Noble Group flags first loss in two decades, blames coal price slide

SINGAPORE: Commodity trader Noble Group warned of its first full-year loss in nearly two decades, blaming US$1.2 billion of writedowns on a slide in coal prices - a move seen by analysts as a response to pressure to be more conservative in its accounting practices.

The Singapore-listed company, which has sought to reassure investors after an accounting dispute and as tumbling commodity markets battered its stocks and bonds, set its 2020 and beyond estimate for thermal coal contracts at US$55 per tonne - a level that it said was 14% below the average market consensus.

Australian spot cargo prices for thermal coal are currently trading around US$53.70 per tonne.

A bleak outlook for coal and many other commodities means that firms like Noble or Glencore not only face falling demand for many of the goods they trade, but also declining values for many assets they own, such as storage facilities or vessels.

"What's driving this is their decision to be more prudent in terms of fair value prices. One potential outcome is that it cleans up the balance sheet from the banks' perspective," said Conrad Werner, an analyst at Macquarie Equity Research.

Shares in the company have lost nearly 70% of their value over the past year after Iceberg Research alleged it was inflating its assets by billions of dollars. Noble rejected the claims and board-appointed consultants PricewaterhouseCoopers found it had complied with international accounting rules.

Iceberg Research on Tuesday criticised Noble's reasons for the impairments, saying it was absurd for the company to say that their forward curves were too aggressive 48 hours before it was due to post annual results.

Noble reports detailed earnings on Thursday. Prior to Wednesday's announcement, analysts had forecast the trader would make a net profit although projections had varied widely.

But Noble, one of the world's biggest traders of commodities from coal to iron ore to oil, stressed that it generated positive cash flow in the fourth quarter and that it expects to have US$1 billion in further liquidity by the end of March including proceeds from its sale of its stake in Noble Agri.

It also said that its cash balance stood at a record US$1.95 billion as of end December.

Noble's stock and bond investors have been concerned about the company's ability to refinance its debt. Both Standard & Poor's and Moody's Investors Service have cut their credit ratings for the company to junk.

It has about US$2.5 billion worth of debt due this year, according to Thomson Reuters LPC data. Noble's bonds and credit default swaps are trading at depressed levels, but Noble has blamed this on illiquid markets. - Reuters