Jul 2008 Financial News

ANSA McAL hunting partners - Wants to grow business in Jamaica, willing to be propositioned

Jul 04, 2008

Trinidad conglomerate ANSA McAL Group has operated peripherally in Jamaica for a number of years, but wants to take a bigger and more direct position in this market.

"We have an interest in entering Jamaica," said Chief Operating Officer Gerry Brooks. "We are looking for mutuality of opportunity."

Sources have said the 127-year-old conglomerate, which is controlled principally by the Sabga family, plans to expand its footprint here, either through joint-venture or acquisition deals, but Brooks would not comment on the mode of entry, nor which businesses were being courted, saying some negotiations were at a sensitive stage.

"We are in discussion with existing partners," he told the Financial Gleaner in a telephone interview from Port-of-Spain.

Corporate relationships

ANSA McAL has relationships with companies like GraceKennedy Limited, whose brand it distributes, and Caribbean Producers Limited which sells its beer here.

But the company, Brooks added, was not averse to creating additional partnerships and would be receptive to being propositioned.

It has a big hurdle, however - lack of name recognition outside of certain corporate circles and a distinctly low profile here.

ANSA McAL, a publicly traded company in Port-of-Spain, already distributes products like Carib Beer, Penta paint and chemicals in Jamaica, said Brooks, but indirectly through agents.

Subsidiary Penta Paints Caribbean Limited produces over three million litres of paint and, alongside Jamaica, exports to six other Caribbean markets.

Carib beer has a very limited presence in Jamaica, and its distributor, Caribbean Producers Limited, acknowledged Wednesday that not only was it a slow-moving product, its market was minuscule relative to big player Red Stripe.

Addressing beer sales

But, the Montego Bay-based distribution company also said there were plans to address the velocity of the beer's sales.

ANSA McAL's business in the Jamaican market already accounts for under five per cent of group revenues, Brooks said, which, based on the company's 2007 top line income of TT$4.98 billion in 2007, would amount to no more than TT$249 million (J$2.9 billion).

But the COO said the company believes there is additional value to be created for the conglomerate here, and though attempting to sell his company as an aggressive player with big plans, was coy on the details, citing stock exchange rules on the disclosure of information. He did signal, however, that the company was looking at building out new business in shipping, saying it was "one of the areas" under consideration.

"We intend to stay within our core competence," said Brooks.

"Jamaica offers opportunities for economies of scale."

Core business

ANSA McAL's core business is distribution and manufacturing, with its automotive trading and distribution segment being its biggest money spinner. The conglomerate has tentacles in the financial services, insurance, media, real estate and brewing, and shipping and communications.

Its proprietary brands include Carib Beer, Penta, Bestcrete, Alstons, and ABEL air conditioning; but it also handles Grace Foods, Brunswick, Carrier, Ford, Honda, Jaguar, KIA, Panasonic, Procter and Gamble, Unilever, Guinness, Pfizer, Microsoft and others.

"We represent every significant brand," said Brooks. "Every day in Trinidad and across the Caribbean, someone eats, drives on and reads ANSA McAL," said Brooks.

ANSA McAL is a big company intent on growing substantially bigger by 2010, with plans by that date to grow revenues to TT$8 billion and earnings per share to TT$5, essentially reflecting a profit outlook of more than TT$850 million attributable to shareholders.

Last year, the company returned per share earnings of TT$3.53 from revenues of TT$4.98 billion, up from TT$2.77 EPS and revenues of TT$4.1 billion in 2006.

Background

The conglomerate had its beginnings in 1881 as Alstons, but eventually took on its current moniker after a series of transitions over the decades. The ANSA McAL identifier, adopted in 1945, is itself a consolidation of the names of three Caribbean entrepreneurs associated with the company over the decades - Anthony Sabga, Charles McEnearney and George Alston.

The conglomerate is now principally owned by the Sabgas, who control more than half the company, largely through a vehicle known as ANSA Investments Limited, which holds just under 85.4 million shares. Norman Sabga is chairman and CEO of the group.

The conglomerate has, for some time, been in growth mode: through acquisitions, Brooks said, but also organically through expanded markets and products, backed by capital investment of TT$300 million to over TT$400 million per year in the past three years.

Employs 6,000

The company employs 6,000 across the group and is one of the largest regional conglomerates "by size and asset base," said Brooks.

The acquisition of Barbados Shipping and Trading by Neal and Massy Holdings, whose combined revenues are projected to top US$1 billion per year, could upset any claim to supremacy.

ANSA McAL, whose revenues convert to about US$750 million, had itself launched a hostile bid for BS&T, but while the rivalry sent the shipping conglomerate's stock soaring as the rivals adjusted their offer price, the company was eventually outmanoeuvred by Neal and Massy.

ANSA McAL's more than 50 companies span eight countries in the Caribbean and North America. Seven companies in the group are more than a century old, Brooks said.

The group is unburdened by long-term debt, said the COO, is heavily capitalised and flush with cash. The group's 2007 balance sheet reflects shareholder equity of TT$2.68 billion, cash of TT$1 billion amid total assets of TT$9.3 billion.

Total liabilities are approaching TT$6 billion but long-term borrowings are less than TT$1 billion of the total.

The company's stock is trading at about TT$59 per share or 3.7 times its book value of TT$15.65.

The majority of ANSA McAL's 50 companies are centred in Trinidad, but ANSA McAL also operates subsidiaries in St Kitts & Nevis, Grenada, Guyana, St Lucia, Barbados, and the United States. At one time, the company was said to be involved in glass manufacturing in Jamaica but pulled out years ago.

Brooks said outside of Jamaica, there are plans to deepen penetration of North America and to explore opportunities in Central America.

Jamaica Gleaner
Website: http://www.jamaica-gleaner.com/gleaner/20080704/business/business9.html
July 4, 2008