Noble

Noble: 2Q14 core results came in at the lower end of consensus estimates, in a quarter which saw the restatement of the group’s financials to take into account its agricultural division stake sale. Net profit for the quarter rose 5% to US$65.8m (+5%) taking 1H14 net profit to US$218.1m (+110%), with the higher y/y net profit aided by lower post-tax losses from the group’s agricultural operations which are held for sale. Revenue for the quarter was up 13% to US$23.6b, led by total sales volume which grew 25.3% to 72.3m tons. Operating income however fell 29% to US$277.4m, as operating margins declined from 1.94% to 1.36%. Operationally, operating loss from the Agriculture segment narrowed to just US$0.3m from an operating loss of US$54m the previous year, led by a 43% increase in sales volume to 19.1m MT, as well as recovering margins from the group’s grains & oil seeds division and improving crush margins. The Energy segment saw a 21% dip in operating income to US$276m, as the Oil Liquids & Gas businesses saw a seasonal reduction in opportunities, as the industry focused on refilling storage in natural gas and rebuilding stock piles for energy commodities. Operating margins for the sector shrank to 1.35% from 2.13%. The last division, Metals, Minerals and Ores, experienced a 39% drop in operating income to US$34m, despite an 88% rise in sales volume to 14.7m MT, dragged by lower operating margins, which fell to 1.02% from 1.24%. Going forward, Noble expects improved performance from its Agriculture Segment, led by its focused business plan and successful ramp up of new crush facilities which provide the group with a geographically diverse portfolio. Noble will work closely with COFCO and the financial investor consortium to ensure that the Noble Agri joint venture closes successfully. In Energy, the group’s Energy Coal & Carbon Complex division is leveraging on its leadership position in Asia and expanding its supply chain, to establish new flows in Europe, while the MMO Segment is also creating additional flows in new origination and destination markets. Noble’s net gearing currently stands at 47.2%, and at the current price, the group trades at 13.3x forward P/E. Latest broker ratings: OCBC maintains Hold with TP $1.31