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Caribbean Cement concretises domestic market, earnings triple

Published:Wednesday | April 27, 2016 | 12:00 AMCamilo Thame
Alejandro Vares, general manager of Caribbean Cement Company Limited.

Caribbean Cement Company more than tripled its profit in the first quarter of 2016, setting a new earnings record.

The $830 million net income for the three-month period by far improved on the $250 million posted for the comparative quarter in 2015, reflecting depressed energy prices and a return to almost full share of the local cement market.

The company also didn't have to contend with redundancy expenses, which cost more than $400 million in the last quarter of 2015.

Revenue increased by 11 per cent to just shy of $4 billion during the quarter under review, despite export volumes of cement and clinker falling by 53 per cent and 56 per cent, respectively.

Domestic sales volume rose by an undisclosed amount to offset those declines.

The company takes on higher cost of selling overseas where it commands lower prices than its products sell for in the domestic market. Last year, export sales took in just 17 per cent of revenue, even though it represented around a third of total volume sold in 2015. So it is likely that a one-tonne increase in cement sold locally would offset the decline in revenue associated with a fall of two tonnes of export volume.

Considering the overall increase in revenue, domestic sales volume increased in the region of 24 per cent.

Most of that increase would have come from a distribution deal it secured with Tank-Weld Metals last November.

The construction and building material company began distributing Carib Cement's product from its cement-bagging plant at Rio Bueno in Trelawny, exiting the import business, and allowing the Rockfort, Kingston-based manufacturer to increase its share of the domestic market from 83 per cent last year to what looks closer to 100 per cent now.




"Improvements in operational efficiencies, effective control of fixed costs, lower financing costs and lower energy costs contributed to the improved financial performance," said the report to shareholders accompanying the latest financial statements.

Indeed, earnings before interest, tax, depreciation and amortisation (EBITDA) increased from $440 million in the first quarter of 2015 to $1.1 billion in the review quarter. Put another way, EBITDA margin (as a percentage of sales) climbed from 12 per cent to 27 per cent.

The group's liquidity position also improved during the quarter. Working capital climbed from $1.3 billion at the end of 2015 to $2 billion as at March 31, as the current assets improved by $750 million to $6.2 billion while current liabilities remained relatively flat.

On the other hand, Caribbean Cement's cash position increased by just $50 million to $960 million over the three months to March 31. Inventories, which represent approximately half of current assets, likely did not increase substantially, given that overall production levels were down from last year, and commodity prices remained depressed.

The jump in current assets likely results from increased receivables and amounts owed by related parties, such as its sister company, TCL Trading, which was basically responsible for all of the $210-million increase in monies due from related parties in 2015.

Years of losses still leave Caribbean Cement's accumulated deficit at around $4.9 billion.

But the earnings in its first quarter of 2016 is the highest quarterly profit on record and is just shy of the highest annual earnings previously achieved by the company in 2004, when it posted $842 million to its bottom line - although this does not take inflation and depreciation of the Jamaican dollar into account.