Caribbean Cement ekes out meager profit

Caribbean Cement factory

Caribbean Cement reported a meager profit of $35 million for the first three months of 2014 but compared to a loss of $497 million in 2013, the latest results represent a major change in the fortune of a company plagued with low production and massive losses between 2009 and 2012. The significant improvement over 2013 is as a result of the debt restructuring exercise completed in June last year, reducing the Group’s exposure to foreign exchange losses, improved sales volumes and increased plant productivity. But the stock market is expecting more, much more from this the sole manufacturer of local cement. In the September quarter last year Cement, as the company is commonly known, sold 214,000 tonnes of cement and 6,700 tonnes of clinker compared with 215,000 of cement this year along with much more clinker exports and reported operating profit of $303 million compared to $130 million in this latest quarter. The company operating profit for the quarter improved by 33 percent over the prior year, increasing from $98 million.

In the 2013 September quarter, the company reported 20 cents per share but only 4 cents in its latest one. There is clearly a sharp increase in cost which the company was not able to pass on in time in pricing during the quarter. The company has to do better than the results in the quarter to come close to justify the stock price at $3.70. The directors stated that they have taken action to improve the operating margin. Part of that no doubt is a 1.3 percent price adjustment implemented at the start of April but that will only recover about $40 million, there must be other cost incurred in the March quarter that have been or is being dealt with.

While the growth in domestic demand remains anaemic, export cement sales volumes grew by 87 percent with new markets established in Suriname and Guyana. Total cement sales volumes rose by 17 percent. Additionally, 44,261 tonnes of clinker was exported to Venezuela. The increased volume coupled with price corrections to recover increases in certain costs, resulted in revenue rise of 36 percent or $959 million.

Cement Company increased its prices by an average of 1.3 per cent starting April 1^st on top of an average increase of 3 percent at the start of January. In October last year there was 2.7 percent upward adjustment.

Outlook| The company in a release to the stock exchange said “We remain cautiously optimistic about increased domestic market demand in the short to medium term as we continue to actively promote new uses for our cement in the domestic market. Our focus on developing export markets, especially in Central and South America, continues and we expect to conclude a new contract for supply of clinker to Venezuela when the current contract is fulfilled in May”.

Borrowings| While Trinidad Cement, the majority shareholders restructured the debt to Caribbean Cement (CCC), CCC still has a large amount due amounting to $1.4 billion costing a huge amount in interest amounting to $66 million during the quarter and picked up exchange losses of $15 million as a result of slippage of the local dollar.

At the end of the quarter the company still has huge build up of deficit on its books standing at $7.35 billion. It will take several years before they are able to wipe this out and place themselves in a position to start paying dividends.

Cash| on a more positive note Cement Company ended with cash of $340 million at the end of the quarter as the operations generated cash inflows of $138 million, this is good news as it could it means that cash build up could during the year end up at close to $900 million.