Aug 2008 Financial News

TCL Releases Half Year Results

Aug 18, 2008

Trinidad Cement Limited
Results for the Half Year Ended June 30, 2008

Earnings Per Share
For the Half Year Ended June 30, 2008, Trinidad Cement Limited (TCL) remained flat over the comparable period in fiscal 2007 with a reported Earnings Per Share (EPS) of 37 cents, the same as HY07. Q208 on Q207, TCL’s EPS grew 5.9 per cent or 1 cent from 17 cents to 18 cents. According to the Directors, the Group’s Half Year results were impacted by global increases in energy costs, freight rates and other input costs.

In addition, while TCL and Readymix (West Indies) Limited (RML) exceeded their 2007 performances and Caribbean Cement Company Limited (CCCL) maintained its level of profitability, Arawak Cement Company Limited (ACCL) did not meet its targets. As such, ACCL’s results negatively impacted the Group’s EPS by approximately 7 cents. The performance of ACCL, the Group’s Barbados operations, was impacted by rising input costs as well as challenges from the new Petcoke fuel system.

Financial Highlights (HY08 on HY07):
• Revenue, up 12.4 per cent or $119.3 million to $1.1 billion
• Operating Profit, down 6.2 per cent or $11.0 million to $165.9 million
• Net Finance Costs, down a significant 28.7 per cent or $15.0 million to $37.3 million
• Profit After Taxation, up a minimal 0.8 per cent or $0.8 million to $103.1 million

Financial Highlights (Q208 on Q207):
• Revenue, up 16.0 per cent or $77.5 million to $561.7 million
• Operating Profit, down 6.6 per cent or $5.5 million to $78.3 million
• Net Finance Costs, down a significant 39.9 per cent or $10.7 million to $16.1 million
• Profit After Taxation, up 10.6 per cent or $4.9 million to $51.2 million

Outlook and Recommendation
As part of the Group’s Expansion and Modernisation Project, the new Kiln 5 at Jamaica’s CCCL, was commissioned on July 11, 2008 and clinker (an intermediate product used in the manufacture of cement) production started in the first week of August. This increase in clinker production will help to alleviate some of the input and freight costs borne by the Group and subsequently enhance cement production capacity to meet the strong demand in the construction sector.

As previously mentioned, the local construction industry has been challenged by significant increases in fuel, freight and input costs over the last year. In light of these escalating prices, TCL introduced a new price structure, effective September 1, 2008, increasing the price of cement on the local market by 6.5 per cent and 12 per cent in the export market.

The Directors expect that with the price adjustments implemented and the current progress of the Expansion and Modernisation Project, the second half of fiscal 2008 will exceed that of the Group’s first half performance.

TCL is currently trading at a price of $10.37 on the local market. Based on these results, we are revising our forecasted EPS for fiscal 2008 to $0.85. At the current price and revised forecasted EPS, TCL is trading at a P/E multiple of 12.2 times. At this time we recommend a HOLD on this share.


Nancy Chen
WISE Equity Research Team