November 9, 2017 / 1:00 AM / a year ago

Noble flags weak outlook after $1.2 billion third-quarter loss, shrinking liquidity

SINGAPORE/HONG KONG (Reuters) - Commodities trader Noble Group (NOBG.SI) reported a third-quarter loss of $1.17 billion, hit by charges from disposals of some of its businesses, and warned that the operating environment remains challenging.

FILE PHOTO: A Noble Group sign is pictured at a meet-the-investors event in Singapore August 17, 2015. REUTERS/Edgar Su/File Photo

The Singapore-listed company, founded in 1986 by Richard Elman who rode a commodities bull run to subsequently build it into one of the world’s biggest traders, is shrinking to an Asian-centric company focused on coal trading, LNG and freight. It is slashing jobs and selling assets to cut debt after a crisis-wracked two years.

“The group continues to face significant credit constraints and availability under its uncommitted bank facilities saw a material decline over the nine months to 30 September 2017,” the embattled company said in its results statement on Thursday.

Noble said discussions were underway with the group’s banks to stabilize support for working capital and trade finance requirements.

Last month, Noble said it would get about $580 million for the sale of its Americas-focused oil trading business and smaller gas and power unit. It also flagged a total net loss of $1.1 billion to $1.25 billion for its third quarter.

Noble was plunged into crisis in February 2015 when Iceberg Research questioned its accounts, and then it was hit by a commodities downturn.

While the company has stood by its accounts, the crisis triggered a share price collapse, credit downgrades and writedowns, as well as fund-raising and management changes. Its market value has fallen to less than $300 million from $6 billion in February 2015.


Noble reported a net loss of $1.17 billion for July-September compared with a loss of $28 million a year earlier. Adjusted net loss from continuing operations was $93.8 million versus a profit of $11.5 million a year ago.

On Thursday, the company warned that it might have to report more losses.

“Further additional non-cash valuation adjustments may be recorded going forward following the execution of the actions determined under the strategic review, in particular with regard to further asset disposals,” it said.

The group’s net debt decreased by $112 million to $3.7 billion in the third quarter. But it has risen by $833 million in the year to date.

The focus now is on whether Noble has enough credit lines to run its businesses.

“We would look at the liquidity headroom which shrank in the last quarter. Also, we would like to see its operating cash flow and working capital situation,” Danny Huang, analyst at S&P Global which has a CCC-minus rating on Noble, said ahead of the results.

S&P said last month that Noble remained at risk of defaulting within the next six months.

Noble reported that its liquidity headroom fell to $800 million in the third quarter from $1.4 billion in the second quarter.

Noble’s 6.75 percent bond due 2020 US65504RAD6=TE fell 1.275 points on Thursday after the results to 39.275/40.35 cents on the dollar. It has a coupon coming up in January 2018. Noble’s shares have plunged 84 percent this year and closed at the lowest in 17 years on Thursday.

The company faces major debt repayments early next year amid concerns that its existing operations and resources are insufficient to service its debt.

Reporting by Umesh Desai and Anshuman Daga; Editing by Stephen Coates and Muralikumar Anantharaman

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