Commodities trader Noble Group issues Q4, FY profit warning on coal price worries

Commodities trader Noble Group has warned it will post a net loss in the fourth quarter and for the full-year 2015, after taking a $1.2 billion hit from adjustments as commodities prices continued to tank.

The company said it had cut its long-term view on coal prices, which it said had been hit by a combination of a drop in the price of oil, the move toward sustainable energy and a fall in global demand. The company's long-term view is key because it uses it to set an "anchor" coal price that it uses to project the value of its trading contracts.

The $1.2 billion impairment is on top of the loss on the sale of Noble Agri to China's Cofco for at least $750 million announced in December last year.

Noble has put the focus on coal prices in its guidance as the vast majority of its long-term contacts are exposed to coal, chief executive Yusuf Alireza said in a conference call Tuesday.

The Singapore Exchange-listed company will release its full-year results on Thursday after market hours.

"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," Noble said in a statement on Tuesday.

Once this adjustment in valuations is taken into account, as well as impairments on investments and other interests and supply-chain assets, Noble would take a $1.2 billion hit in the fourth quarter, it said.

The Hong Kong-based, Singapore-listed company said that it expected, however, to report positive cash flow from operations for the three months to December 31, bringing its cash flow total to $650 million for the second half of 2015.

Long plagued by accusations of liquidity issues, the trader said that it expected to deliver a further $1 billion in liquidity in March.

Moody's Investors Service and Standard and Poor's have cut the company's credit rating to junk due to liquidity concerns amid a wider commodities rout. Fitch still has an investment grade rating on the firm.

The beleaguered company has been trying to shore up confidence and improve transparency in its communication after a firm called Iceberg Research published a report in February last year alleging that the Singapore-listed trader's accounting treatment was "unusual," resulted in "fabricated" profit that "intentionally misleads credit agencies and investors."

Noble has consistently and vehemently denied the allegations and has taken multiple steps to improve its disclosures to investors, including commissioning an independent review of its accounting from PwC, which found Noble's accounting was in line with international standards.

Noble shares were down 1.4 percent at 36.5 Singapore cents half an hour after opening on Tuesday after gaining as much as 2.7 percent in early trade. Noble shares have fallen well over 70 percent since February 2015.

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