What's Left of Noble Group as Trader Retreats to Its Asian Roots

(Bloomberg) -- It’s the end of an era for Noble Group Ltd. Some three decades after its founding, and from a perch among the world’s top commodity traders, the company is abandoning its global ambitions and falling back to its Asian roots in a last-ditch effort to survive.

Noble is selling its North American gas & power unit to rival Mercuria Energy Group Ltd. and is seeking buyers for its global oil liquids business as it grapples with losses of as much as $1.8 billion in the second quarter. That will leave the Hong Kong-based firm -- once a rival to trading behemoths like Glencore Plc in its global reach across multiple commodities -- as effectively an Asian trader of coal, iron ore, freight and liquefied natural gas, with a market value of less than $400 million.

As Noble tries to raise up to another $1 billion from asset sales over the next two years, potential investors will be scrutinizing the profitability of its remaining businesses. It’s been a torrid few years for the company, which has seen it offload prized assets to shore up its finances, including a North American power trading unit and its agriculture arm. The company will also soon lose its gasoline blending facilities on the U.S. Gulf Coast, petroleum storage in Panama, and fuel transport via American pipelines.

With the exception of an alumina refinery in Jamaica and some assets in Mexico, Noble’s left with a largely Asian portfolio including marketing rights to Indonesian coal, LNG trading capabilities as well as some stakes in Australian and Mongolian coal mines. The information below is taken from company reports, earnings statements and Noble’s website and is subject to change.

Following a revamp in 2016, which included the sale of its U.S. energy solutions unit, an exit from European gas and power as well as a reduction in its global metals business, the trader changed the way it differentiates its segments. It’s expected to give an update when it reports quarterly results in August, and the sale of its gas and power business is expected to close by the end of this year.

Energy

Under the structure at the end of the first quarter, Noble’s energy segment comprised the oil liquids, gas & power and energy coal units. It had operating income from supply chains of $27 million in the first three months of 2017, compared with the group’s operating loss of $2.6 million. In revenue terms, it accounted for about 90 percent of total sales in the January-to-March period.

Energy Coal: Noble has a portfolio of off-take and marketing agreements with several mines worldwide from Australia to Indonesia and South Africa, and supply contracts with customers such as power producers and trading houses in key markets including China, India and Japan.

Oil Liquids: Noble has started a formal sales process for this unit, which trades crude and refined products via ship, barge, pipeline, truck and rail. In the U.S., Noble transports fuels via pipelines including Colonial, Magellan and Explorer, and produces ethanol in South Bend, Indiana. It has blending and wholesale facilities in North America and the Caribbean. In 2014, Noble reached a deal to loan $1 billion to Ecuador’s state oil company and signed a five-year contract to supply the South American nation with refined fuels.

Gas & Power: The unit is focused on its North American and global LNG businesses after the trader sold Noble Americas Energy Solutions -- an asset it once considered core -- last year to raise about $1 billion. Noble supplies gas in the Pacific North West from Canada into the West Coast of the U.S. The North American gas & power operations will be sold to Mercuria for $248 million.

Metals, Minerals and Ores

As part of the new structure, this business segment combines Noble’s metals, carbon steel materials and logistics units. It posted an operating loss from supply chains of $29 million in the first quarter.

Metals: Noble’s metals unit comprises its Asian base metals arm, trading copper, zinc, lead, nickel and other raw materials and its global aluminum business. Noble has a 55 percent stake in a joint venture with the government of Jamaica, which mines bauxite and refines it into alumina before it’s exported. The facility has a production capacity of 1.425 million metric tons a year, according to information on Jamalco’s website. It’s among the few hard assets Noble has left, according to Alex Turnbull, managing partner of hedge fund Keshik Capital Pte., who said “any creditor would love to take that.”

To see the structure of Noble Group’s assets and debt, click here

Carbon Steel Materials: This unit focuses on providing raw materials such as iron ore, chrome, manganese and metallurgical coal and coke to mainly Asian steel mills. Noble doesn’t own any production assets.

Logistics: With offices in Hong Kong, Singapore, Mumbai, Beijing and London, Noble’s logistics business services external customers as well as its internal freight requirements, shipping commodities in Capesize, Panamax and Supramax bulk carriers. At any given time, Noble has more than 100 vessels on charter, either owned, bareboat, time charter period or single trips, the company said in its latest annual report.

Joint Ventures & Associates

Some of Noble’s assets are held by the joint ventures and associated companies in which it has shares. These include Yancoal Australia Ltd., the miner majority-owned by China’s Yanzhou Coal Mining Co., as well as mines in Mongolia and South Africa.

--With assistance from Hannah Dormido

To contact the reporter on this story: Jasmine Ng in Singapore at jng299@bloomberg.net.

To contact the editors responsible for this story: Jason Rogers at jrogers73@bloomberg.net, Jake Lloyd-Smith