Aug 2007 Financial News

TCL Releases Half Year Results

Aug 07, 2007

Results for the Half Year Ended June 30, 2007

Trinidad Cement Limited (TCL) for the Half Year Ended June 30, 2007, reported Earnings Per Share (EPS) of 37 cents. This represented an outstanding increase of 85 per cent or 17 cents on the comparable Half Year period in 2006. Q207 on Q206, the Group’s EPS was up 41.67 per cent or 5 cents from 12 cents (Q206) to 17 cents (Q207).

HY07 on HY06, Revenue increased 15.04 per cent or $125.98 million to $963.79 million. The Directors have attributed this growth in Revenue to continued strong regional demand and price adjustments implemented to mitigate rising energy costs. Operating Profit for the period under review amounted to $176.96 million, up a considerable 64.20 per cent or $69.19 million on the corresponding half year in FY06. In addition, there were cement claims of $15.49 million, from the quality issues at Caribbean Cement Company Limited (CCC) in HY06 which did not recur in HY07. As such, Operating Profit after cement claims rose a significant 91.76 per cent or $84.68 million to end HY07 at $176.96 million.

Net Finance Costs for the half year stood at $52.28 million, a decline of 12.04 per cent or $7.15 million on the same period in FY06. Profit Before Taxation increased a substantial 279.58 per cent or $91.83 million from $32.85 million (HY06) to $124.68 million (HY07). Taxation for the six-month period under review amounted to $22.35 million, while the Group benefited from a Tax Credit of $8.82 million for the same period in FY06. Thus, Profit After Taxation was up a noteworthy 145.60 per cent or $60.66 million to end the half year at $102.32 million.

According to the Directors, the Group’s half year profits benefited from a favourable performance by Trinidad Cement Limited, the return of profitability of Caribbean Cement Company Limited and significantly improved profitability of Readymix (West Indies) Limited. Additionally, the Group’s newly established facility in Guyana has been profitable to date. However, the cement plant in Barbados, Arawak Cement Company Limited, continued to be negatively impacted by increased fuel costs, which will be addressed by the commissioning of a new fuel system (Petroleum Coke) in the third quarter of 2007.

Total Net Assets at the end of the half year was $1.36 billion, an increase of 7.66 per cent over December 31, 2006.

The Group remains very optimistic about its prospects for 2007, as demand is expected to remain strong in both the Caribbean domestic and export markets. In addition, the expansion and modernization programme at CCC in Jamaica continues on schedule, with commissioning of the new kiln expected in early 2008.

Given the heavy demands of the expansion and modernisation programme on cashflows, the Board of Directors did not consider it prudent to pay an interim dividend for 2007.

TCL last closed at a price of $7.28 on the TTSE. In light of these results, we are maintaining our forecasted EPS of $0.90 which at the current price translates to a P/E multiple of 8.09 times. Additionally, using a multiple of 11 times and the forecasted EPS of $0.90, this share has an expected return of approximately 36 per cent at the current market price or a target price of $9.90. Thus, based on this analysis we continue to recommend a BUY on this share.

Nancy Chen
WISE Equity Research Team