Cement firm not budging on price hike
Published:Wednesday | June 30, 2010 | 12:00 AM
Mark Titus, Business Reporter
Caribbean Cement Company Limited (CCCL) says it will facilitate the investigation by competition watchdog, the Fair Trading Commission (FTC), on its pricing policy, but says it is willing to give up market share rather than roll back the recent increase on its product.
The cement maker also questioned the state's authority to intervene in what it sees as commercial activity, and appears set for a showdown.
"We are not even sure the government has the authority to initiate this probe, but we always seek to comply with the wishes of the FTC," Alice Hyde, marketing manager of the Rockfort, Kingston-based manufacturer told Wednesday Business.
"We have got a request from the FTC and we are in the process of preparing that," she said.
The probe was ordered by industry and commerce minister, Karl Samuda, following CCCL's announcement earlier this month of a 3.2 per cent increase in the price for its products, the third in the last seven months and coming after back-to-back price hikes in December and again in January, totalling 15 per cent.
The increases, the cement company said, were forced by rising operational and stockpiling costs.
It has pointed to a sharp jump in the cost of some of its key inputs, including petcoke and coal, a seven per cent increase in new duties and cesses, a 15 per cent increase in kiln fuel, and a consistently high electricity bill, which amounts to US$5 million annually.
The cement price hikes came closely on the heels of a dismal 2009 financial performance by the company, which posted a $144 million loss for the year, and a less-than-stellar first quarter this year, in which CCCL registered an anaemic $4.6 million net profit.
The company has laid blame for its lacklustre financials squarely at the feet of what it said was a five per cent contraction in the construction industry and competition from imported cement.
It is against this background that the cement manufacturer, owned by Trinidad Cement Limited, is sticking to its guns on the need for the increased prices.
It has gone as far as to declare that it is prepared to lose more market share to local importers in order to cover its cost of production.
"It is something we are prepared to face at this time," Hyde said this week.
"It is a matter of reconciling lower volumes but being able to cover our cost through higher revenue versus higher volumes at a lower revenue per unit, which would not cover the cost of production," she said.
Despite the planned pricing investigation, Hyde confirmed that the new prices would take effect this week, giving the assurance in the process that only new stock would attract the increased prices.
"Our customers are still selling off their old stock, so the new price is expected to take effect by later this week," the CCCL spokeswoman said on Monday.
The FTC would not be drawn into a discussion regarding the state's authority, referring Wednesday Business to section 5 of the Fair Trade Commission Act. Section 5, sub-section (b) of the law, identifies the commission's functions as being