Noble Group's Shares Plunge, Elman Steps Down

 

Noble Group Ltd reported a quarterly loss that pummelled its shares by a record 33 percent, stoking worries the Singapore-listed commodity trader was failing to recover from a crisis-wracked two years despite a deep restructuring.

 

As previously flagged, founder Richard Elman, 77, said on Thursday he was stepping down as executive chairman to take on a non-executive board role as chairman emeritus. Board member Paul Brough, a former senior partner at KPMG, becomes executive chairman with immediate effect, and would lead a strategic review.

 

Elman, who founded the company in 1986 and took advantage of a commodities bull run to build it into one of the world's biggest traders, said it was time for him to pass on the baton as Noble's "lower-cost and much more focused platforms have started to take shape."

 

"We have told people repeatedly, and I repeat it here, that this undertaking will not be some superficial overnight Botox fill-and-smile. Rather it will be a long, hard slog with ups and downs along the way, until we regain profitability, a goal that we are most likely to achieve in FY 2018/19," Elman said.

 

The loss deals a blow to its efforts to rebuild investor confidence after setbacks that have included a questioning of its accounts by Iceberg Research and a commodities downturn that triggered a share price collapse, credit rating downgrades as well as a series of writedowns, asset sales and fund raising.

 

Noble issued a profit warning on Tuesday, citing a "dislocation in coal markets". It reported a loss of $129.3 million for January-March versus a profit of $40.5 million a year ago.

 

"The two concerns at this stage are liquidity and profitability. They addressed the liquidity issue to some extent last year with the sale of its North American unit and the rights issue and this year with its bond sale," Danny Huang, credit analyst at S&P Global Ratings, said ahead of the results.

 

"It is largely the profitability that they need to address, liquidity is a lesser concern. We also need to see improvements in the operating cash flows."

 

SHRINKING MARKET VALUE

 

Noble's market value has shrunk to about $820 million from about $6 billion in February 2015.

 

During its results call, Noble was repeatedly asked by analysts on its liquidity and debt levels, but company executives downplayed any concerns.

 

"The group continues to be in discussions with banks on a broader financing strategy to ensure that the facilities provide the liquidity required and support the structure of Noble's business going forward," it said.

 

Noble's CFO Paul Jackaman told analysts the firm was still holding conversations with strategic investors but he declined to comment on Sinochem.

 

Reuters reported in February that Noble was in talks with China's state-owned Sinochem for an equity investment. Noble subsequently said it was holding talks on a possible strategic investment, but did not name the company.

 

Noble said its net debt to capital stood at 46 percent as of March 31, in line with the group's stated leverage target of between 45 and 50 percent.

 

Noble, which has stood by its accounts, appointed two new co-CEOs last year after its CEO quit. But its shares have crashed by around 90 percent from mid-February 2015 when Iceberg first issued its report.

 

"The dislocation in coal markets, and the very thin trading liquidity witnessed in the respective hedging instruments, was detrimental to the short term – 12 week - outturn," the Hong Kong-headquartered company said.

 

Noble's shares fell as much as 33 percent to S$0.865, the lowest since December 2002. The company undertook a 10 for 1 share consolidation last month to avoid penny stock status.

 

The net loss was Noble's weakest result in more than two years, excluding the October-December quarter in 2015 when it took a writedown of over a billion dollars.