Nov 2006 Financial News

Trinidad Cement Limited Releases Nine Month Results

Nov 08, 2006

Trinidad Cement Limited (TCL) reported Earnings Per Share (EPS) of 38 cents for the nine months ended September 30, 2006 representing a 20.83 per cent decrease from the corresponding period in 2005. The decline in EPS was largely due to quality issues occurring in the first quarter at its Jamaican subsidiary, Caribbean Cement Company Limited (CCC). In comparison to Q3 2005 however, TCL’s EPS was up 12.50 per cent to 18 cents. The comparative quarterly results are impressive especially considering that Q3 2005’s EPS was affected by two hurricanes which interrupted production in 2005. Q3-06 is in fact the best quarter TCL has had for 2006 so far.

Revenue for the nine month period was up 18.49 per cent to $1.292 billion as a result of robust demand. In comparison to Q3-05, Revenue was up 25.11 per cent to $454.314 million. Operating Profit before Claims increased 13.61 per cent to $195.729 million for the nine month period while after Claims it was down 1.04 per cent. This was owing to an additional claim of $9.708 million in Q3-06 arising from the quality issues mentioned before at CCC. This brought the total Provision for the nine month period to $25.243 million. Q3-06 however contributed 45.87 per cent to the Operating Profit (after Claims) for the nine month period. The total impact of this quality issue is estimated at $0.20 per share before tax and minority interests. Profits were also negatively affected by higher energy costs in Jamaica and Barbados.

Net Finance Costs increased 15.30 per cent mainly due to loan funding for the TCL’s capacity expansion project which was commissioned in December 2005. Profit Before Tax was down 13.10 per cent for the nine month period to $86.156 million, 61.88 per cent of which was contributed by profits in the third quarter. Despite a Taxation Credit of $5.973 million which filtered from the first quarter, Profit After Tax was ultimately down 23.95 per cent to $92.129 million for the nine months ended September 30, 2006.

The Company expects demand to remain strong in both its domestic and export markets. It also expects to continue to benefit from price adjustments implemented at CCC and in the Group’s export markets. The commissioning of the Guyana Bagging Plant is also expected to be completed in the fourth quarter.

Given these results we are revising our forecasted EPS upward to 60 cents implying that TCL will make approximately 22 cents in the final quarter. At the current price of $6.00 and WISE’s forecasted EPS, TCL is trading at a price/earnings ratio of 10 times earnings. Given that this share usually trades in the range of 9 to 14 times earnings, we currently recommend a BUY on this share.

Sreshtha Tewari
WISE Research Team