OREANDA-NEWS. Fitch Ratings says that Noble Group Limited's (Noble; BBB-/Stable) net loss in 2015 does not impact its ratings as this was driven by USD1.9bn of non-cash losses, which reduce uncertainties regarding valuations on the company's balance sheet. In addition, the results showed Noble continues to be able to generate cash flow from its operations and is committed to reducing working capital for its metals business.

Noble's ratio of working capital (current assets minus non-debt current liabilities) to total debt
(including 50% of perpetual capital securities as debt) was 0.96x at end-2015, compared with 1.16x at end-3Q15 (end-2014: 1.14x). This is after the company wrote down USD1.06bn of fair-value gains on commodity and other derivative financial instruments after it cut its anchor price for thermal coal to reflect the company's expectations of prolonged weakness in prices.

We estimate the ratio will improve to 1.1x after Noble receives the full USD750m proceeds from the sale of its stake in Noble Agri Limited (Noble Agri), which is expected in March 2016. Despite the impairment, the estimated ratio remains close to our negative guideline of 1.0x (as noted in "Fitch Affirms Noble Group's Ratings at 'BBB-'" dated 13 January 2016). The ratio will then improve to be in line with other investment-grade commodity trading and processing companies. In addition, we believe the impairment reduces uncertainties regarding its valuations of derivative assets on its balance sheet given the more conservative coal price assumptions.

Noble's liquidity has also improved to USD2.16bn (comprising USD1.56bn of unrestricted cash and equivalents and USD0.6bn of undrawn committed facilities) from USD1.9bn at end- September 2015. The improved liquidity is equivalent to 1.2x its inventory level, which we believe is sufficient to cover requirements arising from reasonable commodity price increments. The higher cash balance at the year-end is mainly a result of strong cash flow generated from operations and reduction in working capital for its metals business.

Noble's ratings depends on its ability to maintain adequate access to unsecured committed facilities, and any signs of deterioration could result in negative rating action. Noble will need to refinance USD1bn-1.5bn of maturing committed facilities in May 2016 to maintain its current liquidity position.

Noble reported a net loss of USD1.67bn for 2015, compared with a net profit of USD132m a year earlier. Apart from the USD1.06bn impairment primarily related to its lower anchor coal price, the company also incurred a USD724m non-cash losses on the sale of its 49% stake in Noble Agri and a 49% share of Noble Agri's loss, and another USD178m non-cash loss on supply chain assets.