Hot stock: Noble Group up, clarifies impairment charge process

SHARES of Noble gained on Thursday, with the commodity firm explaining its impairment charge processes in an announcement late on Wednesday.

The stock was up half a Singapore cent to S$1.005. It was among the most actively traded stock, with 4.5 million shares changing hands.

The announcement was in response to an article in The Business Times on March 2 that questioned the reason for a lack of profit warning from Noble. The article also went further to ask why Noble had said on Feb 16 that "there has been no material adverse change since the company last reported".

The company reported a shock US$240 million loss for the fourth quarter ended Dec 31, 2014, largely due to an unexpected US$438 million write-off, of which US$200 million was related to Australian-listed associate Yancoal.

Noble said that as at Feb 16, its statement was correct, as no recommendation or decision had been made or considered by the board on any impairment in respect of the company and its subsidiaries, then.

Noble said that it undertakes an impairment review every quarter of all long-term assets. "Important information" concerning Yancoal's production schedule, recent refinancing, licence approvals and cashflow models, from the latter's board was received a day after its announcement, or on Feb 17.

Noble said that it was only on Feb 24 that the models ran by it showed that the impairment of Yancoal should be between zero and US$200 million. This was presented to the Noble board on Feb 26, while Ernst & Young included the company's impairment assessment as part of their audit of the 2014 financial statements - which was concluded on the same day.

"The board, in consultation with management, made its decision on Feb 26, 2015 and adopted the most prudent assumptions, thereby establishing the impairment for Yancoal at US$200 million. This was then announced at close of business on Feb 26, 2015, when the final 2014 results of the company were published. The company's shares were in a trading halt on that day."