Aug 2006 Financial News

Readymix Releases Half Year Results

Aug 02, 2006

Readymix (West Indies) Limited (RML) reported Earnings Per Share (EPS) of 21 cents for the half year ended June 30, 2006. This was 22.22 per cent less than the comparable period last year. This quarter however was much better than the first quarter as 18 cents was earned per share in Q2 resulting in an 85.71 per cent contribution to the EPS for the half year. The positive growth quarter on quarter was attributable to Readymix and Precast Concrete Incorporated and signifies that the Company may in fact be in a turnaround mode. Island Concrete NV of St Maarten however continued to record losses for the half year.

Revenue rose 33.47 per cent to $118.236 million while Operating Profit was up 12.58 per cent to $7.559 million. The smaller increase in Operating Profit was due to an increase in costs, driven by the high cost of imported aggregates into Trinidad and St Maarten. In relation to the corresponding quarter in 2005, Operating Profit was up 11.52 per cent to $5.273 million.

Profit Before Tax was down 5.40 per cent in comparison to HY 2005 due to a 57.92 per cent increase in Finance costs to $2.969 million. The Effective Tax Rate rose from 29.99 per cent (HY 2005) to 41.93 per cent (HY 2006) to result in a 21.55 per cent drop in Profit After Tax to $2.665 million.

In Trinidad, RML is currently quarrying new lands provided by the Government but is yet to determine the overall quality of aggregates available. The Group is enhancing its distribution fleet in Barbados which should be completed by the end of Q3. It is hoped that this would enable them to capture a greater share of the growing market for concrete on that island. In St Maarten, the Group continues to review its operations in order to reverse the loss position over the next period.

Given these results we are revising our forecasted EPS to 50 cents. At the current price of $3.80 and the forecasted EPS of 50 cents, RML is currently trading at a price/earnings ratio of 7.60 times. At this relatively low p/e multiple, we recommend a SPECULATIVE BUY on the premise that the Group would be able to sustain its turnaround mode and manage its costs to result in increased profits.

The Board of Directors has decided not to pay an interim dividend for the half year ended June 30, 2006 in order to consolidate the Group’s financial position.

Sreshtha Tewari
WISE Research Team