Aug 2010 Financial News

Cement Company flounders

Aug 06, 2010

Nothing, it seems, has gone right for Caribbean Cement Company Limited in the second quarter. Volume exports are up but sales across markets are down overall and, consequently, so are revenues.

The operation also ran short on liquidity, ending the period with negative cash flows of J$100.6 million.

Some of its misfortune also flowed from having to take its Rockfort, Kingston, plant off-line during the late May west Kingston armed insurrection, a shutdown that "proved very costly to the company".

Caribbean Cement consequently ran a deficit on operations amounting to J$344.6 million in the June quarter that not even tax credits of J$108.4 million and a windfall on-off translation gain on foreign exchange of J$95 million could erase.

The cement maker, though freed of approximately half its debt and attendant financing charges because of a J$1.34-billion debt-equity swap facilitated by a preference share issue to parent Trinidad Cement Limited, racked up net losses of J$217 million in three months ending June 30, with no clear sense of when the construction market will pick up for sales to rebound.

Caribbean Cement called its second-quarter performance "very disappointing", saying it resulted from a 19 per cent drop in volume.

The estimate referenced domestic sales only. Foreign sales ofcement rocketed 97 per cent, while clinker exports spurted 43 per cent.

The Rockfort operation sold 135,227 tonnes of cement on the domestic market, another 50,079 tonnes overseas, plus 23,006 tonnes of exported intermediary product, clinker. In the 2009 quarter, the respective sales were 166,214 tonnes domestic, 25,384 tonnes of cement exports, and 16,123 tonnes of clinker.

As testament to just how important a strong Jamaican market is to Caribbean Cement's financial well-being, its income in this June quarter was J$2.13 billion, an 8.4 per cent drop on the 2009 quarter's J$2.3 billion.

The company's half-year results tracked with the second- quarter outcome. Total sales revenue fell from J$4.9 billion to J$4.3 billion; operating profit of J$610 million became a J$260-million loss, while bottom-line profit of J$216 million was eviscerated, falling J$213 million in the red.

Short term liabilities

Its working capital position remains tenuous, with short term liabilities overtaking matching assets by J$140 million.

"With the continuing contraction in the economy and the re-entry of a third importer of dumped cement, we do not expect any improvement in domestic sales in the short term," said a joint statement to shareholders from chairman Brian Young and director and TCL group chief executive Officer Dr Rollin Bertrand.

"Notwithstanding the foregoing, we continue to achieve increased export sales, including now regular exports to Haiti. We will continue to proactively develop these markets while, at the same time, continuing to defend the local market, using all legal avenues available."

Caribbean Cement contested Vulcan-made and Tank-Weld-distributed cement but lost its bid to have the product labelled harmful to the Jamaican industry, although the Anti-Dumping and Subsidies Commission did rule that there was a margin of dumping.

The Jamaican cement maker is also contesting imports out of the Dominican Republic.


Source:
business@gleanerjm.com
Jamaica Gleaner
Friday August 6, 2010

http://jamaica-gleaner.com/gleaner/20100806/business/business1.html