Thu | Apr 9, 2020

Caribbean Cement debt to Cemex weighs on earnings

Published:Wednesday | October 31, 2018 | 12:00 AM
Peter Donkersloot Ponce, general manager of Caribbean Cement Company Limited.

Cement sales climbed at Caribbean Cement Company Limited but finance costs linked to debt owed to its ultimate parent as well as volatile currency movements led the Rockfort, Kingston-based to post lower profits.

Quarterly sales at $4.5 billion grew seven per cent year on year but profit declined by more than half to $305 million at September 2018, down from $748 million a year ago.

"The reduction in profit before taxation compared to the same period in 2017 was impacted by foreign exchange losses of $464 million and interest payments of $227 million. Both are related to the loans received to finance the acquisition of Kiln 5 and Mill 5," stated the company.

Due to the combined $691 million in charges, the company was unable to sustain the gains in its earnings before interest depreciation, taxation and amortisation, or EBITDA, which at $1.6 billion was nearly twice the year prior out-turn of $966 million.

Caribbean Cement's managers were said to be attending meetings in Trinidad and did not respond to requests for comment on the results as well as market developments from what could be impending competition from another regional company, GB Group, which wants to set up a cement manufacturing operation in Jamaica. However, its EBITDA performance aligns with the goals of the buyback of its production assets from immediate parent, Trinidad Cement Limited.

For its September third quarter, Trinidad Cement reported a net loss of TT$20.1 million on revenues of TT$416 million. A year ago, the Claxton Bay-based operation netted a profit of TT$42.5 million on revenues of TT$427.4 million in the quarter.

The buy back, which was funded by borrowings from ultimate owner, Cemex of Mexico, served to double Caribbean Cement's assets in the past year from $7.7 billion to $23 billion. But the Rockfort company now has to service new debt of $11 billion.

In April of this year, Caribbean Cement terminated its lease arrangement with Trinidad Cement and completed the acquisition of the Kiln 5 and Mill 5 assets at a cost of US$118 million, or $14.9 billion in local currency. The company said that the funds for the acquisition came from cash on hand, and two loan facilities negotiated with Cemex Espana totalling US$82 million.

Sales at Caribbean Cement over nine months topped $13.2 billion, putting the company on track for another record year of revenue. Profit over the nine months at $1.3 billion is ahead of the $1.15 billion reported for the full year in 2017.

During the September quarter, there was a negative movement in the net cash generated by operating activities of $1.8 billion at Caribbean Cement. This was primarily due to the payment made to Trinidad Cement on the $1.9 billion balance that was outstanding on the acquisition of Kiln 5 and Mill 5, the company stated.