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Defying massive Q2, H1 losses, Noble Group shares surge 20%

Noble Group Ltd. shares surged by as much as 20% on Aug. 11 even as the company recorded massive second-quarter losses and on news that it turned down a takeover offer from a London-based fund, according to a same-day The Straits Times report.

The shares rose despite a widening of losses in the first six months of the year to US$1.88 billion, or US$1.45 per share, from a loss of US$14.4 million, or 2.8 U.S. cents per share, a year ago, because the results failed to provide fresh causes for concern for the embattled company, the report said.

In a separate Aug. 10 report, the Financial Times reported that the commodities trader turned down a takeover offer from Centricus, a London-based fund, citing "three people close to the deal."

The offer would have kept Noble's global operations mostly intact, but the exact terms of the deal were unclear. The report added that Noble considered accepting the deal, but decided at the last minute to follow a strategy that will cut its workforce of 1,000 people by half as well as return it to being an Asia-focused coal trader.

Noble's first-half net loss includes US$1.25 billion of exceptional items, including adjustments to valuations of the company's commodity contracts and derivative instruments.

The company also recorded a noncash impairment of US$60 million against its palm oil assets held for sale, it said Aug. 10.

Revenue in the half declined 5% year over year to US$22.69 billion due to higher oil liquids prices, while cost of sales and services increased 3% to US$22.18 billion.

Operating losses totaled US$1.65 billion for the half, swinging from operating income of US$364.7 million in the first half of 2016.

Net debt for the company increased to US$3.82 billion as of June 30, compared to a net debt of US$2.87 billion as of Dec. 31, 2016, mainly due to an increase in working capital.

Noble Group recently said it was planning to sell two of its North American business units to raise cash to repay US$3 billion in revolving credit facilities as the troubled commodities trader prioritizes debt reduction over the next two years.

Volumes fell 19% year over year to 91 million tonnes for the first six months, primarily related to the Oil Liquids business due to higher prices.

Noble Group's loss attributable to shareholders in the second quarter was in line with expectations, widening to US$1.75 billion, or US$1.34 per share, from a net loss of US$54.9 million, or 6.5 cents apiece, in the year-ago quarter. Exceptional items in the quarter totaled US$1.26 billion.

Revenue in the three months dropped 19% year over year to US$10.12 billion, while cost of sales and services shrunk 5% on a yearly basis to US$11.61 billion.

The company posted total operating losses of US$1.64 billion in the quarter, swinging from the prior-year operating income of US$141.9 million.

The metals, minerals and ores segment swung to a loss of US$14 million in the three months, from an US$8 million profit a year ago.