Noble group swings back with a $12.2m full-year profit

Thanks to its strengthened capital base.

Noble group reversed its US$1.67b loss in 2015, recording an $8.7m profit in the past year.

"2016 was a year in which we made significant strides in creating a solid foundation for future development of the Group. We strengthened our capital base with a US$500 million rights issue in August 2016, and exceeded our target of raising US$2 billion in capital with the closing of the sale of Noble Americas Energy Solutions (“NES”) on 1 December 2016. We have also disposed of non-core assets and rationalised our business structure, so as to focus on our core franchise businesses," Noble noted.

With the capital it raised, Noble group managed to reduce its debt, lower its gearing, and increase its liquidity headroom to over US$2b.

"Our 2016 financial results were, as we flagged previously, constrained by a conservative approach to liquidity management resulting in the businesses having to operate well below optimal earnings’ capacity, unable to monetise the embedded optionality in the business models. This particularly impacted the Oil Liquids business where working capital constraints, combined with a cyclical lack of market volatility, contributed to a more than 60% year-on-year decline in our Energy Segment’s Operating Income from Supply Chains," the group explained.

Noble's operating income for 2016 was down 4% year-on-year, when adjusted for exceptional non-cash items and losses from discontinuing businesses and other expenses. Costs relating to restructuring and retaining key personnel weighed on Selling, Administrative & Operating Expenses.

"However, we have executed, and continue to execute on, our cost reduction initiatives by reducing headcount from approximately 1,500 at the beginning of the year to 1,050 by 31 December 2016. We expect to see the run-rate cost benefit from these initiatives within the first half of 2017," the group noted.

It furthered, "Management continues to pursue the same goals that we laid out previously - to rationalise low return or loss-making businesses while devoting resources to those core businesses in which we have a competitive advantage and where we expect to see continued strong returns over a cycle. Tight discipline on costs, a conservative capital structure and robust liquidity will be essential to the success of our strategy."