Singapore 11/08/2016 - The metals and mining business at Noble Group returned to losses in the April-June quarter, with the segment reporting a $20-million loss after the company completed its base metal business exit in North America and Europe.
The figure has increased 65 percent from the second quarter of 2015, but deteriorates from the $7-million-profit reported for the January-March 2016 quarter.
This took its first-half loss to $7 million, which widens from a $2-million-loss in the same period last year, according to Noble's second quarter financial report released Thursday.
Operating income from supply chains at Noble’s metals segment was $4 million in the second quarter, a decline from $26 million in the first quarter, but an improvement from the loss of $29 million a year ago.
The first half’s operating income fell 42 percent year-on-year to $34 million.
Operating income in the second quarter was affected by capital restrictions and management’s focus on the exit of its base metals business – namely in copper, zinc, lead and nickel - in North America and Europe, Noble said.
The exit also saw its tonnage drop. Metal and mining volumes moved during the second quarter was 6.4 million tonnes, down 28 percent year-on-year and 5.9 percent quarter-on-quarter.
This took the first half’s volume to 13 million tonnes, down 32 percent from the same period last year.
Noble had said in the first quarter that it was resizing and rationalising its metals business to focus on the aluminium supply chain, a move that it expects will help its metals business return to profitability in 2016.
The company has since created two businesses in its metals segment – a vertically integrated aluminium supply chain, including its Jamalco asset, and an Asia Base Metals franchise, it said in its latest report without providing further details.
While aluminium prices had trended upwards year-on-year, due to smelter production cuts, bauxite prices have trended downward, due to weaker demand in China, Noble said.
Though Malaysia has suspended exports on environmental grounds during the first quarter of 2016- this has been extended till December 2016 – the shortfall has been offset by increased exports from Australia, India and Guinea, it added.
The company noted that the first half was “an extremely challenging” period for the group as it operated in an environmental where the focus was on generating and preserving liquidity and the allocation of working capital deliberately constrained.
“We have spent the last few weeks purposefully shifting the company onto a smaller more focused and nimble footing,” said company joint CEOs Jeff Frase and Will Randall. The process of transformation will continue for most of 2016, they noted.
CAPITAL RAISING CONTINUES
Noble said it continues to execute its remaining capital raising initiatives and rationalising its cost structure – this includes the closure of its European power and gas business and other loss-making or low return businesses and sale of non-core assets related to loss-making or low return businesses - with a target to raise capital of $1.3 billion of the total $2 billion it had announced in June.
It has planned further cost reduction initiatives including the flattening of organisational structure, rationalising its London office and the closure of satellite offices.
Noble's net debt was at $3.92 billion at end-June, versus $3.97 billion at end-2015.
The company booked an overall net loss of $14 million in the first half of this year, compared to a $169-million-profit in the corresponding period last year.
Overall profit from continuing operations was at $38 million in the first half, down from $331 million in the same period last year.
Noble’s share price rose 4.7 percent to close at S$0.155 on Thursday before the announcement of its interim report.
(Editing by Martin Hayes)