Dec 2005 Financial News

Positive outlook for companies in Barbados

Dec 12, 2005

HAVING performed relatively well in 2004, a number of the listed Barbadian companies are about now preparing their end of year results. Several of them, including the BS&T (Barbados Shipping and Trading) group, Cave Shepherd, and the Barbados National Bank (BNB), among others, have September year ends.
With the exception of BNB which has already spoken about its 2005 performance, the others could be doing so very soon.

In 2004, turnover was in excess of $3.0 billion and combined net incomes totalling well over $200.0 million. It must be noted that these results in many cases were generated from the investments some of the companies have outside of Barbados.

Their contribution to taxation and employment in the economy was also significant, making for a thriving private sector. Corporate tax revenue was $247.3 million in 2004, while those from the VAT which is levied on goods and services totalled $601.0 million.

Their favourable performance in 2004 would also have been built around a very strong economy, particularly tourism and the non-traded sectors.

The economy grew 3.7 per cent with a 7.3 per cent expansion in tourism, and a 3.1 per cent growth in non-traded activity: wholesale and retail, construction and transportation.

What therefore can be expected from the listed private sector companies in 2005?

It is expected that they will continue to do well although the extent of this will be determined by the economy and many of the other factors which impacted on them in 2004.

For one, the economy, while still maintaining growth, is under a careful watch by the Central Bank of Barbados. For most of 2005, the Bank sought to stem the flow of credit for consumption purposes given the degree to which such credit was financing imports.

As a consequence the Bank increased interest rates on deposits on four occasions, three of them within the reporting period of the companies with the September end of year.

While the increases were undertaken to boost savings they also meant that lending rates were pushed up as well, thereby making the cost of borrowing more expensive.

Some companies as a rule, exercised some restraint in pursuing projects unless they chose to raise funds through equity.

It had reached the point where one banker suggested that care had to be taken that the activity does not affect businesses. Overall share trading on the Barbados Stock Exchange (BSE) fell during the period January to September 2005, by an estimated 83 per cent.

The BSE said that one of the reasons for the decline in activity stemmed from the increase in interest rates during the year.

"With these increases (in interest rates) investors are encouraged to spend less, save more and have been moving away from investing," the BSE said. However, one thing is clear, the slower trading will affect the BSE's profits for 2005.

Although still reporting healthy growth, the Barbados National Bank announced lower profits for the year to September 2005, compared to the previous year. The annual general meeting of shareholders of that bank will be held next month.

The end of year of First Caribbean International Bank is also listed on the BSE Directors of Banks Holdings Limited, according to the Barbados Stock Exchange, have declared a dividend of 15 cents a share on behalf of the company's shareholders. This is identical to that declared over the last two years.

At the time (2004 report) chairman, Sir Allan Fields, said the dividend was the equivalent to 57.9 per cent of the company's earnings.

At Cave Shepherd, chairman, Geoffrey Cave, told shareholders last year that 2004 was a very good period for the company. The 2005 results are being eagerly awaited.

Almond the all inclusive hotel property also did well for the period ended September 2004. Results for 2005 are also eagerly awaited.

Sagicor the regions leading insurance company continues to do well.

However, apart from the economy, a major challenge for the companies in 2005 would have been higher input costs especially where energy inputs were concern.

Energy prices reached almost US$70 a barrel and the five per cent inflation rate in Barbados is largely a consequence of the high energy prices.

The Atlantic Hurricane season which was very active in 2005 could also be another factor in determining the performance of companies especially those that do business in the wider Caribbean area.

Last year Hurricane Ivan which ravaged Grenada and other systems which affected several regional countries resulted in losses sustained by the companies. Last week a new tropical storm named Delta was formed.

Although it was closer to the Azores than to the Eastern Caribbean it nonetheless underlined how active a season it has been for the region.

Trade liberalisation tightened in 2005 and the region continues its march towards a Caribbean Single Market and Economy. Both regimes which mandate open markets, offer competition to local firms, particularly those in the export and tourism sectors.

Overall though, the companies are expected to maintain their good performance. Their results should attest to this.


The Barbados Advocate
Business Monday
Monday, 12th December, 2005
http://www.barbadosadvocate.com/NewViewNewsleft.cfm?Record=23577