Feb 2009 Financial News

Carib Cement gets tough - maintains production levels, doubles export target

Feb 25, 2009

Rather than cutting production in the face of contraction in domestic construction, which estimates place as high as 10 per cent down, Caribbean Cement Company Ltd (CCCL) plans to maintain its 2008 output levels and double its export target for this year.

The cement manufacturer's marketing manager Alice Hyde told the Business Observer that her company was expected to send approximately 200,000 tonnes of cement overseas and has even shipped clinker - one of the main ingredients of cement - to Trinidad.

"We have sent shipments to St Kitts, Suriname and Guyana and we are currently looking at Haiti," she said. Her projection is for 200,000 tonnes of export.

Last October, Carib Cement's general manager Anthony Haynes expected his company to export 100,000 tonnes of cement.

Carib Cement sold 569,216 tonnes of cement for the nine months to September 30, 2008 - 28,000 tonnes lower than the comparative period the year before - prompting them to look to the export market in a more serious way during the last quarter of 2008. For the December quarter the company exported approximately 40,000 tonnes of cement.

The price at which they sell the product overseas, however, is lower than local prices as it is viewed as surplus, according to Hyde. But maintaining production at similar levels to last year means that the company will not have to look to layoffs of other major cuts in the near future.

Additionally, having begun to experience higher efficiencies and savings through the completion of its new state-of-the-art kiln or Phase 1 of its US$170 million Expansion & Modernisation Programme, the cement company has rationalised its prices across the island, which translated into a reduction in price for some.

Outside of its Kingston and Spanish Town depots, Carib Cement has three locations - Mandeville in Manchester; Montego Bay, St James; and Discovery Bay, St Ann.

Transporting the cement to these locations meant that the final price to consumers would have been higher than the $510 per 42.5-kilogram bag its main product sold for in Kingston. The prices ranged from $517 to $530.

Now, all locations will sell the cement at the same price - $510.

The new kiln - Kiln 5 - enables the cement manufacturer to cut 30 per cent of the energy cost on manufacturing clinker, and now that energy prices have fallen dramatically, those efficiencies will likely translate into dollar savings.

Kiln 5 can produce 970,000 tonnes of clinker, which can make 1.25 million tonnes of cement, while Kiln 4 can produce 400,000 tonnes of clinker.

Carib Cement's operating cost has been running at $2 billion each quarter for the nine months to September 30 last year, up by 30 per cent over the comparative quarters in 2007.

Phase II, which is the construction of the new Cement Mill, is under way and its completion will result in possibly even greater savings.

Mill 5 has the capacity to mix 831,000 tonnes of cement, which is equal to the company's total annual sales. Running Mill 4 along with 5 brings the company's output to 1.5 million tonnes while running mills 3 through 5 bring annual capacity to 1.8 million tonnes.

Local demand for cement has contracted since the start of the project which began in 2006.

Annual sales in 2007 was 813,448 tonnes, down from 843,295 tonnes the year before. Cement sales for the first six months of 2008 was 394,068 tonnes, down from 409,427 tonnes during the comparative period in 2007.

There was also room for imports into the market this year - 120,000 tonnes by Carib Cement's general manager Anthony Haynes' estimate - suggesting total demand locally has fallen below a million tonnes a year.

This has prompted the cement manufacturer to determine the optimal level of exports it can undertake.

For next year, Haynes expects his company to export 100,000 tonnes of cement.

Source:
Jamaica Observer
Wednesday, February 25, 2009

http://www.jamaicaobserver.com/magazines/Business/html/20090224T230000-0500_146730_OBS_CARIB_CEMENT_GETS_TOUGH_.asp