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'Dramatic' sugar price rise spurs hope of Noble Agri revival

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The "dramatic" recovery in sugar prices has put Noble Agri on course for a recovery which is also being spurred by a hiring spree of "senior" personnel, commodities giant Noble Group said.

Singapore-based Noble Group, which is battling criticism of its accounting methods, unveiled a 48% drop to $194m in earnings for the first nine months of 2015, including an acceleration to 84% in the pace of decline in the July-to-September quarter.

The worsened performance reflected a surge to $208m, from $55m, in the loss taken on associates during the nine-month period, with Noble Agri - in which Noble sold a controlling stake to Chinese state-owned crop trader Cofco last year – accounting for the great majority of the hit.

Noble Agri, which has considerable investments in Brazil's key Centre South sugar-producing region, has been badly hit by the "collapse" in prices of the sweetener, which hit a seven-year low of 10.13 cents a pound in New York in August.

Noble Agri "continued to operate at a loss" during the July-to-September period, with the result also undermined by Centre South rains which hampered the "ramp-up of the seasonal [cane] harvest", and lowered the sugar concentrations in the crop that was processed.

Better prospects ahead?

However, the revival since in sugar prices, which stood at 14.71 cents a pound on New York's Ice exchange on Thursday, has improved markedly Noble Agri's prospects.

Noble Group flagged to boost to sugar price prospects from "increased demand" for ethanol in Brazil, where mills have a choice of processing cane into either biofuel or sweetener.

"Domestic Brazilian prices for both hydrous and anhydrous ethanol have recovered 30% since late September" in Sao Paulo state, the Centre South's focal region.

The group also noted forecasts from the International Sugar Organization and sugar trading house Czarnikow of estimates of a world sugar production deficit of 3m-5m tonnes in 2015-16.

And the threat of El Nino-provoked dryness denting output in Thailand, the second-biggest sugar exporter after Brazil, and in India, the second-ranked producer, could further underpin sentiment".

"Current pricing structures are already having an impact on the [Noble Agri] mills' financial performance and could ensure… the mills generating significantly improved results in 2016," Noble Group said.

'Senior business hires'

The group also flagged the boost to prospects from recent hires, since Matt Jansen was in May poached from Archer Daniels Midland, the US-based agricultural trading giant, as chief executive of Noble Agri.

"A number of further senior business hires, who have come on board in the last few weeks, have also been made with the aim of enabling the group to return to profitability while positioning itself to manage its anticipated growth in both volumes and geographic reach," Noble Group said.

The company has made public the appointment of Valmor Shaffer – also hired from ADM - as head of Noble Agri's South American operations, while Marcelo de Andrade has been named as head of sugar, poached from Cargill.

Separately, Noble Group revealed the departure of its chief financial officer, Robert van der Zalm, after a leave of absence related to health reasons.

Paul Jackaman, chief financial officer for Asia, has taken on the group role on an interim basis.

By Agrimoney.com

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