Mar 2007 Financial News

TCL Releases Year End Results

Mar 21, 2007

Results for the Year Ended December 31, 2006

Trinidad Cement Limited (TCL) has reported Earnings Per Share (EPS) of $0.60 for the Year Ended December 31, 2006. This represents a fall of 9.09 per cent or 6 cents on the comparable EPS of FY 2005. However, Q4 2006 on Q4 2005, the EPS was up by 22.22 per cent from $0.18 to $0.22.

Although the Group¡¦s year end EPS was down, FY2006 produced the highest Revenue in the history of TCL. This figure stood at $1.72 billion and was up by 20.22 per cent or $289.17 million on the previous financial year. The Directors have attributed this growth in Revenue to buoyant demand in the Caribbean domestic and export markets in addition to price adjustments.

Sales Increases:-
„«Cement Sales Volume for 2006 exceeded 2005 by 120.0K tonnes or 6 per cent.
„«Concrete Sales increased by 11.3 thousand cubic metres or 4 per cent.
„«Packaging Sales increased by 5.2 million sacks or 5 per cent.

Operating profit before cement claims for the period stood at $295.11 million and was up by 60.45 per cent or $111.18 million on the corresponding period in 2005. However, due to the cement quality issue at Caribbean Cement Company Limited (CCCL) in February 2006, the Company experienced charges of $30.27 million for claims and an estimated total cost of $59.6 million. Thus, Operating profit after cement claims amounted to $264.84 million and was up by a smaller 43.99 per cent or $80.91 on the comparable period in 2005.

Finance Costs for the period under review was $104.36 million- an increase of $7.22 million or 7.44 per cent on FY2005. According to the Director¡¦s Statement this was mainly due to loan funding of TCL¡¦s cement mill capacity expansion which came into production in 2006. Profit Before Taxation stood at $160.49 million and was up by a significant 84.90 per cent on the same figure for FY2005. The Effective Tax Rate for FY2006 was 5.43 per cent however in FY 2005 the company benefited from a Tax Credit of $66.97 million. As a result, the Profit After Taxation was $151.77 million down by a minimal 1.30 per cent or $2 million on the corresponding year in FY2005.

Net cash generated from operating activities was $231.8 million, representing an increase of $61.3 million over FY2005. The Group invested $381.0 million in Property, Plant and Equipment for the period, mainly on the Expansion and Modernization Programme at CCCL and the Bagging Plant in Guyana, which was commissioned in December 2006.

The Directors have stated that the Group is optimistic about the prospects for 2007, as demand is expected to remain strong in both the Caribbean domestic and export markets. They have also stated that the Bagging Plant in Guyana has had an immediate positive impact on the Group¡¦s ability to service the Guyana and Suriname markets. Additionally, the Expansion and Modernization Programme in Jamaica continues on schedule with the commissioning of the new kiln expected in early 2008.

TCL will need to continue channeling all internally generated funds to its Expansion and Modernization Programme, as such, the Board of Directors have approved a dividend of 6 cents per ordinary share, compared to 15 cents in FY2005.The dividend is to be paid on May 25, 2007 to shareholders on record at the close of business on May 11, 2007. The register of members will be closed from May 11 to 15, 2007 inclusive. The Annual Meeting of shareholders will be held on May 9, 2007.

TCL is currently trading at a price of $7.25 on the local market. Based on the current results and the forward looking statements of the Directors, we are forecasting an EPS of $0.75. At this forecasted EPS and the current price, TCL is trading at a price to earnings multiple of 9.67 times which is attractive for a share that typically trades in the band of 9 to 15 times. Also, using a multiple of 12 times and based on WISE¡¦s forecasted EPS of $0.75, we have estimated a 12 month return on this share of approximately 24 per cent or a target price of $9.00. Thus, we strongly recommend a BUY on TCL.


Gia Singh
WISE Research Team