Business

Noble shares plunge 32.4% to 15-year low


Noble Group shares crashed to their lowest point in 15 years as the ailing commodity trader reported a massive first quarter loss owing to disruptions in the coal market.

And the company may be a long way from returning to profitability, founder Richard Elman hinted as he stepped down from his post as chairman.

The turbulent day followed Noble's warning on Tuesday night that it may suffer a US$130 million (S$183 million) loss.

In the first trading session since then, investors wasted no time dumping Noble shares, which plunged 32.4 per cent to 87.5 cents on 103 million shares traded.

This was the lowest level since 2002.

Noble shares just completed a 10-to-one consolidation this week, which adjusted the share price upwards.

Prior to yesterday's plunge, the shares had been trading at above $1.20 this month.

The actual loss turned out to be US$129.3 million, Noble announced after the market closed, marking a shocking reversal from the US$40.5 million net profit a year earlier.

Even as revenue gained 10 per cent to US$12.6 billion, the earnings were severely affected by what the management called a "market dislocation and decoupling of key indices" in the coal market.

"From the volume viewpoint, everything looked normal in the first quarter. What was not normal is the changing relationship between the markets, for example the Chinese domestic market, and the price of Newcastle," co-chief executive William Randall told a briefing.

Noble used the Newcastle index as a reference to anchor its supply chain contract prices in advance, but Mr Randall said the first quarter saw abnormal divergence between the anchor prices and the domestic prices.

"This extreme movement hurt us, as we executed our supply contract," he said, adding that the Newcastle index can no longer be used as a hedging tool.

As a result, supply chain operating income dipped to just US$5.8 million, down 98 per cent from US$249.6 million a year earlier.

The staggering loss came after Noble issued the US$750 million notes in March, but there was no mention of the coal market issues then and during the special general meeting in late April seeking the approval for the share consolidation.

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