May 2006 Financial News

TCL Releases Year End (2005) & First Quarter (2006) Results

May 31, 2006

Trinidad Cement Limited (TCL) reported flat earnings of 66 cents for the year ended December 31, 2005 down 1 cent from 2004’s earnings per share of 67 cents.

Though Revenue increased 7.5 per cent to $1,429.834 million, Operating Profit was down 39.52 per cent due to a shortfall in clinker production, costly interruptions caused by the passage of hurricanes in Jamaica and increased output costs. In addition, the Company’s Readymix subsidiary reported a net loss of $25.2 million.

Profit Before Taxation was down 56.46 per cent to $86.799 million while Profit After Tax was down by a much lesser margin, 16.34 per cent to $153.767 million. This was due to the fact that the Company benefited from deferred tax credits due to the reduction of the tax rate in Trinidad & Tobago and recognition of a deferred tax asset at the Company’s Barbados subsidiary. TCL’s Provision for Taxation was ultimately a credit of $66.968 million in 2005 compared to a debit of $15.556 million in 2004. The tax credit made up approximately 44 per cent of TCL’s Profit After Tax.

The year 2005 saw the completion of Phase one of the capacity upgrade project at the Trinidad plant. The expansion and modernization program continues at Caribbean Cement Company Limited (CCC) and is scheduled to be completed in early 2008.

During the first quarter of 2006 however, the Company reported a drop in Earnings Per Share (EPS) of 42.86 per cent from 14 cents in 2005 to 8 cents in 2006. The drop in EPS was mainly as a result of quality issues occurring at its Jamaican subsidiary Caribbean Cement Company Limited which interrupted sales and production in Jamaica during the first quarter. A provision of $15.5 million was made for claims arising out of this incident.

Operating Profit for this period was down 45.93 per cent while Profit Before Taxation declined 86.57 per cent to $5.823 million. The Company enjoyed a tax credit of $8.850 million compared to a debit of $5.691 million in the first quarter of 2005 while Profit After Tax dropped 61.06 per cent to $14.673 million. The tax credit made up approximately 60 per cent of the first quarter’s Profit After Tax.

At the current price of $8.74 and running EPS of 60 cents, TCL is currently trading at a running price/earnings ratio of 14.57 times. Given the flat year end performance and the uncertainty associated with the Company in the current year due to problems experienced at CCC in the first quarter, we recommend a SELL on this share.

The Company declared a final dividend of 5 cents to be paid on July 21, 2006 to shareholders on record at the close of business on July 7, 2006. This brings the total dividends paid for the Fiscal Year 2005 to 15 cents.

Sreshtha Tewari
WISE Research Team