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Portfolio Management: Noble Group Limited Report

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Updated: Jan 14th, 2020

Noble Group Limited currently stands as the marketing leader in operating global supply chain of industrial, agricultural and energy commodity products. This claim can be justified by the fact that Noble Group Limited has managed to position itself as the global leader in supply chain management in approximately two decades a factor that can be attributed to their “hand on” to business.

It is noteworthy that Noble Group Limited specializes in production and distribution of raw materials from low cost production and adequacy areas to deficiency areas across the globe. Throughout the delivery chain, the company ensures that value is added at every stage of the supply chain.

Additionally, the Noble Group limited also operates shipping activities, coal mining, Investment and risk management, structured trade finance, and agricultural produce crushing plants and mills especially in South American region. The Group boats of a large network of subsidiary operations in close to 38 different countries spread across five continents.

In terms of career opportunities Noble Group is an employer to approximately 11, 000 personnel of at least 68 nationalities in diverse divisions across the globe (Noble group 2010; p54). Key operations of the group are carried out in Americas, Europe, Middle East, Africa, and Asia. Unmatched specialization of the group include areas of Agriculture, logistics, Energy, metals and minerals

For a period of two decades, Noble Group limited has certainly grown into a global venture in various specialized areas with demonstrable capabilities supply and delivery of valuable commodities to the real world (Bloomberg businessWeek , 2011).

Thanks to the Groups, realization that operating a successful global chain lies in building and owning real infrastructure that include the sophisticated warehouses, real ports, as well as physical mines (Noble Group, 2011).

It is also plausible that the company owns majority of the origination points, independently produce and process the raw materials and above all enjoy an interrupted control over the supply pipeline from the beginning to the end.

In fact, the increasing success of the Group lies in their ability to control and operate most of their infrastructure independently taking to consideration that this move has seen the Group build its businesses in an environment with increased Unification of major commodity producers.

The Group’s success strategy lies in developing a diversified network of “asset-medium” supply pipelines, operated by qualified professions who posses specialized expertise and experience in the respective industry (Noble Group Limited, 2011).

In fact, as per the current understanding of the Group’s executives it is through the asset-medium strategy that the Group has managed to secure long-term supply of vital commodity group. In other words, the Group’s ability to own, control and manage the necessary physical infrastructure required for the delivery of high quality raw materials dependably is attributable to the asset-medium strategy (Nobble Group, 2009; p 23).

This means that owning the supply chain infrastructure has enabled the company to obtain and retain top business success secrecies unlike their competitors and as such the Group stands a better chance of act and respond to issues swiftly owing to first hand information (Noble Group, 2011).

The Group’s logistic services plays a critical role in consolidating activities thus fulfilling key pipeline strategy by ensuring that the company enjoys smooth and dependable flow of various commodities from origination to the processing plants, mills and most importantly to industrial clients in manufacturing destination across the globe (Noble Group Limited, 2011).

Businesses

Noble Group limited is one of the limited companies globally that owns and operates diversified range of raw materials and natural resources that include but not limited to minerals, metals and ore such as aluminum, Ferro Alloys, steel and iron; agricultural produce such as sugar, cotton, soya beans; lean energy; fossil fuel; ship management; risk management and trade finance.

The Group boasts of its wide array of product and service segment as its main risk management strategy considering that all the segments operates in different environments under different professionals and as such experience different risks (Nobble Group, 2010; p 51).

It is obvious that specialization in a single area of business is highly risky considering that a particular peril whether artificial or natural can lead into loses or closure of the entire business. Noble Group limited is cushioned from such risks considering that it has invested in more than a single segment-agribusiness, mineral, logistics, metal, and energy.

Another critical area of success in Noble group involves constant innovation and invention with the objective of increasing efficiency and exceeding customer expectations thus profitable business for all players (Nobble Group, 2009; p 45). For instance employing innovative technologies in chattering and ship management complimented with best practices in trade finance has propelled organization growth considerably.

Agriculture Segment

Noble Group’s Agriculture segment include but not limited to cocoa, grain, cotton, coffee, sugar, sugar mills and fertilizer (businessWeek , 2011). Presently Noble Coffee stands as one of the leading traded coffee across the globe with respect to volume owing to the fact that the company trade in various types and grades of coffees grown in various parts of the world.

The Group started with trading Robusta coffee in 2002 in Vietnam which followed by trading Arabica from the United States. Since then the company has established itself as a specialized trader in coffee by establishing sourcing destinations from various parts of the universe that include Brazil, Indonesia, Colombia, India, as these destinations provides direct access to the large pool of the global coffee production.

Nobble Group (2011; p36), The company does not only source for coffee but also handles other value chain operations related to green coffee ranging from processing, marketing, warehousing, shipping, quality control, and financing. The group also takes advantage of the diversification of location and quality of coffee to come up with competitive pricing strategies for their various markets worldwide (Peavler, 2009).

Headquarter of cotton operation is in Singapore. However, subsidiary offices and representations are based in major consuming and source markets across the globe. The Group handles all its major source of cotton besides maintaining a relatively high quality control measures in each area (Siddiqui, 2006).

The Group is sourcing vast volume of its cotton from West Africa, India, United States, Central Asia, and Brazil. Its major consumers on the other hand include North and Southeast Asia, China, and Turkey (Noble Group, 2011).

It is noteworthy that the Groups success in the cotton business and other segment is based on building effective relationship with the clients as any organization that seeks competitive advantage must understand its producing and consuming clients very well.

The Group has headquartered its fertilizer business in Brazil where the company specializes in operating fertilizer-blending facility in Mato Grosso. However, the group has established its fertilizer warehouse in Paranagua.

The Group has built a state of art facility in Mato Grosso with the storage capacity of 2000 metric tons of bended fertilizer and 4000 metric tons of raw materials (Noble Group, 2011). Additionally the facility is strategically located in the sense that it allows the company to deliver products directly to the farmers in remote areas without complexity.

Noble Group has established its grains and oilseed operations in Europe, Asia and south America owing to the productivity in such areas. Noble Group’s grains and oilseed operations are centered in China as it currently operates three facilities in the region with its base in Shanghai (Brigham & Daves, 2009).

The Headquarter in Singapore also plays a significant role in marketing of grains, oilseeds and vegetables in the Asian market region. In Europe grain operations are based in Turkey which is presently the largest importer of oilseeds and grains; Russia which operates warehouses as well as export of grains and finally Italy which is responsible for trading grains in central Europe (Drake, 2005).

In South America Noble boast of large network of warehouses and elevators in Uruguay, Brazil, Paraguay, and Argentina as they play a critical role in sourcing of produce directly from the farmers and afterward delivery to various facilities.

Noble Group started its sugar business in 2001and presently it accounts for a vast portion of the agricultural segment revenue.

The Group engages in wide range of activities in the sugar business that include but not limited to shipping, risk management, sourcing cane, logistics, trading, distribution and refining of raw sugar in different countries ranging from Brazil, South Africa, Russia, India, Central America, Thailand and Europe (Nobble Group, 2011; p40). Key consumer markets include Middle East, Egypt and Russia.

The company also use sugar canes to produce ethanol however not in very large quantity as the process are still underway for large-scale production.

Noble Group Limited started its Agribusiness in 1998 with Cocoa as one of its main produce (Noble Group, 2011). Currently the company has a number of established sources of Cocoa especially in Africa ranging from Côte d’Ivoire, Ecuador, Ghana, Cameroon, Sierra Leone, Indonesia, Nigeria and Togo. Key consumers of the Cocoa produce include global manufacturers of chocolate and cocoa processors.

Logistics segment

The present increase in the Groups revenue levels is attributable to the growth of the Chattering Division, compounded persistent demand within and from third parties customers in need of dry bulk vessels.

To ensure that the Groups effectively utilize the upsurge demand in vessels the organization decided to reorganize its freight chattering activities, which led to setting up a single business desk responsible for handling all internal requirements(Brigham & Daves, 2009; p276).

Through the reorganization, the company managed to effectively share vital market data among the commodities divisions as well as the logistics operations. Increased revenue levels were also attributable to the rising freight prices experienced in large shipping sector (Nobble Group, 2011; p51).

For instance, the growing tendency of emerging markets to source for commodities from distant resource regions results into longer miles per ton and consequently higher freight rates.

The Energy segment

Noble Group limited is a renowned supplier of various forms of energy ranging from lean energy, fossil fuel, coal, and petrochemicals (Noble Group, 2011). The group also trade in emission reduction certificates large know as “carbon credit” and presently its one of the largest suppliers of the CERs.

The Group has also facilitated dependable supply of thermal and cooking coal as well as coke products to various global markets.

Key coal production assets established in Australia and Indonesia, and vital source include South Africa, Russia, and China through a sophisticated supply chain management network which ensures that coal is delivered to the doorstep of the clients from mines and other industrial origins efficiently (Nobble Group, 2011; p44).

Noble Group has also specialized in the production of clean fuel through its Clean Fuel Departments. This effective team receives adequate support from the storage and transportation divisions to ensure that they continually supply various market with a wide range of clean energy that include liquid natural gas, bio fuel and fuel oil.

Trading areas for the clean energy include markets such as Europe, Latin America, United States, South America, and much important India and China (Noble Group Limited, 2011).

The Group is receiving considerable amount of energy from this sector taking into consideration move by every country to reduce greenhouse emission with environmentally friendly fuel and the volatile oil prices, which keeps on skyrocketing day by day. Apart from the lean fuel and coal the group also trade in fossil fuel which include oil and petrochemicals.

Financial Ratio Analysis of Noble Group Limited

Financial ratios are often calculated from the data reported in the company’s statement of financial position and the income statement for a specified financial period (Brigham & Daves, 2009; p276). For instance, in order to calculate the “gross profit margin” them an individual has to divide the “gross profit” by total sales or revenue from the respective trading period and expressed as a percentage.

Financial ratios significant information for decision makers, investors and regulators in a number of ways. For instance, an investor may use financial ratios to decide whether to invest in the company or not same to a financial analyst who require financial rations to issue opinion of the company situation and likely trends in the future treading.

The management also need ratios to compare their performance in relation to industry performance and their competitors too. In fact financial rations gains utility when they are compared to other standards and data.

For instance, by simply knowing that your company gross profit margin is 25% of no help unless you compare it to another company’s gross profit margin, which stands at 18% as this means that, we are doing fine relative to our core competitor.

Profitability ratio

Ratio Formula 2010
US$’000
2009
US$’000
2008
US$’000
Gross profit margin Gross Profit * 100%
Revenue
1,632,066 * 100%
56,696,058
=2.88%
1,105,046 * 100%
31,183,114=3.54%
1,347,598 * 100%
36,090,161=3.73%
Return on equity (ROE) Net Income
Owners equity
607,049 * 100%
4,431,189
=13.7%
555,130 * 100%
3,038,194
=18.3%
579,738 * 100%
1,860,868
=31.1%

Profitability ratios are ratios used to show a firms overall performance and efficiency. Two important categories of profitability ratios are available for use by company to prove organizations efficiency and they include “margin and return”. According to Peavler (2009), Margins are used to indicate the extent to which an organization can utilize the sales dollars to provide profits for the organization.

Return on the other hand represents organizations ability to provide adequate returns for the investors (Drake, 2005; p7). For instance, gross profit margin is ratio that indicates the percentage of the costs of sales relative to sales.

A higher percentage of the Gross Profit Margin is always better for the company as it represents the ability of the company to control its costs of sales-inventory and production costs (Peavler, 2009). Return on equity is a significant ratio for the investors in the sense that it measures return from the money injected into the business by the owners.

References

Bloomberg businessWeek. (2011). Company Description. Web.

Brigham, E. & Daves, P. (2009). Intermediate Financial Management. California: Cengage Learning.

Drake, P. (2005). . Web.

Nobble Group limited. (2009). Noble Group Annual Report 2008. Web.

Nobble Group limited. (2010). Noble Group Annual Report 2009. Web.

Nobble Group limited. (2011). Noble Group Annual Report 2011. Web.

Noble Group Limited. (2011). Asset Strategy. Web.

Noble Group Limited. (2011). Products. Web.

Peavler, R. (2009). : Determining Profitability is Important to Company Investors. Web.

Siddiqui, S. (2006). Managerial Economics And Financial Analysis. Iowa: New Age International.

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