Noble Sees Earnings Buoyed by Agriculture Recovery

(Corrects timeframe in the first paragraph and CEO comment in the fourth in story originally published on March 1.)

Noble Group Ltd. (NOBL), Asia’s biggest commodity trader by sales, said future earnings will be driven in part by a recovery at its agricultural business after reporting a 14 percent decline in fourth-quarter profit.

Net income fell to $91.2 million from $105.7 million a year earlier, Hong Kong-based Noble said yesterday in a statement. That met the $91 million average estimate of five analysts surveyed by Bloomberg. Sales rose 21 percent to $24.3 billion.

Revenue at the agricultural unit, Noble’s largest after energy, slumped for a third straight quarter amid a drought in Argentina and poor oilseed crushing conditions in China. Noble is betting that almost $500 million of investment to expand the unit over two years will revive the business and boost earnings.

“In terms of the drivers of the performance going forward, clearly one of them will be the recovery of the performance of our agriculture business from what has been the worst year in recent history for us,” Chief Executive Officer Yusuf Alireza said yesterday on a conference call. Potential growth opportunities across all its units will also contribute, he said.

The stock lost 0.8 percent to S$1.175 at 9:48 a.m. in Singapore. The shares have advanced 1.7 percent this year, compared with a 3.2 percent increase in the benchmark Straits Times index.

Difficult Year

“The grains and oilseeds division experienced a very difficult year,” the company said, as operating income from its agriculture supply chain plunged 90 percent in the quarter. “2013 should benefit from a strong crop outlook in our key origination centers in South America.”

Crops including wheat, South America’s biggest, were hurt last year as Argentine growers experienced the first inland dust bowl in 85 years, as well as heavy coastal rains. Argentina is also the world’s third-largest shipper of soybeans and the second-biggest exporter of corn.

Noble, which owns oilseed-processing plants in Argentina and China, expects to start three new facilities in Brazil, Ukraine and South Africa this year, bringing total annual capacity to 10 million metric tons, it said yesterday.

“We are unlikely to see strong evidence of any agri turnaround” until second quarter this year, Macquarie Group Ltd.’s analysts Conrad Werner and Sam Chan said in a report. “The agri division is only likely to be truly firing on all cylinders in second half when the next Brazilian sugar harvest also comes through for processing.”

Record Revenue

Full-year profit increased 9 percent to $471 million, missing the $529.5 million average estimate of 13 analysts. Revenue jumped 16 percent to a record $94 billion, while volumes of all the company’s products reached a record 224 million tons.

Noble has divested assets to bolster its balance sheet, and generated enough cash from such sales last year to match investment spending for the first time, Chief Financial Officer Robert Van Der Zalm said yesterday. The company, which said Feb. 22 it will sell a stake in its palm unit to Wilmar International Ltd. (WIL), continues to review asset-sale opportunities, he said.

Noble is committed to being “light” on asset ownership, Alireza said. “A significantly asset-heavy strategy would put us in conflict with our producers and consumers, and we don’t want to find ourselves in that position.”

To contact the reporter on this story: Michelle Yun in Hong Kong at myun11@bloomberg.net

To contact the editor responsible for this story: Jason Rogers at jrogers73@bloomberg.net