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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Spekulatius who wrote (45352)	11/10/2011 8:56:33 AM
From: Sergio H	Respond to of 78704

ADM also missed on earnings due to rising commodity prices despite increased sales.

To: Spekulatius who wrote (45352)	11/10/2011 1:26:34 PM
From: E_K_S	Read Replies (2) \| Respond to of 78704

Noble CEO Quits After First Loss in 14 Years By Yuriy Humber - Nov 9, 2011 5:11 PM PT bloomberg.com From the article:"...The loss and Leiman’s resignation follow a drop in global commodities demand since June on concern that Greece and other euro-zone members may default on debt and China’s economic growth has slowed. Noble had reported four straight quarters of year-on-year earnings increases before yesterday. “We’re disappointed with the performance, but we believe it is transitory in nature,” Leiman, 45, said on a conference call before the resignation was announced. The loss was based on “unrealized mark-to-market losses” created in “very volatile market conditions,” he said...." . <snip> "...jump in cotton prices in the first half of the year, followed by a recent drop, led farmers to default on contracts, especially in the U.S., Noble said in the statement. Noble had to honor its obligations to cotton buyers by purchasing in the spot market, which eroded profit margins, the company said. Earnings were also hurt by Europe’s Certified Emission Reductions, or carbon credits, dropping in price to as low as 6.35 euros on Nov. 3 from 13.70 euros on March 16. Noble’s remaining risk of losses on carbon credits is “very small,” Leiman said...." ----------------------------------------------------------------------------- It looks like the total gross loss (based on last years reported earnings) from this "cotton" event was somewhere around $170M. They ended up booking a $17M loss for the quarter. I am not too sure how you hedge against this w/o going too long (or short) w/ future commodity contracts. The company is already very leveraged w/ debt and to be leveraging commodity future contracts can run you into BK very fast. Several of my Brazil commodity AG plays booked currency losses again because of the recent recovery of the U.S. dollar. I expect some of my Canadian companies to experience this too as they spend their strong $CAN's to buy foreign assets w/ their LT debt denominated in $US. This is a formula for disaster if/when the $US rises. All of a sudden that LT debit (in $US) becomes more expensive to pay off. Fortunately that was not the case (yet) for NOBEL. From what I can tell they own very little $US denominated LT debt which could blow up from a rising $US. EKS