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Noble First-Quarter Profit Slumps 62% on Agricultural Unit

May 14 (Bloomberg) -- Noble Group Ltd., Asia’s largest publicly traded commodity supplier by sales, said first-quarter profit plunged 62 percent, weighed down by a loss at its agricultural unit.

Net income was $41.3 million in the three months ended March 31, from $110.1 million a year earlier, the Hong Kong-based company said today in a statement. Sales slid 1 percent to $22.6 billion.

The company reported a loss of $66.6 million from supply chains in the quarter at its agricultural business and said it had cut expenses and finance costs in the period. When asked on a conference call on Feb. 28 about earnings drivers for the coming six to 12 months, Chief Executive Officer Yusuf Alireza said one of the drivers of the company’s performance “going forward” would be a recovery at its agricultural unit and potential growth opportunities across all its businesses.

The loss in the agriculture unit was a surprise, said James Koh, an analyst at Maybank Kim Eng Holdings Ltd. in Singapore. “They need to start showing a bit more consistency,” he said.

Shares advanced 0.2 percent to S$1.115 at the close in Singapore. The earnings were announced after the end of trading. The stock is down 3.5 percent this year, compared with the 8.4 percent increase in the benchmark Straits Times index.

“We continue to execute on our strategy, moving to an asset-light model and strengthening our balance sheet while selectively investing to build future origination volumes across our diversified product platforms,” Alireza said in a separate statement today. “In a difficult market environment, our efforts to control costs and focus on core business competencies are starting to have an impact.”

Energy Sales

Revenue from its agricultural unit dropped 12 percent, the company said today. Sales at its energy unit, its biggest, also declined 10 percent to $14.6 billion while revenue at its metals business surged 60 percent to $4.7 billion in the quarter from a year earlier.

“Noble continues to build out its sugar milling capacity in line with earlier guidance, while we expect our agricultural segment to gain momentum as we move into the main harvest periods,” Alireza said today.

Noble is committed to being “light” on asset ownership, he said in February. The company, which also said that month it will sell a stake in its palm unit to Wilmar International Ltd., continues to review asset-sale opportunities, Chief Financial Officer Robert Van Der Zalm said in February.

“We have been shedding some businesses that lacked critical mass, while re-balancing the group towards an asset light business model, which will be best suited to an environment” where smaller producers of commodities are starved of capital, Chairman Richard Elman said in a statement today.

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

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