Noble

Noble: Poor 3Q12 results below estimates. Rev at $22.7b, +9.1% yoy and -6.2% qoq, while net profit at $75.2m vs a net loss of $17.5m yoy and -61.5% qoq. Operating Income margin at 1.39% vs 1.16% yoy and 1.63% qoq. Overall tonnage at 59.5m ton flat yoy and +10.8% qoq. Performance was dragged by a drop in grp’s agri segment. In summary, agriculture saw the biggest miss with an operating profit of just US$70m (+3% YoY). This was due to poor sugar extraction rate, an inability to partake in global demand of soybeans due to a lack of origination, and negative soy crush margins in China. Energy continued its good volume growth trend (+20% YoY), but saw margin compression due to a slowdown in demand as well as declining commodity prices. More detailed analysis on grp’s operations as below: 1) Agri segment, – 3Q12 rev at $3.7b, -35% yoy and -10.5% qoq as tonnage fell 8%, although margins increased vs 1Q and 2Q due to improved performance in Sugar, with utilization levels in line with expectations as ramp up in production continues. 9M12 margins at 1.45% vs 2.55% yoy, as grains & oilseeds remained weak, as corn and soybean prices reversed dramatically during 3Q, and tChina mkt continue to see poor crush conditions. Overall, 9M12 operating income for agri segment at $168.8m, -53% yoy. 2 ) Energy Segment, – 3Q12 Rev at $15.4b, +29% yoy and -6.7% qoq, while tonnage at 34.4m ton, +43% yoy and -12.2% qoq. Operating margins at 1.42% vs 1.3% yoy and 1.9% qoq. For 9M12, Operating Income at $881.7m, +30% yoy. Energy Coal & Carbon division reported an increase in vol of 17% as vol growth, grp’s diverse supply base, and secure marketing agreements continue to support strong operating income. The Oil, Gas & Power division reported record tonnage (+28%) and record rev (+32%) for 9M12, as Noble Americas Energy Solutions continues to provide solid growth in operating income supported by high levels of customer retention and best in-class execution. 3) MMO Segment, – 3Q12 rev at $3.6b, +10% yoy and +2.9% qoq, while tonnage at 10.2m tons, -35% yoy and -4.7% qoq. 9M12 operating income at 121.6m, +26% yoy, while margins at 1.19% vs 1.14% yoy. The integration of the metals teams and coal teams into the Hards Platform was completed during the qtr. The Hards Platform is starting to benefit from the additional mgt expertise in asset and offtake development, as well as from broader sector product knowledge. Grp also saw a 42% rev growth in the Aluminum division supported by increases in tonnage and price due to the lack of physical supply available in the market. Key ratings as follow: CLSA downgrades to Sell with $1.20 TP (ROES expected to be below cost of equity) Nomura maintains Buy with $1.50 TP (Valuation grds) SCB maintains O/p with $1.59 TP (See better upside in 2013)