Noble back in the black with full-year profit of US$8.7m
An improvement in gross profit margins, much lower
impairment charges and gains from the disposal of Noble Americas Energy
Solutions (NAES) helped the group to post a net profit of US$8.7 million, a
reversal from its net loss of US$1.67 billion in 2015.
Comments
Andrea Soh
28 February 2017
Noble Group said it is positioned to resume business as usual in 2017, after returning to the black for its full year 2016 results.
An improvement in gross profit margins, much lower impairment charges and gains from the disposal of Noble Americas Energy Solutions (NAES) helped the group to post a net profit of US$8.7 million, a reversal from its net loss of US$1.67 billion in 2015.
Noble's loss per share, after factoring in capital securities dividend, narrowed to 0.14 US cent, from 17.87 US cents in 2015.
For the 12 months ended Dec 31, revenue dropped to US$45.5 billion from US$60.7 billion in the year-ago period. The decrease in revenue was due partly to the group's constrained liquidity.
"With all the steps that we took in 2016 around repositioning and realigning the business, we have positioned ourselves very well to start taking the benefits through 2017," said its chief financial officer Paul Jackaman in an earnings call. "Beyond the first half of 2017 you will see the business start to get back to more of an even keel."
Earnings in 2016 had been been constrained by its conservative approach to liquidity management, as businesses had to operate below their optimal capacity, said Noble.
This, in particular, took its toll on the energy segment, whose profit before interest and tax (PBIT), after adjusting for discontinued businesses and exceptional non-cash items, fell to US$91 million in 2016, from US$670 million the year before. The energy segment comprises its oil liquids and energy coal businesses.
Its mining and metals segment, meanwhile, turned around to record an adjusted PBIT of US$87 million, from a loss of US$212 million in 2015. The metals business has been restructured to focus on base metals in Asia, and aluminium globally.
The gas and power segment posted PBIT of US$419 million, after including the US$291 million gain from the sale of NAES, up from US$247 million in 2015.
After seeing a large fall in trade payables following the tightening of its bank lines in the first quarter of 2016, working capital levels have largely stabilised, said Noble. With the rights issue conducted last year, it now has a balance sheet that is 84 per cent funded by equity and long term debt, compared to 73 per cent as at end-2015.
The group said it has cash and unutilised committed facilities of US$2 billion as at end-2016, which will cover its bank debt of US$1.3 billion due this year.
Going forward, additional cost reduction efforts in the first half of 2017 will "underpin future profitability", said Noble.
The group had already cut headcount from about 1,500 at the beginning of 2016 to 1,050 by the end of last year. This will be further reduced by 15 per cent by the middle of this year, said Mr Jackaman. The group, which recorded US$599 million in selling, operating and administrative expenses in 2016, aims to reduce this to US$450 million by 2018-2019.
It had earlier, in the third quarter of 2016, also stated its targets of reaching US$1 billion in operating income, and US$550 million in earnings before interest and taxes (Ebit) from supply chains during that period.
On Monday, it further outlined the estimated split of earnings across its business segments from 2018-2019.
Oil liquids is expected to remain the main business, at 40-50 per cent, while hard commodities will contribute 30-40 per cent and gas and power, 10-20 per cent, it said.
Noble shares rose 2.2 per cent to 23 Singapore cents on Mon before the results announcement. It had fallen 16.7 per cent on Fri, following a negative report from Iceberg Research that questioned the market optimism about a strategic investment by China state-owned enterprise Sinochem.