REMAINING PROFITABLE: The group boasts prominent positions in soybean, sugar and ethanol, distribution of crude oil, gasoline and electricity and sale of Indian-sourced iron ore. Photo shows iron ore mining works.
KUCHING: RAM Ratings Bhd (RAM Ratings) has assigned a preliminary AA2 rating to Noble Group Ltd’s (Noble) proposed RM3 billion multi-currency Sukuk Murabahah Programme with a long term stable outlook.
According to RAM Ratings, based in Hong Kong and listed on the Singapore Exchange, Noble was a global supply-chain manager for bulk commodities. The group sourced a vast array of products from low-cost producing countries and delivered them to high-growth markets.
Selectively, the group operated or owned equity stakes in mining, production, processing, and logistics assets. In financial year December 2011, Noble generated approximately US$504 million of pre-tax profit on the back of US$81 billion in revenue.
The preliminary AA2 rating was supported by Noble’s position as one of the leading players in its industry. The group traded a wide spectrum of products such as grains and oilseeds, sugar, coffee, coal, coke, oil, gas, power, iron ore, and aluminium. Most of these products ware characterised by solid demand. Noble also enjoyed prominent positions in niche markets.
“The group boasts prominent positions in soybean processing in China, sugar and ethanol production in Brazil, distribution of crude oil, gasoline and electricity in the US, and sale of Indian-sourced iron ore,” explained Kevin Lim, RAM Ratings’ head of Consumer and Industrial Ratings.
The rating was also supported by Noble’s solid liquidity position and substantial financial flexibility. As at end FY11, the group’s ratio on cash and readily marketable inventories to short-term debts stood at 6.22 times. It possessed about US$2 billion of unencumbered property, plant and equipment at the same date.
Noble’s strong commitment to risk management was underlined by its extensive hedging practices to preserve its relatively thin margins.
This had enabled it to remain profitable amid the economic downturn, Lim noted.
“We further note that there have been fairly minimal impairments in the group’s trade receivables. In the last five years, an average of less than two per cent of its receivables have been impaired annually; about 95 per cent of its receivables have maturities of less than 30 days. Meanwhile, the group has a rather short operating cash cycle, averaging at 13 days for the past five years,” he pointed out.
Elsewhere, Noble’s financial performance could fluctuate with changes in commodity prices.
“Although this is partly mitigated by the diversity of the group’s largely hedged portfolio of products, this does not preclude the effects of sudden and sizeable changes in commodity prices. Such occurrences could dampen profitability in this low-margin, high-volume business, as was the case in December FY11,” observed Lim.
Apart from this, the group’s operations were exposed to external factors such as port congestion, poor weather conditions and changes in regulatory policies that could affect prompt delivery of products.