Write offs at Carib Cement hit profit

Caribbean Cement

Profit at Caribbean Cement before exceptional charges rose 31 percent from $1.85 billion to $2.43 billion from sale revenues rose that grew by just 4.64 percent for the quarter to $16.5 billion, from $15.78 billion in 2016.
Gross profit increased 7 percent or $656 million excluding labour cost and the margin increased modestly to 62 percent from 61 percent in 2016. The company wrote off inventories amounting to $458 million and incurred redundancy and other manpower restructuring cost of $417 million, reducing the profit for the year by 12 percent to $1.22 billion.
Wages and related cost declined 6 percent to $1.94 billion while Administrative expenses were virtually flat at $4.49 billion, but depreciation rose 7 percent to $532 million flowing from additions to fixed assets and transport, marketing and selling expenses rose 22 percent.
Importantly, while revenues rose just under 5 percent for the year, in the final quarter it increased by 12 percent to $4.25 billion and helped to lift profit before exceptional cost from a loss of $225 million in 2016, to a profit of $367 million. The net position for the quarter is well down on the $748 million reported in the September quarter from revenues of $4.18 billion.

Carib Cement 2017 operating profit rose.

Analysis of the figures raises question about the costing for raw material used in production. It was reported as just $323 million in the September quarter and $520 million in the final quarter, unadjusted for inventories for finished goods sold in the period but coming from the prior period. Direct cost jumped sharply over the September quarter and is out of line with prior period. Charge for corporate taxation rose from just $49 million in 2016 to $411 million.
Gross cash flow brought in $3.2 billion but addition to fixed assets absorbed $2.2 billion with cash funds ending at $1.67 billion at the end of December. Shareholders’ equity improved to $8.96 billion with accumulated losses of $3.25 billion, roughly $700 million worse than the $2.59 billion at the end of September. There are no noted borrowings on the financial statement but the company has a long standing lease arrangement with its parent company. Usually reliable sources indicate that the arrangement with Trinidad Cement will be refinanced shortly in Jamaica and will result in significant cost savings for the company which could be as high as $2 per share. Net current assets ended the period $790 million with third party Payables of $2.58 billion.
Earnings per share came out at $1.35 cents for the year but without the one off charges would have been in region of $2.10. The stock traded at $33.05 on the Jamaica Stock Exchange with a PE ratio of 16 times 2017 adjusted ongoing earnings. With the new fiscal year normal earnings should increase with the growth taking place in the construction sector and the lowering of cost in a number of areas. IC Insider.com is projecting earnings of $5.50 per share for the year based on savings already effected in its operations, increased demand for cement and savings to flow from a new financing arrangement, for a PE ratio of 6. Investors interested in buying into the potential for may want to wait to see if there is a sell off before picking them up.

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