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Caribbean Cement makes $1.6b profit despite big severance payout

Published:Wednesday | March 2, 2016 | 3:00 AM
Caribbean Cement Company Limited

The separation of some former managers and voluntary redundancies late last year cost the Caribbean Cement Company $436 million.

It is not clear how many persons were paid from this sum, but Anthony Haynes, who demitted office as general manager last April to make room for Alejandro VarÈs as the new head, was the most senior manager to leave the company last year.

"(There were) cases of mostly mutually agreed redundancies that occurred in 2015 after some employees indicated an interest in retiring due to age or pursuing other interests," said the company in response to Wednesday Business queries.

Despite the one-off expense, the local cement-maker posted $1.54 billion in earnings for year ending December 2015, which is elevenfold the $139-million profit made the year before.

Increased domestic sales boosted company revenue from $14.4 billion in 2014 to $15.4 billion last year.

However, significantly higher efficiencies, likely garnered primarily from lower energy prices, resulted in earnings before interest, tax, depreciation and amortisation (EBITDA) before severance cost rising from $961 million to $2.6 billion.

Put another way, EBITDA margin climbed from 6.7 per cent to 16.8 per cent.

"The company benefited from improved operational practices, tight cost controls, and lower costs of fuels and energy," said a report to shareholders in the latest financial statements.

It likely also helped that Caribbean Cement shifted some of its sale of cement from the export market, where it takes on higher cost of selling and where it commands lower prices to the domestic market.

Domestic cement sales volume climbed by 12 per cent, or by 72,000 tonnes to 670,000 tonnes, while cement export volumes declined by 82,000 tonnes, or by 35 per cent to 151,000 tonnes.

At the same time, Caribbean Cement increased its sale of clinker, an intermediary product used to make cement, to Venezuela through the PetroCaribe export-for-debt-payment mechanism, by 25,000 tonnes, or by 16 per cent to 180,000 tonnes.

Plans are under way to expand the Rockfort plant's annual capacity from 1.2 million tonnes to 1.6 million tonnes at a cost of US$30 million by next year September.

Net debt restructuring also added $168 million to the cement-maker's bottom line, while interest expenses fell from $253 million to $149 million, reflecting a reduction in debt from $870 million to $227 million.

Caribbean Cement's parent, Trinidad Cement Limited, used new third-party funding secured last May and proceeds from successful rights issue last March to pay off lenders an amount of $30 billion.

As a result, the company's auditors said that the "debt default conditions and resulting going concern risk factors which existed in 2014 are no longer existent as at December 31, 2015".

The improved profitability of the manufacturer resulted in working capital increasing from $794 million at the end of 2014 to $1.3 billion at the end of 2015.

However, years of losses still leave Caribbean Cement's accumulated deficit at around $5.7 billion.

camilo.thame@gleanerjm.com