Noble Group - Financial Health, Receivables & Pre-Purchasing

NOBLE GROUP |

Financial Health, Receivables & Pre-purchasing |

Mohd Hazly Abdullah |

CASE STUDY: NOBLE GROUP

Q1: How does Noble’s financial health compare to that of its competitors? Please consider measures of asset efficiency and net margins

Noble is a market-leading global supply chain manager. It operated across 3 core commodity segments – Agriculture, Energy and Metals, Minerals and Ores (“MMO”). It employed a pipeline strategy, taking part in nearly every step of the global supply chain for products in those segments. The Agriculture segment traded in grains, coffee, cotton, cocoa, sugar, pulses and fertilizer; the Energy segment traded in coal, fuel oil, ethanol, petrochemicals and carbon credits; and the MMO segment traded in iron ore, ferro alloys, chrome ore, manganese ore, aluminum and steel. Noble also operated a Logistics Segment to facilitate trade of these commodities. All of Nobel’s segments boasted rising revenues in response to the ever-increasing demand for commodities.

In answering the question on Noble’s financial health against its competitors, we have to look at what common information is available across Noble and its competitors for meaningful comparisons. Noble lists Cargill, Archer Daniels Midland (ADM), Bunge and Olam as its competitors. Whilst there is detailed financial information for Noble in the form of the Income Statement and the Balance Sheet, there is limited information for its 4 competitors. Data on revenues, gross profit, net earnings/income, current assets, total assets, current liabilities and total liabilities for 2005-2007 are available across the 5 companies. Thus, comparisons on asset turnover, working capital, gross margin and profit margin are possible across the companies. The following is a brief explanation of the 4 measures:

Asset Turnover is simply the amount of sales or revenues generated per dollar of assets. The Asset Turnover ratio is an indicator of the efficiency with which a company...