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January 18, 2008 |
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NOBLE GROUP: S&P Revises Outlook on Credit Profile Improvement Standard & Poor's Ratings Services said that it had revised the outlook on the rating on Noble Group Ltd. to positive from stable. At the same time, it affirmed the 'BB+' long-term corporate credit rating on the company. "The rating actions reflect Noble's improving risk management. Its transformation from largely a commodity-trading operation to an increasingly vertically integrated business model is gaining traction and is a positive rating factor," said Standard & Poor's credit analyst Ryan Tsang. Noble has shown its commitment to balancing growth and managing risk by investing in risk management functions and resources in the past few years to keep up with its rapid growth and expansion into new business lines. Its risk functions are now better integrated with its operations than in the past. The company's risk management department has expanded outside Hong Kong to a number of key offices. Noble plans to further enhance its risk management functions by implementing more sophisticated tools to measure the risk and returns of its investments and operations. These developments could further improve its risk management capability. Continuous diversification of Noble's geographical and product lines is likely to further reduce its concentration risk. The company has successfully managed its global commodity supply chain, with a secure feedstock supply, through investments and equity stakes in upstream fixed assets. It has also continued to lower its revenue concentration; its revenue from China as a percentage of total revenue has declined in the past few years. In addition, Noble has diversified its product lines, including carbon credit trading, to reduce product concentration and leverage its customer base to cross sell. Noble's strengths are counterbalanced by the inherent risks of its commodity trading business, with volatility in commodity prices and low operating margins, as well as financial and execution risks associated with the company's rapid expansion. The company is trying to improve its profit margin by integrating vertically and creating more profit points in its commodity supply chain business. Noble's entrepreneurial spirit has inherent risks. The company invests in new businesses, as well as in plants and upstream assets that have a poor operating record and are high risk investments in nature -- albeit with high return potential. The company's satisfactory track record on investment selections and integration of acquired operations partly offsets these concerns. Noble Group Ltd., headquartered in Hong Kong and listed on the Singapore Stock Exchange, is mainly engaged in the sourcing and distribution of a wide range of commodity products in agriculture, energy and metals as well as the logistics management business. It has over 70 offices in 42 countries. |
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