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Noble accounts cleared but jobs to be cut

Noble Group, the commodity dealer attacked over its accounting practices, is to cut 16 per cent of its staff and seek asset sales or new financing deals as it continues to face difficult trading conditions.

News of the jobs cuts came as Noble released second-quarter results showing a slight decline in net profit and an increase in net debt.

Noble has moved to try and blunt the criticism that has dogged the oil and metals dealer since February, when an unknown group first accused the company of bolstering its results with aggressive accounting techniques, a charge the company has denied.

Jerome Favre | Bloomberg | Getty Images

On Monday Noble published a review into its accounting and management practices commissioned from PwC, the professional services firm, which concluded that the way the company recorded profits on long-term sales and marketing deals was consistent with industry practice.

However, in a statement on Monday Noble said: "Given the industry-wide challenges that we face . . . we have undertaken a thorough review of our cost base and commenced the implementation of various cost reduction initiatives.

Noble said it was targeting a 16 per cent reduction it its global workforce to just over 1,500 people by the end of the year and $70m in cost savings. It cut 187 positions in July and August and has closed a scrap metals business in New Orleans as well as offices in Hamburg and Oslo.

Noble is Asia's biggest commodity trading house and has a market value of $2.8bn. It mines, ships and finances iron ore, coal and industrial metals such as copper as well as playing a growing role in North American oil and gas markets.

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In the three months to June, Noble posted net profit after tax of $62.6m, down from $65.8m in the same period a year ago. At the same time, its net debt increased $357m to $4.3bn, and its operating cash flow — a measure studied closely by analysts and credit rating agencies — was negative.

"The results are generally underwhelming," said one hedge fund manager.

Gains recorded on commodity contracts and derivatives declined by $487m to just over $4bn.

Yusuf Alireza, Noble chief executive, said the company continued to hold talks with investors over possible asset sales, financing or equity stakes in the Singapore-listed company. He added that he hoped the publication of the PwC review would help the company move on from its recent troubles.

He revealed on Monday that some trading counterparties had extended the company less credit in recent months. Rating agency Standard & Poor's had said it could cut Noble's credit rating to junk if it did not bring greater transparency to its accounting.

"It wouldn't be surprising for certain counterparties to be more conservative in terms of the exposure they are willing to have with us," Mr Alireza said.

Nevertheless, he said this had not had a material impact on Noble, pointing to a 40 per cent increase in half-year trading volumes to 133m tonnes.

The Hong Kong-based trader released its results at the end of a four-day public holiday in Singapore, which celebrated its 50th anniversary at the weekend.

Noble's shares have fallen 50 per cent since February, hitting a six-year low of S$0.435 a share late last month, before rebounding to about S$0.58 by Thursday.

The company plans to hold an investor day in Singapore next week to explain more about how its business makes money.