Bloomberg News

Noble Profit Declines as Agriculture, Metal and Mineral Margins Shrink

February 28, 2012

Noble Group Ltd. (NOBL), Asia’s biggest listed commodities trader by sales, reported a 57 percent drop in fourth-quarter profit, in line with analyst estimates, as margins in agriculture, metals and minerals narrowed.

Net income fell to $105.7 million in the three months ended Dec. 31 from $247.5 million a year earlier, the Singapore-listed company said today in a statement. That compares with the $105.8 million average of eight analyst estimates compiled by Bloomberg. Sales rose 15 percent to $20.1 billion.

Noble follows Glencore International Plc (GLEN) and Archer Daniels Midland Co. (ADM) in posting weaker earnings as volatile markets eroded trading profits and demand for commodities including sugar eased. The Hong Kong-based supplier of energy, food and mining products reported its first quarterly loss in about 14 years in November and its chief executive officer resigned.

“As long as commodity prices are not as volatile as last year, it’ll be less challenging than 2011,” said Eugene Ng, a Singapore-based analyst at UOB-Kay Hian Holdings Ltd.

Noble’s agriculture division posted a drop in operating income margin to 2.78 percent in the fourth quarter from 10.85 percent a year earlier. The metals, minerals and ores segment reported a margin of 0.73 percent compared with 2.23 percent.

Full-year profit fell 29 percent to $431 million, according to the earnings statement. That compares with the $432 million average estimate of 20 analysts compiled by Bloomberg.

Agriculture Business

The stock rose 0.4 percent to S$1.375 in Singapore trading, before the profit announcement. Noble has slumped 33 percent in the past year, compared with the 1.4 percent decline in the benchmark Straits Times Index.

Crush margins for grains and oilseeds were generally weak, and in some cases negative, throughout the year, even as the division posted record revenue and volumes in the final quarter, according to the statement.

The sugar division also reported a quarterly record for revenue and volumes even as prices were volatile, helped by the integration of two newly acquired mills in Brazil, Noble said.

Raw-sugar futures slumped 27 percent in 2011, the most in a decade. Olam International Ltd. (OLAM), a rival to Noble, said output of the sweetener may be in surplus again next season, depressing prices further.

Price Volatility

The trading environment in the company’s aluminum division was “challenging” in the quarter, as price volatility continued to erode margins, Noble said. Swings were also seen in iron ore prices, according to the statement.

Noble will remain “active” in the aluminum business, Chairman Richard Elman said today on a conference call.

Cotton prices stabilized in the fourth quarter after the “unprecedented” volatility in the earlier months, Noble said.

Prices of cotton plunged 37 percent in 2011, the most among 24 commodities tracked by the Standard & Poor’s GSCI Index, as debt crises in Europe and the U.S. slowed economic growth, and textile makers in China canceled purchases.

Ricardo Leiman quit as CEO in November following the company’s announcement of the $17.5 million loss in the third quarter. Noble, founded by Elman, named Yusuf Alireza, the former Asia-Pacific co-president of Goldman Sachs Group Inc., as its new chief executive officer starting April 16.

“We expect things to pick up by mid of the year, with the new CEO in place and the new heads of division,” Carey Wong, a Singapore-based analyst at OCBC Investment Research Ltd., said before the earnings announcement.

The company last month named Jose Luiz Glaser, who joined from Cargill Inc. in August, as chief executive officer of its agriculture business, the biggest division after energy. Noble Agri Ltd. accounted for about 26 percent of sales as of Sept. 30.

Noble is planning to list its agricultural assets separately on the Singapore Stock Exchange, the company said in October. It aims to raise about $700 million through the spin- off, two people with knowledge of the matter said in November.

“No decision has been made as of this moment,” Elman said today.

Energy Division

Demand for coal buoyed earnings at Noble’s energy division, which accounted for 67 percent of sales in the quarter, according to the statement. Unit Gloucester Coal Ltd. (GCL) said sales in the second quarter ended Dec. 31 doubled.

Noble, which owns 64.5 percent of Gloucester, agreed to sell part of its stake in the Australian coal miner to Yanzhou Coal Mining Co. in December. Noble will retain about 13.7 percent of the merged entity and receive A$420 million ($452 million) in cash, it said.

Noble aims to spend $900 million on capital expenses over the next three years following the Gloucester deal, Chief Financial Officer Robert Van Der Zalm said on the call.

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

To contact the editor responsible for this story: Rebecca Keenan at rkeenan5@bloomberg.net.


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