Noble Group says profit slumps 84% amid 'tough' environment

[SINGAPORE] Noble Group Ltd, the commodity trader battling criticism of its accounting methods, a share-price slump and lower raw-materials prices, said that third-quarter profit slumped 84 per cent as markets remained difficult and its metals business and joint ventures reported wider losses.

Net income fell to US$24.7 million in the three months to Sept 30 from US$153.9 million a year earlier, the Hong Kong-based trader said in a statement on Thursday. Sales dropped 20 per cent to US$18.7 billion, Noble said. Tonnages handled were a record, margins rose and the company said that cash flow from operations turned positive in the quarter.

Executives led by chief executive officer Yusuf Alireza have parried attacks from a group calling itself Iceberg Research and short-seller Muddy Waters LLC that Noble's accounts lack transparency. The company has sought to cut debt, focus on its most profitable businesses and generate positive cash flow to restore investors' confidence. While the Singapore-listed stock remains this year's worst performer on the Straits Times Index as slumping commodity prices put off some investors, the shares rebounded last month.

"We are spending an increasing amount of time ensuring that we run our existing businesses as profitably as possible," Mr Alireza said in a statement.

"While the operating environment has been tough, and even more unpredictable than usual, it is this very change and uncertainty that has enabled us to re- position the business."

The shares lost 2.9 per cent to 50 Singapore cents on Thursday before the results statement. Noble rose 22 per cent last month, the most since May 2008, as the company got fresh funding. The stock is 56 per cent lower this year.

The mining and metals unit had a loss of US$72.1 million in the quarter from a loss of US$65.2 million in the same period a year earlier, according to the company, which said its share of losses from joint ventures and associates was US$65.7 million from US$20.2 million. Profit from the energy business rose to US$143.4 million from US$27.8 million from a year earlier.

"We achieved the group's target of generating positive cash flow from operations early, generating US$318 million in positive cash flow from operations in the quarter," it said.

Iceberg, a previously unknown group whose members are anonymous, has said Noble uses aggressive interpretations of accounting rules to inflate the value of assets and contracts. The company repeatedly denied the allegations, and Mr Alireza said last month he should have been more forceful in pushing the trader to boost transparency.

In August, Noble published a report by PricewaterhouseCoopers LLP saying its accounting practices complied with international rules in valuing long-term contracts. It also organized an investor meeting in August at which Noble set a target to raise operating profit to more than US$2 billion in three to five years.

The Bloomberg Commodity Index collapsed 29 per cent in the past year and fell to a 16-year low on Wednesday as the slowdown in China's economy cut demand from the biggest user of metals to grains and compounded surpluses.

BLOOMBERG