Noble Group to post loss on coal price collapse

Commodities trader Noble Group (SGX:N21) warned Tuesday it would post a net loss in the fourth quarter and for the full-year 2015, after issuing a surprise $1.2 billion write-down from adjustments as commodities prices continued to tank.

Noble, Asia’s biggest commodities trader by volume, attributed the massive hit to the recent climate-change agreement struck in Paris, which bodes ill for coal use, and the fall in oil prices, which act as a barometer for the energy industry.

“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,” the firm said in a statement, only two days before its scheduled annual results release.

Noble said the write-down was in addition to one it would book on the sale of its remaining stake in an agricultural joint venture to China’s state-backed grain trader Cofco. However, it also said expected to report positive cash flow for the second consecutive quarter.

The Singapore-listed company set its 2020 and beyond estimate for thermal coal contracts at $55 per tonne — a level that it said was 14% below the average market consensus. The World Bank forecasts Australian thermal coal at $58.10 a ton for that year, according to projections made in January.

Coal prices are at near nine-year lows because of slowing demand from China and the global move towards cleaner sources of fuel. The fossil fuel is a pillar of the trader’s energy unit, which accounted for 85% of revenue in 2014.

“There is a potential scenario, where coal prices will remain at these lower levels for an extended period and it is therefore prudent to reflect this view in the assumptions upon which the company’s valuations are based,” the group said.

The company stock has dropped about 70% over the past year after Iceberg Research alleged Noble was inflating its assets by billions of dollars. The beleaguered commodity trader rejected the claims and board-appointed consultants PricewaterhouseCoopers found it had complied with international accounting rules.

Other companies, including GMT Research, have since come forward to criticize the trader’s bookkeeping practices.