Caribbean Cement hedging fuel bill as energy costs rise
Caribbean Cement Company Limited is now hedging its fuel bill to stabilise its costs.
The hedges began in the second quarter, amid rising sales and profit at the Rockfort-based operation.
The group entered into forward contracts through its ultimate parent company, Cemex of Mexico, to hedge the price of estimated fuel consumption.
"By means of these contracts, the market price of a portion of the fuel component was fixed based on estimated consumption," said Caribbean Cement in its newly released third-quarter financial report.
The cement maker has spent $70.76 million on the hedges so far this year.
The company's fuel and electricity bill remains its main cost centre, and one that is rising. Its energy bill rose to $2.22 billion year to date, compared to $1.87 billion in the same period in 2016.
The management of Caribbean Cement did not respond to requests for comment on the hedges.
In the third quarter, July-September, the company turned around a loss of $81 million to a profit of $748 million. Net profit doubled in the nine-month period to September, sales rose at the Rockfort plant from $11.98 billion to $12.64 billion. Net profit doubled in the period to $1.8 billion, from $973 million, as Caribbean Cement shed one-off costs linked to the restructuring of both its inventories and staff last year. Together, those charges amounted to more than $840 million.
The gains at the top and bottom lines come amid reinvestment in the operation, with capital expenditures hitting $1.5 billion year to date.
"The group continues to maintain its liquidity position and to fund capital projects from cash generated through its operations," said Chairman Parris Lyew Ayee and General Manager Peter Donkersloot Ponce in a statement appended to the results.
"The directors remain committed to meeting local cement demand and contributing to economic development," they said.
In July, Caribbean Cement announced plans to invest US$24.7 million over the next 12 months to complete a coal mill and kiln, and implement green energy programmes. It aims to push cement production from 910,000 tonnes to 1.2 million tonnes annually by 2019.