SINGAPORE/HONG KONG: Noble Group’s stocks and bonds plunged for a second straight day on Friday and have now lost half their value this week, as an unexpected quarterly loss stokes concerns about the commodity trader’s financial strength.
Noble has struggled to repair investor confidence after setbacks in the past two years that included a questioning of its accounts by Iceberg Research and a commodities downturn that triggered a share price collapse, credit rating downgrades and a series of writedowns, asset sales and fund raising.
“The trading loss raises questions about the ability of remaining businesses to deliver results on a consistent basis,” said Rick Mattila of MUFG Securities. Noble declined to comment on market worries. In its results call on Thursday, it defended its ability to pay debt and manage liquidity.
“The group continues to be in discussions with its banks to ensure that the group’s facilities provide the liquidity required to support the structure of the group’s businesses going forward,” Noble CFO Paul Jackaman said on Thursday.
He said that for the remainder of 2017, Noble was still working on its key initiatives of improving profitability, reducing costs and maintaining a solid balance sheet. The company’s net debt to capital stood at 46 per cent as of March 31, in line with the group’s stated target of 45 to 50 per cent.
Analysts remained worried about the performance of Noble’s existing businesses and its debt position.
“Noble Group posted a loss in its core business and we question if the remaining business lines support the company’s $3.3 billion of net debt now that the lucrative US gas and power business has been sold and oil market volatility has died down,” Andy DeVries, an analyst at CreditSights, said in a report.
The slide in Noble’s shares began after Noble reported a surprise quarterly loss of $129.3 million for January-March. Noble’s market value has shrunk to a low of about $576 million from $6 billion in February 2015. “The decline in working capital facilities and the drop in payables were the main reason for the negative operating cash flows and reflects concerns over its liquidity and operations,” said Chris Park, an analyst at Moody’s Investors Service.
The shares fell 30 per cent on Friday to a low of S$0.61, their weakest level since early 2002, after sliding as much as 33 per cent a day ago in its biggest decline. — Reuters
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