So much for loyalty and sticking to a company through thick and thin. At the first hint of trouble, "investors" bail out in droves and send the share price crashing! Then again, the report does mention "traders", and not "investors", so it does do itself some justice.
The Straits Times
Nov 11, 2011
Noble shares dive on shock Q3 loss
Crash triggered by company's report of first quarterly loss in 14 years
By Goh Eng Yeow
TRADERS stampeded out of giant commodities trading firm Noble Group yesterday, sending its share price plunging by as much as 27.7 per cent to levels last seen during the global financial crisis two years ago.
The crash, which wiped about $2.73 billion off the company's market value, was triggered when Noble announced its first quarterly loss, of US$17.5 million (S$22.3 million), in 14 years after trading hours on Wednesday.
Founder and chairman Richard Elman alone suffered a loss of about $500 million in the 21.6 per cent stake in which he has a deemed interest.
A massive 436.7 million shares worth $529.5 million changed hands in frantic trading, as the counter ended 42.5 cents, or 26.5 per cent, lower at $1.18. This accounted for about 29.7 per cent of yesterday's total market turnover in value terms.
Other commodities-linked firms were also hurt by Noble's rout, with plantations giant Wilmar International losing 3.55 per cent and agricultural commodities trader Olam International dropping 6.87 per cent in value.
Traders said that the sell-off in Noble was exacerbated by the jitters in the global stock markets, as investors agonised over the debt problems faced by Italy, the world's seventh largest economy.
Investors were also dismayed by a statement from the company late last night which announced the abrupt departure of the group's chief executive Ricardo Leiman who was previously seen as a possible successor to Mr Elman.
'Leiman's departure is adding uncertainties when the company is facing a tough time, even though Mr Elman's return to the helm will probably provide a safe pair of hands to see it through,' said OCBC Investment Research analyst Carey Wong who cut his call to 'sell'.
Noble had shocked investors by reversing into a third-quarter loss compared with a net profit of US$157 million a year earlier.
In his usual folksy-style write-up to shareholders, Mr Elman pinned the blame for the company's unexpected loss on extreme market volatility which had characterised trading during the quarter.
'We would obviously have much preferred to report records all over the place, but we operate with the realities that you read about in the financial press every day,' he wrote.
And volatility had reached such a level that there was little which the company could do, except to ensure that its risk exposures are 'as considered as possible, which obviously also means that profits are impaired in the short run'.
Mr Elman also disclosed that in the volatile cotton trading business, the company was seeing 'renewed defaults', and this was partly responsible for the lacklustre performance of the company's huge agricultural division.
'Extreme price volatility has resulted in participants walking away from contracts in an unprecedented way - so much for the sanctity of contracts,' he added.
But Royal Bank of Scotland Asia Securities' analyst John Rachmat said he was not entirely convinced by the explanation.
'If contractual defaults were the root cause of this loss, and particularly if those defaults occurred in such a litigious country as the United States, we believe that Noble can strongly pursue legal action with good chances of winning damages,' he added.
[email protected]
Homepage
PR Newswire
