Nov 2012 Financial News

Carib Cement posts first solid result in three years

Nov 14, 2012

Caribbean Cement Company's reported a modest operating profit after nine consecutive quarters of losses last week.
But the company was pessimistic that the positive result would continue into the next few quarters.

The $15 million operating profit for the three months to September 30 reflected a trend of shrinking losses since December.
However, "it will prove difficult to maintain this momentum as both the domestic and export markets are softening," according to a statement from directors, Brian Young and Rollin Bertrand.

They blamed delays in finalising a new bilateral arrangement with the International Monetary Fund for negatively affecting local business activity.

The company plans to "concentrate on cost containment while promoting the value proposition of the Carib Cement brand" in the near term.

The cement manufacturer has a long way to go to turnaround the $5.6 billion in losses it incurred over the last three years.

"There is still a material uncertainty about (Carib's) ability to continue as a going concern," said the report.

Carib saw its cement and clinker production increase by seven per cent and five per cent, respectively, over the same period last year.

However, cement sales volumes into the domestic market fell by 7.9 per cent during the review quarter, when compared to the period last year.

Export sales volumes fell more sharply. The company sold 35 per cent less cement overseas than in the comparative period in 2011.

The falloff in the local market was due to the continued contraction in the Jamaican economy and increased competition from dumped cement, Carib said.

Export sales were significantly lower, "largely due to the severe weather conditions in August, which resulted in high inventories in a number of our export markets and minimal export sales in September", it said.

Ultimately, levels of inventories of both cement and clinker climbed during the quarter.

An average 9.2 per cent increase in prices in June, in response to escalating energy and other costs, helped the company post higher revenue - $2.1 billion for the three months to September 30 compared to $2 billion during the same period last year.

At the same time, the company managed to slash its cost of operations by $630 million, or 24 per cent year over year.

Nevertheless, the company posted a net loss of $245 million during the three-month period, compared to $551 million during the three months to September 30, 2011.

Higher interest charges and foreign currency exchange losses dragged down the bottom line.

Carib's parent company - Trinidad Cement Limited (TCL) - completed the restructuring of its debt, which includes some of Carib's liabilities.

"The servicing of the restructured debt will be over six years starting with interest in December 2012", but it is not clear how that will affect the local cement manufacturer's bottom line.

In the meantime, Carib continues to rely on the support of TCL to continue to operate, according to notes in the company's latest financial statements.

The Company's working capital has declined from $610 million at the end of June to $427 million at the end of September.

What's more, its capital base, which was $409 million at the beginning of the year, was negative $1 billion on September 30.


Source:
Camilo Thame Business Co-ordinator thamec@jamaicaobserver.com
Jamaica Observer
Wednesday November 14, 2012

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