Photographer: Nicky Loh/Bloomberg

Noble Group Results Reveal That Trader's Troubles Are Worsening

Updated on
  • Hong Kong company’s quarterly figures confirm another loss
  • Unit sale to Vitol in focus as chairman sees further disposals

For more than two years, the story of whether Noble Group Ltd. will survive or implode has gripped the global commodities industry. On Thursday, the Hong Kong-based trader turned in quarterly results that showed conditions are getting even tougher.

Noble Group confirmed a loss of $1.17 billion in the period, and reported cash available and liquidity headroom have shrunk. The company founded decades ago by Richard Elman is downsizing, and recently agreed to offload its oil unit to Vitol Group. More sales may follow, according to Chairman Paul Brough.

As investors digested the latest developments, with the Singapore-listed shares facing renewed pressure on Friday, here are some of the key takeaways:

Cash Available

Noble Group’s usable cash -- total cash and cash equivalents less the amount restricted with brokers -- plunged by more than half to $262 million in the third quarter, excluding cash at subsidiaries classified as held for sale, according to Bloomberg calculations based on the results. The company said it faced a challenging operating environment as constraints placed on finance lines impacted trading and its capacity to generate earnings.

Liquidity Headroom

Noble Group’s liquidity headroom gives an indication of how much spare capital it has available to fund its business. The figure slumped to $800 million at the end of September from $1.4 billion three months earlier.

Net Debt

Even with the sale to Vitol and an earlier gas-unit disposal, which should help pay down two facilities, the trader still faces a battle to service its loans and bonds. While net debt eased slightly to $3.71 billion in the third quarter from end-June, it’s still $833 million higher than at the end of last year. BNP Paribas SA, Nomura Holdings Inc., and JPMorgan Chase & Co. have all predicted Noble Group will be forced to restructure its debt.

Supply Chain Income

Apart from an alumina refinery in Jamaica and some assets in Mexico, Noble Group’s now left with a largely Asian portfolio as a trader of coal, iron and freight. While Brough again promised further disposals in remarks to analysts, there remains doubt the rump business can manage to service debt obligations and engineer a turnaround. For the third quarter, Noble Group posted an operating loss from supply chains of $6.6 million.

How Much?

Citing “live and ongoing” discussions with lenders and others, Chief Financial Officer Paul Jackaman has largely steered clear of queries on the sale of Noble Americas Corp. to Vitol given sums parked in escrow and clauses that need to be worked out. In the October announcement, the company lumped the proceeds from that sale with an earlier gas-and-power unit disposal for an estimated total consideration of $582 million. On Thursday, Jackaman said he sees cash proceeds from the two disposals at $560 million to $570 million.

Off the Job

At its peak Noble Group employed 15,000 people. In the spiral lower, it’s slashed staffing as it shrinks to survive. Senior departures in recent months included the treasurer, head of market risk, and head of Asia treasury and trade finance. The company has said that after the oil-unit sale, headcount is expected to drop to about 400 from 1,050 at the start of the year.

— With assistance by Lianting Tu

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