What went wrong for Noble and Olam in 2012

Profit declines and cotton-market woes persist.

According to CIMB, global traders’ dismal profits had started in 2011 and persisted through 2012. Noble and Olam were not spared. The sector’s woes surfaced in 3Q11 when wild  gyrations in cotton prices and industry-wide defaults sent profits diving.

Here's more from CIMB:

Weakness in cotton markets persisted in 2012 with prices tumbling a further 16%. Compounded by weak demand for wood and economically-sensitive commodities, Olam’s profits declined, with FY12 net contributions from its industrial raw materials cascading 41%, offsetting growth from its edibles segments.

Noble bore the brunt of cotton-market woes in 2011. It reeled from an exodus of confidence when Vice Chairman Mr Harry Banga trimmed his stake almost immediately after its 3Q12 earnings miss. These two events sent the stock tumbling 18% within a week.

3Q12 profits disappointed due to a poor agriculture segment, where the group was caught wrong-footed by a sudden decline in soybean and corn prices. As for Mr Banga’s stake sale (for personal reasons), it appeared to have been poorly timed, having nothing much to do with the group’s fundamentals.