Noble Group (OTCPK:NOBGF, OTCPK:NOBGY) is one of the world's leading supply chain managers for a very diverse group of commodities. Noble manages commodities in the areas of agriculture, energy, minerals and metals.
Noble's strategy is to create fully integrated supply chains in the commodity sectors in which it deals, and use this process to source from low-cost producers to supply fast growing markets. The company refers to these supply chains as its "pipeline". The pipeline consists of origination, transportation, storage, processing, marketing and delivery to high growth markets around the world. The company's global position is solid, with 150 offices and plants in 40 countries.
To better understand the structure of Noble Group and the commodities in which it deals, I have broken down the company by operating segments and noted the major products and 2010 highlights.
- Thermal and coking coal delivered record tonnage and operating income for 2010 as a result of higher market prices, higher production and increased origination from Indonesia, Australia and South Africa.
- Oil, Gas and Power tonnage grew by 73% in 2010, which was largely the result of major U.S. acquisitions including fuel terminal and storage assets, as well as the purchase of Sempra Energy Solutions. The company also brought online a new fuel storage facility in Brazil and established trading desks for crude oil.
- Polymers entered into preliminary agreements to originate ethylen and propylene to produce finished polyolefin under the Noble brand. The company expects major demand increases for polylefin in China and India.
- Petrochemicals growth was spurred by the creation of a global naptha platform in 2010, as well as growing Venezuelan naptha market share to 20%.
- Noble is a leading originator of carbon credits holding a 15% market share of issued CERs.
- Grains and Oilseeds saw revenues jump 45% in 2010 on a 39% increase in tonnage volume. The increases were primarily the result of improved origination volumes. During 2010 the company significantly increased its oilseed crushing capacity, as well as dry storage capacity, with a new plant in Argentina. The company also opened a new dry bulk export terminal at Santos in Brazil to support additional handling of raw sugar, grains and meals.
- Sugar tonnage increased 83% and saw revenues triple in 2010. The increases were assisted by continued expansion of distribution in the Middle East and Asia. In addition, the company began operation of the Meridiano sugar mill in Brazil, as well as an acquisition that could potentially double the company's annual crushing capacity to 17.5 million tons.
- Cocoa saw record revenue and tonnage volume in 2010 as a result of the company securing Ivory Coast supplies in addition to favorable market conditions.
- Cotton saw both record high revenues and record high tonnage in 2010. This performance was driven by increased cotton prices and expansion into key markets.
- Coffee tonnage increased 27%, which drove revenues up 44% in 2010. This division also saw record profits for the second consecutive year boosted by further destination expansion in Europe.
Metals, Minerals & Ores
- Iron Ore revenues increase 51% in 2010 and the division saw a significant increase in operating income. Even though tonnage decreased 13%, higher iron ore prices supported the higher revenues and operating profits.
- Aluminum recorded record revenues and tonnage volume which resulted in a 50% increase in operating income. The better results were driven by improved pricing and the economic recovery in the United States.
- The company provides charting and fleet management services for both its own commodity sales, as well as commodities shipped for third parties. This segment saw revenues fall slightly as customers became more dependent on their own in-house freight management operations.
- Beginning with the first quarter of 2011, logistics will no longer be a separate reporting segment.
To support each segment, the company has made investments in key assets around the world. The company invests in assets which allow it to add value throughout the supply chain and diversify risk. The company has interests in oilseed processing facilities in China and South America, sugar cane crushing plants in Brazil, fuel terminals in the United States, coal operations in Australia and Indonesia, palm oil plantations as well as ports, terminals and logistics assets located throughout the world. For complete details regarding the company's assets click here for the company's asset book.
For an investor looking for an alternative commodity investment with diversification, Noble Group may be worth a closer look.
The company's business remained very strong through the first quarter of 2011. A few of the highlights included record revenue, volume and net profit with increases of 76%, 16.7% and 76.5% respectively. The company also provided shareholders with a 20.5% return on opening shareholders equity.
Noble has been aggressively investing primarily in energy and agricultural related assets since 2007. With these major investments behind it, the company intends to leverage these assets to satisfy projected increases in demand. While the company's primary business is the management of the commodities supply chain, the stock price often moves in tandem with overall commodities markets, despite the company's use of hedging strategies to manage risk. Even with the often correlation of the stock price and commodities markets, Noble should be looked at as a bellwether on the increase in world demand for the commodities in which it deals. As long as the company appropriately manages risk, demand and asset utilization should drive the stock price higher over the long-term.
This is a large and complex company and this article is only meant to present Noble Group as an alternative commodity sector investment. Therefore, I recommend you visit the company's very informative website to obtain further information for your due diligence. There are also other companies that operate in similar areas such as Terra Nova Royalty (NYSEARCA:TTT), Olam International (OTCPK:OLMIF), Wilmar International, Ltd. (OTCPK:WLMIF)(OTCPK:WLMIY), Archer Daniels Midland Company (NYSE:ADM), Bunge Limited (NYSE:BG) and the soon to be public Glencore International AG.
Disclosure: I am long TTT.