the sale of Noble Agri.

A majority of the adjustments arises from the adoption of a more "conservative" anchor price of thermal coal at US$55 per tonne, Noble said.

The downward revision is a more than 20 per cent discount to the average market consensus price of US$69 per tonne, Noble said in a statement to the Singapore Exchange.

Noble made the adjustment based on the fact that its coal portfolio would not be protected by its hedge programme if coal prices were to stay lower for longer.

Similar adjustments were made across the company's entire portfolio of net fair value gains on commodity and other derivative financial instruments, resulting in a "significant increase" in the effective discount rate to 20 per cent, Noble said.

Noble said the adjustments are non-cash items and have no impact on the company's cash position or cash flows. The company added that it expects to report positive cash flow from operations in Q3 & Q4 2015 and continues to focus on ensuring ample access to liquidity.

Noble also said its net asset value per share as at Dec 31, 2015 including the adjustments, with Noble Americas Energy Solutions carried at historic cost, remains in excess of 70 Singapore cents per share.

Noble said it will give further details when it releases its full year results after the market closes on Thursday.

Already pressured by plunging commodity prices, Noble shares have lost nearly 70 per cent over the past year after allegations by Iceberg Research, an anonymous group, that the company was inflating its assets by billions of dollars. Iceberg was later joined in its attack on Noble's accounting methods by US short seller Muddy Waters and several analysts. Noble rejected the claims and appointed consultant PricewaterhouseCoopers to undertake a review, that concluded that the company had complied with international accounting rules.

Noble shares were trading unchaged at 37 cents as of 11:11 am, after being down 2.7 per cent earlier.

In a call with analysts on Tuesday, chief executive Yusuf Alireza said Noble remained focused on ensuring it had ample funds, adding that it expects to deliver US$1 billion in further liquidity by March 2016, Reuters reported. In January, Standard & Poor's cut Noble's credit rating to junk, adding to concerns about financing costs for the company after a similar downgrade by Moody's Investors Service.

Later on Tuesday, Iceberg commented on Noble's profit warning: "This US$1.2 billion number is only a compromise that was found between the auditor and Noble Group two days before the annual results. The problem is much bigger than US$1.2 billion."

"Any commodity specialist will find the reasons given to justify the impairment absurd. Noble has just admitted their forward curves were far too aggressive 48 hours before they issue their annual results. Forward curves move every day. A company does not realise there is a problem 48 hours before the annual results," Iceberg said in an emailed statement.

Iceberg said it will issue its fourth report on Noble before its results are announced.