Noble working to address stakeholders' concerns
Noble Group boss Yusuf Alireza has defended the firm's recent share buybacks and vowed it will not dance to the tune of short sellers.
The chief executive told The Straits Times in an exclusive interview that the bout of buybacks over the recent months was aimed at bolstering shareholder value.
He said: "When we started our buyback, our shares were trading at 0.7 time its book value, which put our market cap at US$3.5 billion (S$4.7 billion).
"How can that be when Noble just sold 51 per cent of our agricultural business last year at a valuation of just under US$3 billion, not to mention its businesses in oil gas and metal?
"It's the management and board's responsibility to deliver shareholder value. Sometimes that means investing in your own shares. It's not like we don't have the cash either, after the spinoff of our agri-business, and our balance sheet is at its most deleveraged in the company's history."
He added that the buybacks do not mean that Noble will not deploy cash to expand the business or pay out as dividends.
Since June 12, Noble has announced nine rounds of share buybacks, read by many market watchers as a move to sustain its free-falling share price amid aggressive short-selling.
It has spent around $75 million on this exercise, an amount which is less than 15 per cent of the total trading volume during that time, Mr Alireza noted. "It's not about directing our share price, which we want to be reflected solely on how our company performs. That's what I'm focusing on."
Noble, which has shareholder approval to acquire up to 10 per cent of its issued shares, has bought back only around 2 per cent. The management has a "clear target" for the total volume of the buybacks, but Mr Alireza declined to give specifics.
The buybacks came amid a period of volatility sparked by a series of reports from Iceberg Research accusing Noble of dodgy accounting and governance practices.
Mr Alireza and company founder Richard Elman have fought back, launching a lawsuit against Mr Arnaud Vagner, the person allegedly behind Iceberg, and making additional financial reporting in its first-quarter results, but they have failed to fully silence the critics.
And last month, former Morgan Stanley banker Michael Dee released an open letter that questioned the ethics and competence of Noble's management. He also called for Mr Elman to resign.
In what appears to be the latest move to fix public perception of the company, an independent Noble board committee last week appointed PwC to conduct a review of its term contracts, valuations and the relevant corporate governance framework.
"In the past four months or so, we've been hard at work engaging our key partners and stakeholders - such as our investors, customers, banks and employees - to address concerns and maintain their support," said Mr Alireza.
"I think we've succeeded - the banks were comfortable enough to give us $2.3 billion in financing at the lowest spread in Noble's history; our top 13 shareholders also own a larger percentage of the company now.
"Having done that, we are now in the second stage of our strategy, which is to address the continued noise in the market. People have said they don't trust the management, or the board, or our auditor Ernst & Young."
But he noted that Noble is so confident in its balance that it is now bringing in a second Big Four accounting firm in PwC to provide further assurance.
When the review is completed - which will likely take several weeks - the independent board committee will report the findings to Noble's board for approval and adoption. A summary of the report will be released, Mr Alireza said.
But despite the review, Noble has no plan to replace its auditor E&Y, he added.
Meanwhile, to reflect its efforts in improving corporate governance, Noble also announced yesterday that it has appointed prominent legal expert David Yeow as an independent non-executive director on its board.
And even as Noble grapples with the drama on the market, the global commodity downturn remains a key focus.
"At the end of the day, we don't control the commodity environment," he noted.
"What we can control is that we perform better than our competitors. We entered this year expecting an opportunity-rich environment, and I still feel the same way because of our partnerships with Cofco, X2 and EIG."
This refers to Noble's joint ventures in the agricultural, mining and energy sectors.
And he believes the turbulent market conditions prove that Noble's asset-light business model - which has seen the company sell or spin off its capital-intensive assets to focus on just commodity trading - is the right decision.
"We don't have to be worried about exposure to coal prices if we're not a coal producer. Noble is a trader that focuses on moving commodity from point A to B; that's the core of our business model, and the volume on this front has continued to grow despite changes in commodity consumption cycle."
Noble will look at growth opportunities such as China's emergence as the world's leading importer of consumption commodities even as industrial commodities are losing traction there. And India, with a new government and a new development paradigm, will present a new growth market for the company, he added.
