RAM Ratings has assigned a final long-term rating of AA2 to Noble Group Limited's (Noble or the Group) RM3 billion Multi-Currency Sukuk Murabahah Programme (2012/2032) ("sukuk"); the long-term rating has a stable outlook. This rating announcement follows RAM Ratings' press release on Noble on 16 March 2012.
Based in Hong Kong and listed on the Singapore Exchange, Noble is a global supply-chain manager for bulk commodities. The Group sources a vast array of products from low-cost producing countries and delivers them to high-growth markets. Selectively, the Group operates or owns equity stakes in mining, production, processing, and logistics assets. In FY Dec 2011, Noble handled 219.8 million metric tons of products; its revenue came up to USD81 billion.
"The rating is supported by Noble's position as one of the leading global bulk commodity supply-chain providers. It trades a wide spectrum of products, most of which are characterised by solid demand, such as grains and oilseeds, sugar, coffee, coal, coke, oil, gas, power, iron ore, and aluminium," explains Kevin Lim, RAM Ratings' Head of Consumer and Industrial Ratings. Noble enjoys prominent positions in niche markets and operates integrated supply-chains to control the flow of products. The Group is among the largest trading houses for coffee and cocoa bean. It also boasts strong positions in soybean processing in China, sugar and ethanol production in Brazil, distribution of crude oil, gasoline and electricity in the United States.
The rating also reflects Noble's solid liquidity position and substantial financial flexibility. As at end-June 2012, the Group's ratio on cash and readily marketable inventories (RMI) to short-term debts stood at 3.32 times. It possessed about USD2 billion of unencumbered property, plant and equipment as at the same date.
Noble's strong commitment to risk management has enabled it to remain profitable amid the economic downturn. We further note that there have been fairly minimal impairments in the Group's trade receivables. In the last 5 years, an average of less than 2% of its receivables have been impaired annually; about 95% of its receivables have maturities of less than 30 days. Meanwhile, the Group has a rather short operating cash cycle, averaging at 13 days for the past 5 years.
That said, Noble's financial performance can fluctuate with changes in commodity prices. Although this is partly mitigated by the diversity of the Group's largely hedged portfolio of products, this does not preclude the effects of sudden and sizeable changes in commodity prices. Such occurrences could dampen profitability in this low-margin, high-volume business. Apart from this, the Group's operations are exposed to external factors such as port congestion, poor weather conditions and changes in regulatory policies that could affect prompt delivery of products.
Elsewhere, Noble's financial metrics are modest relative to its rating. As at end-June 2012, its adjusted gearing and net gearing ratios stood at 1.27 times and 0.98 times, respectively. Accounting for its RMI, however, the Group's adjusted net gearing ratio would come up to a much healthier 0.49 times. Meanwhile, Noble's average adjusted funds from operations debt cover (FFODC) ratio stood at 0.23 times for the past 5 years (end-June 2012: 0.21 times). Taking into account the portion of its debts that were covered by RMI, this ratio would have averaged at 0.65 times in the past 5 years (end-June 2012: 0.34 times). Factoring in the Group's on-going deleveraging efforts, we expect Noble's gearing ratio to ease to around 1.1 to 1.2 times and adjusted FFODC to hover at around 0.2 to 0.25 times over the next few years.
Media contact
Low Su Lin
(603) 7628 1071
sulin@ram.com.my
© Press Release 2012
