Oct 2014 Financial News

TCL's fired CEO fires back

Oct 06, 2014

Less than two weeks ago, on September 23, the board of Trinidad Cement Ltd terminated the company’s former CEO, Rollin Bertrand “following a review of his performance.” Apparently undaunted by his dismissal, the combative Bertrand has taken exception to comments made by Wilfred Espinet, in an interview published in Thursday’s Business Guardian 

I would like to submit some comments on an article published in the Business Guardian of October 2, 2014 entitled “TCL requires drastic restructuring.” At the onset, I would like to advise Mr Espinet to keep quiet for at least six months until he understands the business before he broadcasts plans for the company. He will learn there is a wide gap between “theory” and “implementation” as I hope to outline in this response.
 
1. Mr Espinet was non-committal on the company’s recent foray into the high-yield markets to restructure the company’s US$300 million in debt. He will soon learn the US high-yield market is still the best opportunity for the company to reduce interest rates (below 8.0 per cent) and have a more covenant-friendly arrangement with lenders.

Local and regional capital markets are simply too thin to cope with restructuring TCL’s US$300m in debt at reasonable rates. He expressed surprise after the last debt restructuring in 2012, TCL came away with “high principal and higher interest rates” but that is exactly what the last board was complaining about, much to the chagrin of the existing lenders. 

This, in turn, led to some of the lenders organising a group of shareholders (Espinet included) to change the board at the 2013 AGM. In fact, the Guardian editorial of August 23, 2014, criticised the last board “who never had anything good to say about the financial institutions that lent the company money.” Be careful, Mr Espinet, or you may find your stay at TCL to be short-lived. 

2. Mr Espinet noted that the company was “doing the same thing and expecting different results.” That is a very ill-informed statement and he should review the recent financial history of the company, which showed a dramatic improvement in performance over the past three years (2011, 2012 and 2013). The group’s EBITDA improved from US$15.4m in 2011 to US$26.3m in 2012 to US$62.6m in 2013 and was on track for US$70m in 2014. These results were not achieved by “doing the same thing”.  

Apart from general cost control, TCL won new markets in Venezuela, Brazil, and the French West Indies and expanded market share in Suriname, Guyana and the OECS. In capital-intensive industries, with high fixed costs, asset utilisation is critical to success so mundane cost cutting does not get you very far.

Management presented the lenders with a comprehensive turn-around plan, which was being executed—before being interrupted by Mr Espinet & Ors—and that is why there were “no demands for change in management.” Management did not cause the global economic crisis, but TCL’s management led the company through very difficult waters and back into growth.

3. Mr Espinet talks about jettisoning things that “dragging down the company” and talks about “core” and “none core” assets. The TCL group is a typical vertically integrated cement company with investments in “non-core” assets that are mission critical. He talks about closing down Arawak, but that is a “core” asset. 

Cemex is currently operating several core assets with operational losses while waiting for markets to improve (such as their plant in Puerto Rico, which was recently managed by the new acting group CEO). Cement assets are not easily sold and, once shut down, are very difficult to re-activate.

A company could lose a significant market by closing capacity during a downturn and handing the market over to importers, who would be very difficult to dislodge once the economic climate improves. He then refers to the packaging companies and readymix as non-core, but they are also strategic and profitable. 

Source:
Trinidad Guardian
Sunday October 5, 2014

http://www.guardian.co.tt/business/2014-10-05/tcl%E2%80%99s-fired-ceo-fires-back