With shale gas, Noble has stepped into an environmental controversy. Hydraulic fracturing involves pumping millions of gallons of chemically treated water and sand underground to break shale rock and free trapped gas. Environmental groups say the process causes groundwater contamination, and France has banned the practice.
“We fully support society setting enforceable standards that ensure that private benefits do not accrue at a cost to the broader community,” Noble spokesman Stephen Brown says. “We expect no less in the shale gas industry.”
Noble’s problems in the slowing emerging markets, which account for more than 60 percent of the commodities the firm hauls, are more urgent. Elman says his goals have recently shifted from increasing revenue to boosting profit.
“I feel a little bit like China,” Elman says. “We are so big now that just maintaining growth and keeping the company in good health is already quite a challenge.”
Alireza says one of his biggest concerns is the excess capacity of China’s steelmakers and other manufacturers. After years of breakneck expansion, steelmakers can’t sell as much as they produce as global demand falters. As these companies buy less iron ore, the raw material needed to make steel, the price falls, hurting Noble.
Ore at the Chinese port of Tianjin, a global benchmark, fell to a three-year low of $86.70 a dry ton on Sept. 5, compared with $180.50 a year earlier.
Noble has diversified its businesses to minimize the damage from any single market. In 2011, energy accounted for 64 percent of the company’s revenue, agriculture made up 23 percent, and metals, minerals and ores contributed 13 percent.
Last year, Noble’s operating profit from its iron ore and metals business supply chain slumped 64 percent, while its energy operations posted a 59 percent gain. In the first nine months of 2012, Noble’s profit rose 17 percent from a year earlier to $380 million as operating income from its energy supply chain increased 30 percent, offsetting a 53 percent drop in agriculture.
Elman is keeping a close eye on his new chief executive. Four months into his job, Alireza presided over the second-quarter earnings conference call on Aug. 16 while Elman was on vacation. Elman dialed in without telling anyone.
“He did extremely well,” Elman says. “The important thing is, Yusuf is now CEO and that’s his job. Don’t think because I am not the CEO I don’t care about the company. I still care about the company, but I will not interfere with his job.”
Noble’s stock fell 1.9 percent to S$1.275 since Alireza’s appointment in April through Nov. 8, compared with a 15.2 percent drop for Glencore. Noble’s shares peaked at S$2.34 in January 2011.
“Noble has taken one step forward and two steps back on finding a successor,” Agrocorp’s Iyengar says. “Recently, there seems to be some stability on this front.”
Elman placed a bronze sculpture in his 18th-floor lobby a few years ago that reflects his optimism. The 2008 work by China-based Qu Guangci is titled “Everything Is Possible II” and shows a man with a golf club on top of a tree. Elman says the artwork is a message to employees that those who seize opportunities can achieve more than they ever believed was possible.
“His biggest challenge is his legacy,” Iyengar says, “to make sure it lasts.”
The full version of this Bloomberg Markets story appears in the magazine’s December issue.