NOBLE Group's net profit in 2014 fell 46 per cent to US$132 million, despite a rise in revenue, as its losses on supply chain assets soared.
The largest commodities trader in Asia by sales saw revenue grow 4
per cent to US$85.8 billion, on volume growth from 187.2 million tonnes
to 215 million tonnes.
But losses on supply chain assets rose six-fold to US$290.1 million, from US$46.2 million a year ago.
The group said that it had written off US$438 million for the year,
including US$200 million for Yancoal, the valuation for which has been
criticised by research firm Iceberg Research.
The research firm had questioned Noble's accounting treatment of
certain subsidiaries and said that the group overstated the value of
Yancoal by US$603 million
Noble Group declared a dividend of US$0.007 for each share, compared with US$0.0091 in 2013.
Noble Group, which has halted trading of its shares after a second
report by Iceberg, is expected to provide further details of its
rebuttal against the research firm in a conference call later on
NOBLE Group has fingered a former employee as the person
behind Iceberg Research, as it reported on Thursday its first quarterly
loss in three years due to a heavy impairment charge on an associate.
The author of the research reports is a "disgruntled" former
employee that the group fired 11/2 years ago, Noble chief executive
Yusuf Alireza revealed in a briefing call.
"We have a high degree of confidence we know who it is," he
said. The company has handed the information over to the regulators and
does not intend to take any legal action against the person.
"We don't plan to spend any management time on it or
shareholders' resources on it... Our stakeholders will judge us not by
an anonymous blogger but by our results, and that's what we want to
The largest commodities trader in Asia by revenue posted a
net quarterly loss of US$240 million - its first since September 2011,
against a net profit of US$117 million a year ago. For the three months
ended Dec 31, revenue dropped 14 per cent to US$21 billion.
For the full year, net profit almost halved to US$132
million, missing by far the average estimate of US$470.6 million by 13
analysts, according to Bloomberg data. Revenue was 4 per cent higher at
Notwithstanding these, "2014 was a landmark year for us",
said Mr Alireza, pointing to how the sale of Noble Agri had freed up its
balance sheet, and "breakthroughs" in performance and market
penetration, in particular by its oil liquids and power businesses in
The group said that it had written off US$438 million for
the year, including a US$200 million charge for Yancoal Australia, the
valuation for which had been criticised by Iceberg Research.
The little-known research firm had earlier questioned
Noble's accounting treatment of certain subsidiaries and said that the
group overstated the value of Yancoal - the Australia-listed coal miner
in which Noble has a 13 per cent stake - by US$603 million.
Noble, however, said that its latest results had not been
affected "in any way" by the Iceberg report. The group reviews the value
of its associates and investments on a quarterly basis, and on a more
detailed level annually.
It arrived at the value for Yancoal based on a cash flow
model that has been verified by both internal control functions and its
auditor EY, and used conservative assumptions around input variables
such as production levels, fuel inputs and coal prices.
The model provides for a range of values, and "we have
impaired Yancoal right below the bottom of that range", said Mr Alireza,
who also called Iceberg's suggestion of using the market capitalisation
of Yancoal as its value "naive".
Both its board and auditor are comfortable with the adjustments in value, he added.
Noble's shares have fallen 12 per cent since Iceberg
published its first report on Feb 15. Its website does not provide any
contact details nor other identifying information.
In its second report on Thursday, Iceberg pointed to a
"divergence" between Noble's net profit and operating cash flow as a
result of Noble overstating the fair value of its long-term contracts.
Noble has a practice of booking the entire profit for
long-term unrealised contracts the same day they are signed, said
Iceberg. It also suggested that Noble had manipulated projections for
forward prices and tonnage to inflate the fair values of these
contracts. "These contracts surged from near zero in 2009 to an
unprecedented net US$3.8 billion," it said in a 28-page report released
before Noble announced its results.
Impairing these values would
"dramatically impact" Noble's financial performance.
Iceberg further accused Noble of stretching accounting rules
"to the maximum", though it said that there was no outright accounting
Noble rejected these claims of inflated unrealised contract
values as "factually incorrect". Iceberg had ignored the fair value of
inventory, and the effect of short-term rolling hedging versus the
long-term physical contracts, it said.
The group has a consistent mark to market - or the practice
in measuring the fair value of its contracts - policy, Mr Alireza
emphasised. "This is our core business."
As part of the asset-light strategy that the group is
pursuing, its business model relies on the group's ability to manage
market, credit and operational risks for buyers and sellers. The group
manages 12,000 contracts with a weighted average duration of five years.
These are marked to market in order to provide profit and
loss figures daily, said Mr Alireza. "It's a function of risk
Iceberg Research is expected to release a third report that
will focus on Noble's debt levels and its investment grade credit
rating. Noble's shares, which were suspended on Thursday morning
following the second attack by Iceberg, will resume trading on Friday.
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