Noble to post loss on coal price collapse

Embattled commodities trader Noble Group is set to post its first full-year loss in nearly two decades because of the collapse in coal prices.

The firm issued a profit warning on Tuesday, saying it expects $1.2bn in asset impairment charges as coal prices remain at "lower levels for an extended period of time".

It also expects to book a loss from the sale of its agricultural unit.

Noble reports its annual results on Thursday.

"Long-end crude prices have fallen by almost 40% over a very short period of time," Noble, Asia's biggest commodities trader by volume, said in a statement.

"Crude, besides being the benchmark for the energy sector, is also a key driver of the cost curves for coal miners via their consumption of fuel. In addition, the Paris COP21 agreement raises the probability of future substitution away from coal."

"The combination of these factors, combined with a growing concern about weaker economic growth globally and especially in China has had a knock on effect on consensus estimates of future coal prices".

Noble, which buys and sells long-term contracts for raw materials like coal, iron ore and oil, relies on its energy division for most of the company's revenue.

But like industry rivals Glencore and Olam International, its been hard hit by the fall in commodity prices which has also eroded the value of their assets like storage facilities.

Coal prices are at near nine-year lows because of slowing demand from China and the global move towards cleaner sources of fuel.

Noble now estimates thermal coal contracts for 2020 and beyond to trade at $55 per tonne, which is below market consensus.

Last year, the company's debt rating was cut to junk by ratings agencies Moody's Investors Service and Standard & Poor's over concerns about its finances.

The Singapore-listed company has been trying to reassure investors since it was accused of misleading accounting and targeted by short sellers.

Noble's share price has lost 70% of its value since research firm Iceberg Research, which focuses heavily on Noble, alleged last year that it was inflating its assets.

Other companies, including GMT Research, have since come forward to criticise the trader's accounting practices.

Noble has rejected the allegations and denied any wrongdoing. An audit by consultants PricewaterhouseCoopers also found it had complied with international accounting rules.

Market sentiment

Noble said its cash balance was a record $1.95bn at the end of December. It also expects $1bn more in liquidity by March.

The Hong Kong-based company has more than $2bn worth of debt payments to make this year, but investors have questioned its ability to refinance debt.

Markets have been mostly negative on Noble's performance so far, with its stocks and bonds trading at depressed levels.

Noble shares were the worst performer on Singapore's benchmark Straits Times Index last year.

The cost of protecting the company's notes against non-payment for one year is also the highest in Asia, according to Bloomberg News and data provider CMA.

"The most interesting aspect of today's statement was that the company is likely cash flow generative in the fourth quarter," Nirgunan Tiruchelvam, director of research at Religare Capital Markets told the BBC.

"Investors are really focusing on the company's cash flow generation as a major yardstick of its viability."