40
Six Months Results June 2015
Six Months Results June 2015
1 AUGUST 2015
Financial HighlightsSix Months Ended 30 June 2015
» Continued Volume Growth
- Tonnage for the six months ended 30 June 2015 up 40% year-on-year at 133 million tonnes with volumes upacross all Segments
» Gross Margins Recovery
- Gross margin during the first six months of 2015 at 2.13%, compared to 2.08% during the six months to June2014 and 1.42% during the six months to December 2014
» Solid Performance from Core Businesses
- Our core businesses continue to perform well, despite adverse market conditions
- Profit from our core businesses was US$320 million for the six months ended 30 June 2015
» Strong Balance Sheet
- Net adjusted debt as of 30 June 2015 at US$2 billion (adjusted for RMI), compared to US$2.4 billion as of 30June 2014
- Group net adjusted debt to capitalization(1) stood at 28.1% as at 30 June 2015 versus 31.2% as at 30 June2014
» Continued Conservatism in VaR
- Group Value at Risk was 0.28% of Shareholders Equity as at 30 June 2015
(1) Capitalization = adjusted net debt + shareholders’ equity (unaffected by share price movements)
2 AUGUST 2015
Consolidated Income Statement Summary
Six Months Ended Three Months Ended
(US$ MM) 30 Jun 2015 30 Jun 2014 30 Jun 2015 30 Jun 2014
Tonnage 132.8 92.4 67.0 53.1
Revenue 34,998 41,508 18,357 23,552
Operating income from supply chains 747 862 329 343
Gross margin (%) 2.13% 2.08% 1.79% 1.46%
Losses on supply chain assets (28) (77) (4) (28)
Total operating income 719 785 325 315
Selling, administrative and operating expenses &Other income net of other expenses
(306) (290) (148) (132)
Profit before interest & tax 413 495 177 183
Finance costs – net (94) (90) (45) (44)
Taxation (8) (28) 2 (8)
Profit from Core Businesses (1) 311 377 134 131
Share of profits & losses of joint ventures & associates (142) (35) (71) (21)
Net loss for the period from Agricultural discontinued operations - (123) - (44)
Non-controlling interests - (1) - -
Net profit 169 218 63 66
(1) Adjusted for share of profits & losses of Joint Ventures and Associates, but does not adjust for impairments
3 AUGUST 2015
Semi-Annual Performance
388
292 320
612
1H2014 2H2014 1H2015 Last 12 months
Solid Performance in Core Businesses Despite Challenging Market Conditions(Adjusted, US$MM) (1)
(1) Adjusted for share of profits & losses of Joint Ventures and Associates, impairments and negative goodwill
Continued Volume Growth(Million Tonnes)
54.2 63.4 68.4
17.220.1 20.021.0
39.144.4
1H2014 2H2014 1H2015
Energy Mining & Metals Logistics
92.4
Gross Margins Recovering
2.08%
1.42%
2.13%
1H2014 2H2014 1H2015
122.6132.8
4 AUGUST 2015
Product & Geographic Diversity
Volume Contribution by Region (1)
(1) Excludes Gas & Power Segment volumes
Contribution by Business to Operating Income from Supply Chains (2)
(Last Twelve Months to 30 June 2015)
Asia
North America
Others
NAES
Gas & Power
Oil Liquids
Energy Coal
Metals
Carbon Steel Materials
23%
12%
23%
26%
42%
30%
12%
32%
2008 2009 2010 2011 2012 2013 2014 1H2015
North America
China
Asia (ex-China)
Others
CSM, 2%
Gas & Power, 12%
Metals, 13%
NAES, 18%
Energy Coal, 25%
Oil Liquids, 30%
(2) Excludes Corporate Segment
5 AUGUST 2015
Market Overview – Oil LiquidsCorrection in crude prices while world oil production reaches new record highs
Crude prices erasing gains in 2Q 2015(WTI Index)
World oil production reaching new records(World Production. Million Barrels per Day)
84
86
88
90
92
94
96
98
40
50
60
70
80
90
100
110
120
Source: Bloomberg Source International Energy Agency & Noble Research
6 AUGUST 2015
Market Overview – Energy CoalThermal coal prices remain under pressure as China demand continues to decline, particularly sub-bit coal with a 40% Y-o-Y reduction
1,000
1,500
2,000
2,500
3,000
3,500
4,000
Volume 2 Month Moving Average
Coal prices under pressure(US$/Tonne)
China’s declining coal import volume(Thousand Tonnes)
50
55
60
65
70
75
80
85
90
95
Newcastle API2
Source: Bloomberg Source: General Administration of Customs
7 AUGUST 2015
Segment Results – Energy
54.2
68.4
1H2014 1H2015
Volume
(Million Tonnes)
Revenue
(US$MM)
34,190
25,525
1H2014 1H2015
Profit Before Interest & Tax
(US$MM)
266
363
1H2014 1H2015
Oil Liquids
» Oil Liquids showed strong results for the first six monthsof 2015, contributing the majority of the Segment’searnings. Volumes for the period were also impressive,growing by close to 33% year on year
» Gasoline continues to perform well, with a fivefoldimprovement in operating income, whilst crude,petchems, biofuels and the other businesses performed inline with expectations
» The Asian business build out is almost complete andprogressing according to plan. During the first six monthsof 2015, the business delivered its first supply of aviationfuel into Indonesia and China and secured its first crudetanks in China
Energy Coal
» Energy Coal delivered a solid performance in a challengingmarket environment, with a 13% year-on-year increase involume
» Volume growth in current markets reflects the strength ofthe Group’s customer franchise and our dominant positionin the market, as both producers and consumers migrate tothe best quality intermediaries
» We continue to establish new long term relationships andpartnerships
» During the quarter we started deliveries under a long termIPP supply contract into India, the fastest growing marketfor energy coal
8 AUGUST 2015
Market Overview – Gas & PowerOversupply in LNG putting downward pressure on prices
Natural Gas Prices Remain Depressed Cumulative Liquefaction & Demand Additions(BCM / Year)
0
50
100
150
200
250
300
350
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Cumulative capacity additions recently started or under construction
Likely additions not yet under construction
Previously likely additions, now at risk of delays
Cumulative demand growth
Source: Company data and Noble Group Research Source: Bloomberg
40%
60%
80%
100%
120%
140%
160%
180%
200%
NBP NYMEX Henry Hub
9 AUGUST 2015
Segment Results – Gas & Power
425.7
507.8
1H2014 1H2015
Volume
(Million MWh)
Revenue
(US$MM)
308 324
1H2014 1H2015
Profit Before Interest & Tax
(US$MM)
167
100
1H2014 1H2015
Energy Solutions
» Continued solid performance in our Energy Solutionsbusiness, although margins were impacted by lowervolatility and declining electricity prices across the NorthAmerican retail energy market
» From a sales perspective, all regions performed well withtrading opportunities in the Mid-West and North-East UScontributing positively to operating income
» NAES is tracking consistently with its 2014 performanceand slightly above 2015 plan
Gas & Power
» Operating income for Gas & Power benefitted from new dealsin LNG and successful risk management around our tradeflows, increasing 90% vs Q1 2015
» The decline in year-on-year profitability is primarily due tothe exceptional performance recorded in 1H 2014 duringextreme market conditions caused by the Polar Vortex
» European Power & Gas suffered operating losses, butprogress has been made in repositioning the business byrationalizing and focusing on core activities under newleadership
(1) MMBTu to MWh conversion based on market heat rates
10 AUGUST 2015
Market Overview – MetalsPrices under pressure due to rising supply and slowing demand
40%
50%
60%
70%
80%
90%
100%
110%
120%
130%
140%
Aluminum Premiums(MW US Transactions)
Aluminum LME
Source: Bloomberg
70%
75%
80%
85%
90%
95%
100%
105%
110%
115%
120%
Copper Lead Zinc
Collapse in Aluminum Premiums LME Metals Price Trends
Source: Bloomberg
11 AUGUST 2015
Market Overview – Carbon Steel MaterialsIncreasing supplies of iron ore from Australia keeping prices under pressure, while China ramps up steel exports
China’s Increasing Steel Export Volumes(Thousand Tonnes)
300
400
500
600
700
800
900
1,000
1,100
Volume 2 Month Moving Average
Source: General Administration of Customs
Continued Decline in Iron Ore Prices(Iron Ore Delivered to Qingdao. US$/Tonne)
Source: Bloomberg
40
60
80
100
120
140
160
180
12 AUGUST 2015
Segment Results – Mining & Metals
17.220.0
1H2014 1H2015
Volume
(Million Tonnes)
Revenue
(US$MM)
6,5407,090
1H2014 1H2015
Profit Before Interest & Tax
(US$MM)
187
3
1H2014 1H2015
Metals
» Volumes in Metals grew close to 100%, driven by the newphysical tonnage in alumina and bauxite; howeverrevenue grew at a slower rate due to price declines
» Although a well established franchise, our aluminumbusiness had a very difficult quarter as premiums formetals in key distribution locations weakened sharply,impacting the overall business and resulting in a loss
» The copper business performed strongly as a result ofstrong customer growth and associated volumes amidbroader copper market weakness. Overall volumes inCopper grew 30% year-on-year
Carbon Steel Materials
» Volumes in Carbon Steel Materials grew 10% year-on-year,but revenues fell in line with the overall price declines iniron ore and metallurgical coal
» Price declines are impacting the entire industry, with allplayers under margin pressure, resulting in a 75% year-on-year decline in operating income
» Despite its challenges, Carbon Steel Materials continues toexpand its supply relationships, signing a significant twelvemonth coking coal off-take agreement with a tier 1 mine
» Territory Resources is now in the final stages oftransitioning to a care-and-maintenance program
13 AUGUST 2015
Segment Results – Corporate
» The Corporate & Others Segment incorporates the Logistics business as well as the investments in our major associates and
joint ventures which include Noble Agri Limited (“NAL”), Yancoal Australia Limited (“Yancoal”), X2 Resources Limited (“X2”)
and Harbour Energy (“Harbour”)
Performance of Major Associates & Joint Ventures
» US$124 million of the total US$142 million in the Group’s share of losses of Joint Ventures and Associates for the six months
ended 30 June 2015 is included in this Segment, the vast majority of which reflects the first six months performance of Noble
Agri Limited (NAL)
» NAL achieved a key milestone with the hiring of Matt Jansen as CEO, who has over 25 year of experience in the industry.
Matt’s initial focus will be on improving the profitability of NAL, with a particular focus on the Sugar Mills
» The first six months of 2015 was challenging for NAL, as heavy losses in its Sugar Mills and continued challenges in Grain &
Oilseeds (G&O), offset the positive performance of the Softs businesses.
» Sugar prices have fallen over 60% since 2010. The declines in sugar and ethanol prices combined with low crushing volumes
due to heavy rains, resulted in losses for the Sugar Mills . G&O showed significant turnaround in Q2 2015 compared to Q1
2015, but our profits in China were impacted by mark to market changes on forward sales made in previous quarters which
will be reversed as we make deliveries. The business also experienced challenges in Brazil and South Africa
» Yancoal continues to make good progress in rationalizing costs with a major focus on the development of the second phase of
the very significant low cost open cut Moolarben resource
» X2 and Harbour Energy continue to actively evaluate investment opportunities
Logistics
» Freight rates continue to trade at historic lows, those difficult market conditions and counterparty non performance have
continued to impact profitability
14 AUGUST 2015
Segment Results – Corporate (cont’d)
Yancoal & Gloucester Coal Merger
» Yancoal is one of the largest pure-play thermal and metallurgical coal exporters in Australia
- Large reserve and resource base with 7 operating mining complexes in 2 of the largest coal producing areas in Australia
- Ownership of critical port infrastructure which allows for future expansion
» The Group acquired its stake in Yancoal via a sale of 100% of the Group’s shares in Gloucester Coal into Yancoal Australia
» The initial carrying value of our stake in Yancoal upon completion of its cash and scrip merger with Gloucester Coal in 2012was US$825 million - over US$500 million in excess over current book value - which was validated by third party valuationexperts
Yanzhou Coal Mining Company
Noble Group
Yancoal Australia
Gloucester Coal
100%
78.0% 13.2%
Post Merger Structure (at Inception) Summary Transaction Terms
» Yancoal Australia purchased all of Gloucester’s ordinary sharesat a consideration implying a price of A$10.21 per share ofGloucester
» Noble received:
- Shares in the Yancoal merged company
- Special dividend of A$0.47 per share prior to the effectivedate of the merger
- Capital return of A$2.68 per share 6 months after themerger is implemented
- Total cash of US$417 million
- Inter-company loan repayment of US$361 million
15 AUGUST 2015
Segment Results – Corporate (cont’d)
Yancoal Accounting Treatment
» Yancoal is recognized as an associate on the Group’s balance sheet based on relevant IFRS rules as we are deemed to havesignificant influence
» IFRS stipulates that the existence of significant influence by an investor is usually evidenced in one or more of the followingways:
- representation on the board of directors or equivalent governing body of the investee
- participation in the policy-making process
- material transactions between the investor and the investee
- interchange of managerial personnel
- provision of essential technical information
» Yancoal is a long-term investment for the Group with William Randall, Noble Group’s President on the Board of Directors, asubstantial long-term off take agreement and regular dialogue on potential partnership activities
16 AUGUST 2015
Segment Results – Corporate (cont’d)
Yancoal Market Trading Summary
» Yancoal shares are not regularly traded in the market with a 9% free float
» 78% owned by Yanzhou Coal Mining Company, which is ultimately majority owned by the Shandong Provincial Government
» Long-term financial support underpinned by the Chinese government’s commitment to Australian Foreign Investment ReviewBoard, and to Yancoal to provide ongoing operational support and ensure solvency
Shares (MM)
% of shares outstanding
Value (US$’000)
Free Float 87.9 8.84% 7,852
Daily traded volume (3 month average)
0.14 0.01% 13
Daily traded volume (12 month average)
0.31 0.03% 27
Summary Trading Statistics
Ownership Structure% of shares outstanding
Yanzhou Coal Mining Co Ltd 78.0%
Noble Group Limited 13.2%
Free Float 8.8%
Ownership Structure
0.0
0.5
1.0
1.5
2.0
2.5
3.0
Value Traded since January 2014
(A$MM)
Source: Bloomberg
17 AUGUST 2015
Segment Results – Corporate (cont’d)
Yancoal Valuation
» Noble’s valuation model incorporates a conservative price curve compared to broker consensus
» Price curves are established based on broker reports and market consensus and follows a strict methodology andgovernance policy – note that all price curves were reviewed by PwC as part of the assurance review
» Key valuation parameters are largely sourced from third parties
» The valuation model and all parameters are updated and reviewed on a quarterly basis
Key Valuation Parameters
Inputs Sources
WACC 9%
Coal Price CurveBased on broker reports, market consensus & fundamental research
ProductionVolume
Short-term plan from Yancoal; long-term plan from BDA2 and revised by Noble
Product Mix From Yancoal
Cost structure From Yancoal, and verified with market sources
Capex From Yancoal
FX Curve Market observable forward curve from Bloomberg
Yancoal Enterprise Value
(US$BN)
4.3
6.6
Current market implied enterprise value
Implied enterprise value from Noble balance sheet
valuation
(1) As of 3 August 2015(2) Long-term plan provided by Behre Dolbear Australia (“BDA”, a mining consulting firm) during its review of Yancoal operating
assumptions in 2012, and have been further updated regularly, when relevant, based on our understanding of changes to the mine plans since the BDA’s report was issued.
(1)
18 AUGUST 2015
825 813
678
322 312 306
At Closing 2012 2013 Dec 14 Mar 15 Jun 15
Segment Results – Corporate (cont’d)
Yancoal Valuation and Recognition
» The associate value of Yancoal has declined from US$825 million upon closing of the merger in 2012 to US$306 million asof 30 June 2015 due to the losses incurred by Yancoal and impairments
» The valuation of Yancoal is reviewed by our auditors
Yancoal Associate Carrying Value on the
Group’s Balance Sheet
(US$MM)
Yancoal Valuation Range and Recognition
(US$MM)
462 462
435
326331
302
31 Dec 14 31 Mar 15 30 Jun 15
Valuation Range
Carrying value on Noble’s Balance Sheet
322312
306
19 AUGUST 2015
Segment Results – Corporate (cont’d)
Yancoal Valuation Sensitivity
Price Curve Change
Ch
an
ge
in
WA
CC
(10.0%) (5.0%) 0.0% 5.0% 10.0%
(1.0%) ($157) ($27) $104 $234 $364
(0.5%) ($200) ($74) $50 $175 $299
0.0% ($239) ($119) $0 $120 $239
0.5% ($276) ($161) ($47) $68 $182
1.0% ($311) ($200) ($91) $19 $129
WACC vs Price Curves
(US$MM)
FX Rate Change
Ch
an
ge
in
WA
CC
10.0% 5.0% 0.0% (5.0%) (10.0%)
(1.0%) ($132) ($19) $104 $240 $392
(0.5%) ($175) ($68) $50 $181 $326
0.0% ($216) ($113) $0 $125 $264
0.5% ($254) ($155) ($47) $73 $207
1.0% ($289) ($194) ($91) $25 $153
WACC vs FX Rates
(US$MM)
20 AUGUST 2015
(US$MM)Less than 4
YearsMore than 4
YearsTotal
31 Dec 2014 2,469 2,098 4,567
30 Jun 2015 2,058 2,022 4,080
Maturity Profile Net Fair Value At 30 June 2015 (US$MM)
» Decline in net fair value Net fair value gains on commoditycontracts and derivative financial instruments (“net fair value”)declined by US$487 million. Longer dated net fair value, definedas greater than 4 years, was substantially unchanged from 31December 2014
» Consistent cash realization For the six months to 30 June2015, cash realization on the portfolio of long term physicalcommodity contracts slightly exceeded expectations, asconfirmed by the Group’s back testing activities
» US$10.8 billion in undiscounted and unreserved valueUndiscounted and prior to the provision of further performancecontingency reserves, net fair value stood at approximatelyUS$10,800 million at 30 June 2015, compared to the balancesheet carrying value of US$4,080 million
Net Fair Value Profile
10,800
5,680
4,080
1,600
Undiscounted & Unreserved
Discounted & Unreserved
Further Performance Contingency
Reserves
Net Fair Value (Carrying
Value)
21 AUGUST 2015
Net Fair Value Profile (cont’d)
Change in Level 3 Balances
» Reduction in Level 1 & 2, primarily due to the roll-off ofshort term contracts in Oil Liquids and cash realization
» Level 3 increase due to the transfer of existing contractsduring the first quarter in accordance with the Group’saccounting policies as a result of reduced dataobservability
(US$MM) 31 Dec 14 30 Jun 15
Level 1 & 2 3,521 2,898
Level 3 1,046 1,182
Group Total 4,567 4,080
(US$MM)Six Months Ended
30 Jun 2015
Opening balance as at 1 Jan 2015 1,046
Additions 2
Disposals (35)
Realized during the period (11)
Unrealized gain included in the income statement
28
Transfers in to Level 3 152
Transfers out of Level 3 -
At 30 Jun 2015 1,182
Level 1 & 2 represents US$2.9 billion (71%) oftotal Net Fair Value. Valuation basis;
» Level 1; quoted (unadjusted) prices in active marketsfor identical assets or liabilities
» Level 2; valuation techniques for which all inputs inaggregate are significant to the fair value measurementare observable, either directly or indirectly
Level 3 represents US$1.2 billion (29%) of totalNet Fair Value. Valuation basis;
» Level 3; valuation techniques for which one or moreinputs that are significant in aggregate to the fair valuemeasurement are unobservable
22 AUGUST 2015
Net Fair Value Profile (cont’d)
» Net fair value gains on commodity contracts andderivative financial instruments (“net fair value”)comprise less than 23% of Noble’s total assets
» Of these, 71% are Level 1 & Level 2 with eitherobservable market prices or values based on observablemarket data
» Only 29% of the net fair value (representing only 7% ofNoble’s total assets) are Level 3 contracts wherevaluation techniques for which one or more inputs thatare significant in aggregate to the fair valuemeasurement are unobservable
Total Assets US$17.5 billion(1)
Net Fair Value US$4.1 billion
Yancoal2%
Agri8%
Fixed Assets5%
Inventories14%
Trade Receivables
23%
Prepayment & Other
Receivables7%
NAES2%
Level 1 & 216%
Level 37%
Cash & Equivalents
8%
Other Mine Properties
<1%
Other Assets
8%
Net Fair Value Gains on Commodity Contracts & Derivative Financial Instruments and Total Assets
(1) Total Assets net of fair value losses on commodity contracts and derivative financial instruments
23 AUGUST 2015
Net Fair Value Profile (cont’d)
Region & Type(As of 30 June 2015)
Segment(As of 30 June 2015)
Energy51%
Mining & Metals
35%
Gas & Power
14%Asia
Pacific50%
Americas27%
EMEA17%
Financial Hedges
6%
» Decline in net fair value on commodity contracts and derivative financial instruments (“net fair value”) to US$4,080million at 30 June 2015, compared to US$4,567 million at 31 December 2014
» The majority of net fair value as of 30 June 2015 is comprised of physical commodity contracts in thermal coal,metallurgical coal and coke
» Geographic split of net fair value, based on origination markets, at 30 June 2015 reflects the Group’s strong presencein Asia Pacific
» The Americas are largely represented by the Group’s Energy Solutions, Gas & Power and Oil Liquids businesses
» Financial hedges reflect the value of financial instruments, including futures, swaps and options, used for hedgingpurposes and will fluctuate period to period based on commodity price movements
24 AUGUST 2015
What is an Inventory Sale?
» The Group utilizes a readily marketable inventory sales program which is fully non-recourse to the Group
» The structure incorporates an option (not an obligation) for the Group to repurchase the inventory
» As at 30 June 2015, the Group’s balance was US$1.1 billion. The average balance through the year is approximately US$1 billion with the highest having been US$1.5 billion and the lowest at US$800 million during the six months to 30 June 2015
» The structure conforms to IFRS standards for “true sale”
» There is no profit associated with entering into an inventory sale transaction
» Key Terms & Considerations
- Readily marketable liquid inventory
- Inventory cannot be designated for onward sale to a customer
- Inventory is exchange deliverable, stored in exchange approved warehouses and/or traded in liquid markets
- Option to repurchase (not an obligation)
- Both physical commodity contract and underlying hedge also sold to the counterparty
Inventory Sale Balance(US$MM)
1,065
861
1,293
979
1,256
978
1,476
1,094 1,109 1,093
1Q 14 2Q 14 3Q 14 4Q 14 Jan '15 Feb '15 Mar '15 Apr '15 May '15 Jun '15
25 AUGUST 2015
Cost Reduction Initiatives
» The Group has targeted cost savings of approximately US$70 million via various initiatives:
- Headcount and office reductions in non-core businesses, including: closing of New Orleans scrap metals business,downsizing of Indonesian office, closing Hamburg and Oslo offices, closing Turkey chrome business, and rationalizingoffices in India
- Rationalize support functions post-Agri: Headcount reductions across Finance, IT, and other support functions
- Reduction in discretionary spend: including vendors, travel and entertainment, and data/subscriptions
- Reduction in Group finance costs: Reduction due to the lower cost May 2015 revolving credit facilities and theredemption of US$735 million in fixed rate bonds
» Total Headcount reductions: Target reduction of 16% of total headcount - 62 reductions as at 30 June 2015, 187 reductionsundertaken during July and August, with a further 62 reductions to be processed during the remainder of the year
13,500
1,564
30 Sep 14 2015 Target
Pre and Post Sale of Noble Agri
(Headcount)Headcount Development
1,875 1,813
1,564
62
249
31 Dec 14 Reduction 30 Jun 15 Reduction 2015 Target
26 AUGUST 2015
Net Debt Movement for the Nine Months Ended 30 Jun 2015(US$MM)
(1) Excludes change in cash with futures brokers not immediately available for use and includes taxes paid and interest received(2) Excludes bank debt additions/repayments and redemption of senior notes and includes interest paid on financing activities and other
Cash Flow and Net Debt post Noble Agri Sale
» Net debt decrease of US$1.1 billion following sale of 51% in Noble Agri. US$3.3 billion proceeds from disposition has beenrecycled and redeployed in our growing asset light businesses
» Increase in working capital relates primarily to investments in our Oil Liquids, Gas & Power and Metals businesses
» Q4 2014 investment in Jamalco bauxite mining and alumina refining joint venture. Other investments made to furtherenhance our distribution supply chain networks
» US$320 million returned to shareholders, including US$202 million special dividend, US$46 million 2014 interimdividend and US$72 million of share repurchases in Q2 2015
3,365
5,411
4,330
2,028
3,327
842
2,151 131 261 320
192 33 2,302
Adjusted net debt at 30 Sep 2014
Net debt at 30 Sep 2014
Proceeds from NAL disposal
Operating profit before
change in working capital
Increase in working capital
Acquisition of Jamalco
Other net investing activities
Dividends & share
repurchases
Other net financing activities
Net foreign exchange
differences
Net debt at 30 Jun 2015
RMI Adjusted net debt
(1)
(2)
27 AUGUST 2015
Working Capital
» Six months increase in working capital of US$1,405 million, with US$453 million relating to Q2 2015
» Increases in trade receivables and inventories driven partially by growth in businesses, particularly in Oil Liquids and Energy
Coal, including the investment in working capital for new European crude refinery deal in Q2 2015
» Readily marketable inventories (“RMI”) increased to US$2,302 million at 30 June 2015 (US$2,169 million at 31 December
2014), accounting for 95% of total inventory
» As of 30 June 2015, Noble’s off balance sheet readily marketable inventory sales program stood at US$1.1 billion.
» Trade and other payables returned to normalized levels in Q1 2015, following a ramp-up in Q4 2014. Access to credit remainsstrong and supplier credit lines have been largely unaffected
» US$487 million reduction in net fair value gains on commodity contracts and derivative financial instruments largely due tothe roll-off of short term contracts in Oil Liquids and cash realization
(US$ MM)30 Jun
201531 Mar
201531 Dec 2014
Trade receivables 3,970 3,590 3,704
Prepayments, deposits and other receivables 1,244 1,366 1,557
Inventories 2,423 2,318 2,287
Trade and other payables and accrued liabilities (6,339) (6,523) (8,142)
Net fair value gains on commodity contracts and derivative financial instruments
4,080 4,174 4,567
Working Capital 5,378 4,925 3,973
6,824 6,719
8,142
6,5236,339
Q2'14 Q3'14 Q4'14 Q1'15 Q2'15
Trade & Other Payables (US$MM)
28 AUGUST 2015
Net Debt Movement for the Three Months Ended 30 Jun 2015 (US$MM)
(1) Excludes change in cash with futures brokers not immediately available for use and includes taxes paid and interest received(2) Excludes bank debt additions/repayments and redemption of senior notes and includes interest paid on financing activities and other
Cash Flow and Net Debt for Q2 2015
» Net debt increase of US$357 million from 31 March to 30 June 2015, in line with working capital growth
» Operating profit before working capital changes during the three months ended 30 June was generated primarily fromtrading flows in the Energy Segment
» Increase in working capital due to increased trade receivables and inventories, the normalization of trade and otherpayables and accrued liabilities, offset by a reduction in net fair value gains on commodity contracts and derivativefinancial instruments
» Net cash used in investing activities includes investments made in the US and Southeast Asia to enhance our distributionsupply chain network, and is a substantial reduction following sale of 51% stake in Noble Agri
3,973 4,330
2,028
236 380 70 72 68 3 2,302
Net debt at 31 Mar 2015
Operating profit before change in working capital
Increase in working capital
Net investing activities
Share repurchases
Other net financing activities
Net foreign exchange
differences
Net debt at 30 Jun 2015
RMI Adjusted net debt
(1) (2)
29 AUGUST 2015
Capital Structure
(US$ MM)30 Jun
201531 Dec
201430 Jun 2014(2)
Gross debt 5,754 3,971 5,519
Less Cash (1) 1,424 904 722
Less Readily marketable inventories (“RMI”) 2,302 2,169 2,368
Adjusted net debt 2,028 898 2,429
Net debt/Capitalization(3) 45.5% 37.8% 47.2%
Adjusted net debt/Capitalization(3) (4) 28.1% 15.1% 31.2%
Non-current assets 4,005 4,066 4,073 (5)
(1) Cash includes cash balances with brokers not immediately available for use(2) Excludes Agricultural operations’ assets and liabilities held for sale(3) Capitalization = net debt + shareholders’ equity (unrelated to the market value or share price movement of the Group)(4) Adjusted for RMI(5) Adjusted for 49% of NAL’s net assets as of 30 June 2014
49.9% 48.9% 49.7%
37.8%
45.5%
FY2011 FY2012 FY2013 FY2014 30 Jun 2015
Net Debt/Capitalization (3)
» As of 30 June 2015, 48% of the Group’s debt portfolio comprised debt funded in the international debt capital markets
» On 5 August 2015, the Group redeemed a total of US$735 million in principal amount of the 4.875% senior notes due 2015and 6.625% senior notes due 2020 at par. The redemption was financed with existing cash and bank facilities
» Net Debt to Capitalization stood at 45.5%, as of 30 June 2015 and 28.1% adjusted for RMI. The Group is committed to itsinvestment grade rating
30 AUGUST 2015
Liquidity Access and Debt Profile
» Total committed and uncommitted bank facilities as of 30 June 2015 stood at US$15.2 billion, comprising US$4.6 billionin committed facilities and US$10.6 billion in uncommitted facilities
» 39% of Group debt maturing after 1 year as we manage our debt profile to reflect our asset light balance sheet, particularlyfollowing the sale of the 51% stake in Noble Agri
» Liquidity headroom(1) of US$2.9 billion, which is 55% of working capital and 85% of total debt less RMI
Debt Maturity Profile(US$ billion)
Assured Access to Liquidity
(1) Readily available cash and unutilized committed facilities(2) 31 Dec 2013(3) 30 Jun 2015
2.0 2.3
3.5
0.80.7
0.61.7 1.6
1.61.6
0.3
31 Dec 13 31 Mar 15 30 Jun 15
< 12 months 13-24 months
25-60 months > 5 years
4.9
6.1(US$ billion)
30 Jun
2015
Available Committed Bank Lines 1.8
Cash & Cash Equivalents 1.4
Less: Cash Restricted with Brokers (0.3)
Liquidity Headroom 2.9
As % of Working Capital 54.6%
As % of Total Debt less RMI 85.1%
5.7
Asset Liability Profile
Pre-NAL Sale Post- NAL Sale
62%53%
38%47%
80%69%
20%
31%
ST Liabilities LT Liabilities & Equity
ST Assets LT Assets
(2) (3)
31 AUGUST 2015
» Group VaR at current levels demonstrates the Group’s conservative approach to risk in current markets
» VaR derived from 95% confidence level, 75 trading days, exponentially weighted so that last 12 days carry half of theweight
» Reported daily along with other risk management measures
Value at Risk
As a % of Shareholders Equity
0.35%
0.45%
0.56%
0.39%
0.24%
0.39%
0.36%
0.31%
0.21%
0.34% 0.34%
0.38%
0.33%
0.38%
0.34%
0.25% 0.24%
0.28%
Jan 14 Feb 14 Mar 14 Apr 14 May 14 Jun 14 Jul 14 Aug 14 Sep 14 Oct 14 Nov 14 Dec 14 Jan 15 Feb 15 Mar 15 Apr 15 May 15 Jun 15
PwC Assurance Review
33 AUGUST 2015
Ms. Lee is the Executive Chairman of Hysan Development Company Limited, an Independent Non-Executive Director of Cathay Pacific Airways Limited,CLP Holdings Limited and Hang Seng Bank Limited (all listed on the Hong Kong Stock Exchange); and is an Independent Non-Executive Director ofHSBC Holdings PLC and The Hongkong and Shanghai Banking Corporation Limited. She has held senior positions with a number of global financialinstitutions involved in investment banking and funds management over the past thirty years. She has been an Executive Director of Citicorp InvestmentBank Limited in New York, London and Sydney; and Head of Corporate Finance at Commonwealth Bank of Australia and Chief Executive Officer ofSealcorp Holdings Limited, both based in Sydney. She also served as a member of the Australian Government Takeovers Panel and numerous listed andunlisted companies in Australia. Ms. Lee holds a Bachelor of Arts Degree from Smith College, United States of America, and is a Barrister-at-Law inEngland and Wales and a member of the Honourable Society of Gray’s Inn, United Kingdom.
Irene Yun Lien Lee, Independent Non-Executive Director. Joined 1 March 2012
Mark to Market Committee
Mr. Brough is an Independent Non-Executive Director of GuocoLeisure Limited (listed on the Singapore Stock Exchange); and a Non-Executive Directorof Habib Bank Zurich (Hong Kong) Limited, a Hong Kong restricted licence bank. He stepped down as the Chairman and CEO of Emerald PlantationHoldings Limited (“EPHL”) on 1 April 2015 and resigned from the EPHL Board on 15 April 2015; and was an Executive Director and Interim CEO ofGreenheart Group Limited (listed on the Hong Kong Stock Exchange) until he was re-designated as a Non-Executive Director of the company effective 2April 2015. Mr. Brough came to Hong Kong in 1983 to join KPMG, where he became a Partner in 1991, and later became the Senior Partner of Hong Kong.He retired from KPMG in 2012. Mr. Brough is an associate of the Institute of Chartered Accountants in England and Wales, the Hong Kong Institute ofCertified Public Accountants and the Hong Kong Securities and Investment Institute.
Paul Jeremy Brough, Independent Non-Executive Director. Joined 6 May 2015
Joined 20 June 2013. Mr. Margolis is a former diplomat, investment banker and businessman with more than 30 years’ experience in Greater China. Hecurrently holds senior advisory roles with the Holdingham Group, Rothschild (Investment Bank) and Milestone Capital. Subsequent to his diplomaticservice with the Foreign and Commonwealth Office in London, Beijing, Paris and Hong Kong, Mr. Margolis pursued a private sector career in Hong Kong.He was Managing Director, Corporate Finance at Smith New Court Far East, and Head of Strategy and Planning for Asia Pacific at Merrill Lynch. Mr.Margolis served on the boards of China Oilfield Services, Hsin Chong Construction (both listed on the Hong Kong Stock Exchange) and Bank of ChinaInternational Investment Management Company; and was a member of the Hong Kong Stock Exchange Listing Committee and the Hong Kong Securitiesand Futures Commission Advisory Committee. From 2003 to 2011, he was the Regional Director, North East Asia for Rolls-Royce. Mr. Margolis wasawarded the CBE (Commander of the Order of the British Empire) in 2011 for services to British business in China.
Richard Paul Margolis, Independent Non-Executive Director. Joined 20 June 2013
Mr. Pratt was the Executive Chairman of Swire Pacific Ltd from February 2006 until his retirement in March 2014. He was also Chairman of CathayPacific Airways Limited, Hong Kong Aircraft Engineering Company Limited, John Swire & Sons (H.K.) Limited and Swire Properties Limited, and aDirector of Swire Beverages Limited, Air China Limited and The Hongkong and Shanghai Banking Corporation Limited. He joined the Swire group in1978 and has worked with the group in Hong Kong, Australia and Papua New Guinea. Mr. Pratt was awarded the CBE (Commander of the Order of theBritish Empire) in 2000 for Services to the Community in Papua New Guinea. Mr. Pratt is an Independent Non-Executive Director of Johnson ElectricHoldings Limited, PureCircle Limited and the Grosvenor Group.
Christopher Dale Pratt, Independent Non-Executive Director. Joined 3 June 2014
34 AUGUST 2015
» Evaluate whether the Group’s valuation of certain long-term physical commodity contracts at 30 June 2015 complies with IFRS 13 “Fair Value Measurement” and standard industry practicesMandate
Scope
Coverage
Summary of PwC Review
PwC assurance review focused on the majority of long-term physical commodity contractsincluded in Level 2 and Level 3 net fair value. Engagement performed in accordance with theSingapore Standard on Assurance Engagements 3000
Overall FinalConclusion
» Counterparty contracts reviewed represented as at 3o June 2015:
» 81% of the value of derivative contracts with a duration of at least 2 years
» 98% of the value of the Level 3 net assets
» Engagement scope defined and process overseen by new independent Board Committee
» Counterparty by counterparty contract valuation reviews performed
» Review covered 12 areas, including governance and controls, and 35 relevant criteria. Relevant Criteria were reviewed on a contract by contract basis
» Assessed the completeness and appropriateness of the Relevant Criteria
» “….the individual valuations and overall valuation of the contracts included in the Group’s consolidated balance sheet as at 30 June 2015 comply, in all material respects, with the Relevant Criteria”; and that
» the “Relevant Criteria represent those factors which are necessary for management to ensure that the MTM valuations are derived in a manner which is in compliance with the relevant requirements of IFRS 13 as well as standard industry practices”
35 AUGUST 2015
Coverage of PwC Review81% Coverage of “Undiscounted and Unreserved” Net Fair Value
8.7Bn
10.8Bn
PWC Reviewed Total
98% Coverage of the Value of the Level 3Net Assets
1.2Bn 1.2Bn
PWC Reviewed Total
81% Coverage of the Value of Derivative Contracts with a Duration of at Least 2 Years
2.2Bn
2.7Bn
PWC Reviewed Total
» Level 3 represents US$1.2 billion (29%) of total NetFair Value, which are valued using techniques forwhich one or more inputs that are significant inaggregate to the fair value measurement areunobservable
» Why have we focused on Level 3 and greater than 2years?
- Typically these are the points where theunobservable inputs start to become material
36 AUGUST 2015
Areas Addressed in PwC Review
12 areas reviewed by PwC to assess contract by contract valuations at 30 June 2015 incompliance with IFRS 13 and standard industry practices
In total, 35 relevant criteria reviewed, with detailed procedures performed to assesscompliance with the relevant criteria, to support PwC opinion
Areas Reviewed
Adoption of IFRS 13 Yield Curves Volumes Foreign Exchange
Governance & Oversight
Own Credit SpreadFuture Commodity
PricesModel Reserves
Policies Counterparty CreditSpread
Freight MTM Values
37 AUGUST 2015
Steps to Assurance
Volumes Price
» Checked the volume forecast to the contract (amounts, periodetc)
» Checked the volume forecast to the mine's forecast given to usfrom the business
» Challenged the volume forecast with the business and supportfunctions
» Checked that adjusted volumes did not exceed the proven andprobable reserves under the most recent JORC-compliant report
» Looked at recent production volumes (volume back-testing) toassess whether the forecast production volumes are consistent(where appropriate)
» Checked the margin to the contract
» Checked that the right benchmark curve had been applied(including checking the derivation of the curve, includingchecking the source of external inputs where available)
» Discussed with the business and modeling team any adjustmentsto the forward curve for the relevant benchmark (qualityadjustments)
» Checked the arithmetical application of the margin to thevolumes, which gives the gross cash flow
Discount Rates Reserves
» Checked the derivation of the risk-free curve (including checkingthe source of external inputs where available)
» Checked the addition of own credit spread (again includingchecking the source of external inputs where available)
» Checked that the counterparty spread matched the right curve forthe counterparty rating (again, including checking the source ofexternal inputs where available)
» Checked that the right discount factor was then applied
» Checked the reserves were consistent with the MTM dealsummary
» Challenged the business and modelers on the derivation ofreserves and the explanation for them
» Checked all reserves and valuation adjustments that should beconsidered as part of the MTM valuation have been considered
Q&A
Investor Day SingaporeMonday, 17th August 2015
14:00 at the Ritz Carlton, Millenia Singapore Ballroom
Details to follow. A webcast will also be available.
