Can Noble convince investors it is back on track?

Published November 16, 2011

By FELDA CHAY


REPORTS that Noble Group is talking to former Goldman Sachs Asia-Pacific co-president Yusuf Alireza to head the company, as well as a share buyback undertaken by the group on Monday, appear to have done little to lift market confidence in the company. And there are very good reasons why investors are wary, given the double whammy it delivered last week.


On Thursday, the commodities trader surprised investors by reporting a third-quarter loss of US$17.5 million - its first quarterly loss in 14 years. It then dropped another bombshell: that the man it placed in the position of chief executive as recently as January last year had decided to step down.

The market's response to the two shocks was swift and furious. Noble's shares fell 26.5 per cent on Friday, wiping $2.8 billion off its market value. And it hasn't recovered by much since its great fall. At yesterday's closing price of $1.195, the stock has recovered just 1.5 cents from last Friday's close of $1.18.

Market talk has it that what really got investors jittery was the resignation of Ricardo Leiman from the CEO post, which comes at a time when management stability is key, given the tumultuous global economic environment, the quarter of losses, and that Noble is trying to hive off its agriculture assets for a separate listing - which it says is still on track.

Noble must have known this, and this may also be why it has very quickly engaged in talks with a big gun to lead the company. But it will take more than just talks, or even the hiring of Mr Alireza or another individual as CEO, to convince investors that the company is back on track.

This is because Noble has seen a string of key management departures since founder Richard Elman decided it was time to hand over the reins of the business almost two years ago and take a back seat in the organisation.

After vacating the CEO position for Mr Leiman, the founding father of Noble stepped down as executive chairman in September last year and was replaced by Tobias Brown - previously a non-executive chairman of the company. The position of chairman emeritus was then created for Mr Elman.

Mr Brown lasted just two months as executive chairman. In an announcement to the Singapore Exchange, Noble said that his resignation arose from 'the practical realities of running Noble with both an executive chairman and a CEO'.

Noble then said that it will 'identify a suitable candidate as a new non-executive chairman'. In the meantime, Mr Elman would assume that role - which he holds to this day.

Then in January this year, two months after Mr Brown's departure, Noble's long-time chief financial officer Stephen Marzo resigned.

What Noble needs to prove now, therefore, is that it can hire the right people to form its management team and also keep them. The company is now back at square one in trying to find a successor to the 71-year-old Mr Elman, who is now also interim CEO. What he needs to do right now is to ensure that a cohesive and strong team is formed quickly that can lead Noble in the years - and not just months - to come.

And given the perception that he is not one to readily delegate responsibility - as the changes within Noble's top ranks suggest - perhaps the greatest favour Mr Elman can do for the company is also to really do what he said he would: take the back seat as Noble goes forward. - BT