Noble Will Target U.S. Agriculture Assets to Supply China

Noble Group CEO Yusuf Alireza
Yusuf Alireza, chief executive officer of Noble Group Ltd. Photographer: Jerome Favre/Bloomberg

Noble Group Ltd., Asia’s biggest publicly traded commodity supplier, will target agricultural assets in the U.S. as it seeks to meet demand from China and sees potential for deals across its units.

“It’s hard to be the supplier and partner of choice for China in the grain space, and especially in the corn space, without having significant origination assets in the U.S.,” CEO Yusuf Alireza said today in an interview with Susan Li on Bloomberg Television’s “First Up” program. “Over the medium term, that’s an investment we’re looking to make.”

Noble announced at least $2 billion of deals in the past three years as it built its sugar operations in Brazil and energy assets in the U.S. and Australia. The Hong Kong-based company last month said it was time to build the agriculture unit after shelving plans to sell shares in the business.

“We’re seeing a consolidation process in the agriculture sector and that’s going to arise very significant opportunities,” Alireza said today. Noble is considering different options including acquisitions and potential partnerships with U.S. companies, he said.

Profit Jump

Noble’s second-quarter profit rose 39 percent to $194.8 million as it posted record sales in its energy and metals units, the company said Aug. 13. Operating income from supply chain at its agriculture unit slumped 69 percent in the quarter as heavy rains delayed the sugar harvest in Brazil and on weak crushing margins for grains and oilseeds.

Agriculture, Noble’s second-biggest business by revenue, accounted for 17 percent of sales in the six months ended June 30, according to Bloomberg calculations. Energy is its biggest business, comprising nearly 70 percent of its sales.

Singapore-traded Noble declined 0.8 percent to S$1.255 as of 3:26 p.m. local time, while the benchmark Straits Times index was little changed. The stock is the best-performer in the index in the past month with a 15 percent gain.

“China is going to be the largest importer of corn over the next few years and we want to be in the position to help supply that,” Alireza said. The Asian nation was the world’s sixth-largest buyer of corn in 2011-12, according to the U.S. Department of Agriculture. The U.S. was the top corn producer, according to the USDA.

Tough Environment

There have been 293 announced agriculture deals in the past year, with a combined value $13.4 billion, including Glencore International Plc’s bid for grain handler Viterra Inc. for C$6.1 billion ($6.2 billion).

Noble will receive $800 million from asset sales in the next five months and will look at “interesting asset opportunities,” Alireza said.

“The environment is going to be a tough environment for the next 12 to 24 months,” he said. “One of things we’re making sure of is our balance sheet is strong and we’re in the position to build businesses in down markets and we see opportunities across all three of our platforms.”

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