Mar 2012 Financial News

TCL strikers hoping for support in Barbados

Mar 05, 2012

... similar action here not practical

WITH their company facing some challenges, it is doubtful whether employees at the St. Lucy-based Arawak Cement Company will take industrial action in solidarity with their counterparts at Trinidad Cement Limited (TCL), who have been on the picket line for over a week.

The union representing the TCL Trinidadian employees want their Barbadian and Jamaican counterparts to exercise solidarity with them, said a recent report out of Port of Spain.

When to this is added the fact that all across Trinidad and Tobago there is more to the news concerning strike action at TCL, parent company of Arawak, then the situation is becoming very acute. There is speculation that from the low construction activity in recent times that triggered a falling demand for cement, to TCL’s debt restructuring plans, and other structural issues, mean some very challenging times for TCL. Therefore, whatever happens to TCL could have implications for Arawak, and possibly Caribbean Cement Company Limited in Jamaica. Industrial action in Barbados would not make sense.

The current industrial action concerns pay. Workers, according to the reports from Port of Spain, are demanding a 16 per cent pay increase. The company is offering six per cent which from this vantage point in Barbados, is understandable on account of what is taking place within the TCL group.

Robust cement sales are directly related to what happens in the construction sector. From the boom times in construction, especially in the lead up to preparation for Cricket World Cup 2007, activity has fallen in subsequent years. This naturally triggered a decline in demand for cement and with it lower returns to the company’s shareholders.

Group Chairman, Andy Bhajan and Dr. Rollin Bertrand, Director/GroupCEO, gave their assessment on TCL’s consolidated interim results for the period to September 2011. They said that while domestic sales increased in 14 per cent and seven per cent in Trinidad and Tobago and Jamaica respectively in the third quarter, they were flat in Barbados. They also dealt with fuel and electricity costs, stating that they were 23 per cent and 47 per cent higher in Jamaica, and for Barbados, were 26 per cent and 36 per cent higher when compared to the prior year’s period.

“Further, the absence of credit lines and the ability to establish Letters of Credit hindered continuous operations in Jamaica and in Barbados, in the nine months,” the two men said.

In January this year Barbadians began paying more for cement following what management at Arawak said was the fact that the company’s had fallen in recent times. The increase will drive up the cost of construction in Barbados. Cement blocks will cost more because cement is a principal component of the blocks. Those transporting of the product will most likely demand more since fuel prices are not low.

In 2010, growth in the construction industry in Barbados was measured at three per cent. Last year it was four per cent and sustained activity is what is required to keep the momentum going at Arawak. In 2010 both Dr. Betrand and Mr. Bhajan pinned their hopes for a pick up in cement sales on the resumption of work on the Four Season Project. That project is still to re-commence although the start of construction of both the new Barbados Water Authority headquarters and Cost U Less will spur demand for the commodity.

However, the bigger picture of the group is being highlighted in Trinidad and Tobago. The Trinidad Guardian Anthony Wilson recently penned a piece entitled, “Will TCL survive.” In it, he said that for more than a year the TCL Group had been negotiating a restructuring of its debt estimated at $1.8 billion.

TCL, Wilson wrote, was forced into the position of having to restructure its debt because in the second half of 2010, the company had taken a hard look at its declining revenues from and profits from the sale of cement and related products across the Caribbean.

“It soon realised that while it may have been able to continue meeting the interest payment between 2011-2013, it did not have the financial resources to be able to pay both the interest on the debt and the principal.”

In giving their outlook Dr. Bertrand and Mr. Bhajan said in the review of the nine months to September last year, that the TCL group had reached an agreement in principle with the Steering Committee of lenders on the terms for the re-profiling of the debt. “Currently, various approvals are being sought whilst the legal appointments to effect the re-profiling are being drafted,” they said. It was anticipated that an agreement would have been signed last January.

Strike action will do the company no good. There will be a drop in production and output and the revenue position of the company could be undermined. The same can be said about the TCL’s Barbados operations and therefore it would be a surprise if the solidarity the Trinidadian union is expecting in this country becomes a reality. But then again, you never know.


Source:
Barbados Advocate
Monday March 5, 2012

http://www.barbadosadvocate.com/newsitem.asp?ore=business&NewsID=23212