Shane Ingram, Contributor
Dr. Rollin Bertrand (left), chief executive officer of the TCL Group of Companies is in discussion with Brian Young, chairman of the TCL subsidiary, Carib Cement. They were speaking at the launch of Carib Cement Plus in Jamaica, last February. - WINSTON SILL/FREELANCE PHOTOGRAPHER
DESPITE THE overall decline in all three market indices for 2005, stocks rallied strongly in December to allow the change in all three indices to close in positive territory for the month - the Main JSE Index advanced 3.79 per cent, the JSE Select grew 6.08 per cent, and All Jamaican Composite climbed 7.49 per cent.
The upbeat market conditions largely reflected favourable developments in the currency market together with significant slowdown in local inflation and signs of weakening international oil prices. December is also typically a period of healthy gains in stock prices as retail and institutional clients hunt profits to finance the activities of the Christmas. At the same time, some brokers tend to push prices artificially higher in December in order to reap
market-to-market gains for the end of the quarter and the year. There were, apparently, some incidences of this in December 2005 as stock prices dipped
significantly on the first day of trading in 2006.
COMPANY SPOTLIGHT: LESS CONCRETE OUTLOOK FOR TRINIDAD CEMENT LIMITED
Revenues at Trinidad Cement Limited grew 9.8 per cent to TT$1.09 billion for the nine-month period to September 2005 on the back of an average 12 per cent increase in cement sales volumes in all three domestic markets. However, operating profits dropped 21.4 per cent to TT$172.3 million due to the interruptions to Caribbean Cement's operation caused by the passage of hurricanes in the period along with the increases in energy costs. Operating profits were further depressed by significant losses recorded by Ready-mix (producers of pre-concrete mix) due to provisions and adjustments made to the
accounting records.
Even as finance cost fell 12.2 per cent due to debt refinancing undertaken in the review period, this was not enough to prevent TCL's pre-tax profit from falling to TT$99.1 million, from TT$135.8 million in the prior year. However, profit after taxation advanced 8.6 per cent to TT$121.1 million as the company received a tax credit of TT$24.6 million arising from the five per cent reduction in the T&T tax rate. After minority interests were considered, net profit attributable to shareholders amounted to TT$118.05 million, up 16.5 per cent on the matching period of 2004. The net profit margin was marginally higher than last year's moving from 10.21 per cent to 10.83 per cent for the nine-month period ended September 2005. Consequently, earnings per share increased TT 6 cents to TT 48 cents.
The TCL Group is the dominant producer and supplier of cement in the Caribbean region, which together with its subsidiaries in the pre-mixed concrete and packaging sectors form a potent vertically integrated operation. It enjoys leadership in several markets including Trinidad, Barbados, Jamaica, Anguilla and recently expanded its reach into Guyana and St. Maarten. With the demand for cement rising on the world market due to strong growth in economies such as China, TCL may be presented with an opportunity to supply both Caribbean and American markets. As such, the group has embarked on an Optimisation and Capacity programme that promises to improve facilities so as to take advantage of operating efficiencies. The company recently completed the upgrade of its cement mill in Trinidad with the installation of new state-of -the-art equipment that is expected to boost production capacity to 1.8 million tons per annum, up from 780 thousand tons per annum. Its subsidiary, Carib Cement Limited, also boasts an enhanced presence in the Jamaican market through the Government's imposition of the Common External Tariff (CET) of 40 per cent on cement imports.
Notwithstanding, the group is likely to be challenged by rising input costs, inclusive of volatile fuel prices. More importantly, the cost of servicing its US$70 million debt obligation will result in a significant financing burden in coming periods. There is even concern as to whether Group can sustain sufficient liquidity to meet its obligations, given that finance costs are expected to rise going forward. The short-term prospects look less concrete for the Group at this point in time.
RECOMMENDATIONS
We hold favourable outlook for NCBJ, CWJA, PJAM, DB&G, and BNS; Seprod, D&G, CRTS, KW, and Goodyear could also perform well over the short-term. Please contact DB&G's Stock-brokerage department at 1-888-CALL DBG for further information on these and other stocks or visit for detailed analyses.
Disclaimer: All information contained in this article has been obtained from sources that DB&G believes to be accurate and reliable. All opinions and estimates constitute the author's judgment as of the date of the article. No warranty as to the accuracy, timeliness or completeness of this article and as to the opinions based thereon is given or made by DB&G. DB&G and/or its employees or directors and/or any associated person may have an interest in, or interest in the acquisition or disposal of the securities or class of securities mentioned herein. Call 1-888-CALL DBG if in doubt about the content of this article. Decisions based on information contained in this article are your sole responsibility.
