Market punishes Carib Cement after J$1.3b loss
Published:Wednesday | December 8, 2010 | 12:00 AM
A 40-day shutdown atop a contracting construction market sent Caribbean Cement Company Limited's (CCCL) finances off the rails in the summer, but the company is trying to remain positive in its outlook, saying there are signs in the final December quarter that cement sales may see an uptick.
The assurance was not enough for the market. On Monday, when the results were posted, the cement stock dropped 9.5 per cent and another .72 per cent of value on Tuesday to fall to a new one-year low of J$2.75.
The market reacted adversely despite a pre-filing advisory put out last month by Caribbean Cement parent Trinidad Cement Limited that better things were ahead because of initiatives being pursued by the group.
Caribbean Cement made a J$1.29 billion loss on operations - pretax losses amounted to J$1.39b after debt financing - which it mostly pinned on the lockdown in August-September. Net losses amounted to J$924 million, after a healthy dose of close to half a billion of tax credits.
The nine-month deficit hit J$1.14 billion, 15 times the losses wracked up in the similar 2009 period.
Trinidad Cement has not traded on the Kingston exchange since this week, but weighed down by the performance of its Jamaican and Barbados operation, its stock at J$53 is also at a one-year low.
TCL, whose debts amount to TT$2.5 billion, is now negotiating with its creditors to craft a new repayment plan, after the Claxton Bay company breached its short term borrowings and current ratio covenants.
"The group has embarked on a debt restructuring exercise which seeks to defer principal payments to long-term loans due in 2011 - 2013 and convert short-term loans into longer terms facilities," a joint statement to shareholders, from the cement maker's chairman Andy Bhajan and group chief executive officer Dr Rollin Bertrand said.
Alan Nobie, company secretary and manager of Investor Relations and Corporate Communications for the TCL group, refused to say how much of the debt TCL was seeking to refinance.
The company's short term obligations, however, amounted to TT$955 million at September, as shown on its balance sheet.
Nobie also refused to be drawn by Wednesday Business into a discussion on the challenges being experienced in Barbados, where business has seen a decline of 20 per cent in 2010.
"I don't want to get into anything more than was in the report," he said, referring to the financial results. "The statement from the directors is self explanatory, so we don't need to go into any further details than there is."
Too much to handle
Caribbean Cement's modernisation project and subsequent transactions between the group and the subsidiary might have been too much for the group to handle.
The parent company provided the majority of the financing for the US$177 million Rockfort plant expansion, and now owns the asset, for which Caribbean Cement pays a lease. TCL also facilitated a programme by CCCL to deleverage and cut its debt financing costs, whereby J$1.3 billion of the funds owed to TCL were converted into preference shares.
"You would have seen both the Carib Cement and TCL publications, and recognised that Carib Cement had a major impact on the group," said Nobie. "It's based on the fact that Carib Cement represents such a big element of the group's operations and that is where a lot of the expansion for the group took place."
TCL made a loss of TT$77 million in the third quarter, erasing previous gains made up to the half-year mark. Some of its third-quarter misfortune came from, as it turns out, its hasty move in the June quarter to book a gain from sale of an asset. Its numbers now reflect a TT$9 million reversal of that gain after the buyer pulled out of the deal, pushing nine-month losses to TT$30 million.
Carib Cement meantime is struggling to hold its market share, but notes its own difficulty in a cement market that has contracted 31 per cent over the past three years.
"The loss for the third quarter is largely due, the company said, to the 40-day shutdown of the new Kiln 5 "resulting in a net under recovery of costs totalling J$400m, a reduction in domestic sales revenues of J$300m and a J$93m accrual for redundancy costs on account of a manpower rationalisation programme that is currently being implemented," the company disclosed to shareholders.
Redundancies equal elimi-nation of job positions, which means staff cuts. The company had initially denied it was cutting staff after reports surfaced that 120 people were being eliminated from its payroll.
Looking forward, the company said it has noted "some rebound in cement sales in the fourth quarter and the Ministry of Works has announced a fairly significant infrastructure restoration programme over the next six months that should see some improvement in domestic demand."
"At the same time we remain cautious in regard to its sustainability since our economic recovery is influenced by so many international factors."
Caribbean Cement sales
Jan-Sept (tonnes)
2010 2009
Cement Jamaica: 410,007 496,163
Cement export: 132,805 59,716
Clinker export: 48,669 88,253