Hot stock: Noble Group slumps after profit tumbles with commodity prices

[SINGAPORE] Noble Group Ltd tumbled in Singapore on Friday after the commodity trader reported a slump in quarterly profit and investors shunned equities linked to raw materials amid a rout in prices.

The shares lost as much as 9 per cent to 45.5 Singapore cents, the lowest level since Oct 9, and traded at 46 cents at 9.04am local time. The stock is this year's worst performer on the Straits Times Index, down 60 per cent.

Raw materials from copper to iron ore are in retreat as growth in China slows, spurring surpluses, at the same time that the dollar's ascendancy hurts commodity prices.

Chief Executive Officer Yusuf Alireza said that the group, which has been fending off criticism of its accounting, plans to raise at least US$500 million through asset disposals or from a strategic investor, and also reported a return to positive cash flow.

"It has been a supply-driven bear market in most of the commodities that we've been involved in," Mr Alireza said. "And it's not obvious that anything has really changed besides the fact that prices are lower."

Several transactions are under discussion, according to Mr Alireza. He didn't offer a timetable, although Noble's next critical financial commitment is to refinance several credit lines that mature in May. The fundraising plan is linked to Noble retaining its investment-grade status.

NET INCOME

Net income fell 84 per cent to US$24.7 million in the three months to Sept 30 from a year earlier as sales dropped 20 per cent to US$18.7 billion, Noble said in a statement on Thursday after the market closed.

While margins rose and tonnages handled were a record, losses widened at its mining and metals unit and from joint ventures and associates, notably Noble Agri Ltd.

Noble also said that Chief Financial Officer Robert van der Zalm stepped down for health-related reasons. He'll take on the London-based role of vice chairman of finance and will be replaced on an acting basis by Asia CFO Paul Jackaman.

MUDDY WATERS

Mr Alireza has parried attacks this year from a group called Iceberg Research and short-seller Muddy Waters LLC on its accounting practices. In August, Noble published a report by PricewaterhouseCoopers LLP saying its accounting complied with international rules.

Noble also organised an investor meeting at which it set a target to raise operating profit.

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.

Noble Group asked deal maker Michael Klein back in August to review options for the trader, including selling a stake in the company.

Mr Klein, a former investment banking chairman at Citigroup Inc who founded his own M&A firm, brokered the talks between the bosses of Glencore and Xstrata Plc that led to the takeover of the mining group by the commodity trader in 2013.

BLOOMBERG