Wed | Feb 26, 2020

Caribbean Cement blames rain for profit decline

Published:Friday | November 1, 2019 | 12:26 AM

Caribbean Cement Company profits were battered by heavy rains at the end of summer, and that, plus a large tax bill, caused the company’s bottom line to shrink by three-quarters in the quarter ending September.

Earnings for the company amounted to nine cents per share, compared to 36 cents per share in the 2018 period.

Caribbean Cement said in its third-quarter earnings report that the “unusually heavy rainfall” negatively impacted sales volumes, and that the company also had to contend with higher operational expenses.

Some of its cost were associated with the demolition of a large obsolete structure at the Rockfort, Kingston-based plant, aimed at improving the aesthetics of the area.

Caribbean Cement is highly dependent on its domestic market, and its financial performance is tied to the level of activity in the local construction sector.

President of the Incorporated Masterbuilders Association of Jamaica Lenworth Kelly, said rain leads to delays in construction, especially for projects without roofing.

“Once the rain falls you basically cannot mix concrete,” said Kelly. He adds, however, that the impact of weather on demand is momentary, as ongoing building projects would still require a set amount of cement for the job at hand.

“If contractors were to use 10,000 bags in September, they still need that amount. So they might bump up orders in October or November. You still need it anyway for projects,” he said.

Caribbean Cement’s sales revenue slipped in the quarter to $4.38 billion, from $4.46 billion in the quarter ending September 2018. Profit before tax dipped 55 per cent to $238 million from $531 million in the same period. Profit after tax was down 75 per cent to $76.8 million from $305.1 million a year earlier.

Over nine months, profit at the cement plant is up, at $1.57 billion or $1.85 per share, compared to $1.31 billion or $1.54 per share the previous year.

Caribbean Cement otherwise reported that its pilot project is ongoing to assess the viability of converting old tyres into scraps of rubber for use as fuel within its energy-intensive kiln. The project started in July.

“During the pilot phase, approximately 200 truckloads of tyres will be transported from the Riverton disposal site to the Rockfort plant,” the company said. “The trials are about to finish and the results will be made public.”

On Wednesday, in the first full day of trading after the release of the financial report, Caribbean Cement shares traded mostly stable at $75. The shares are up nearly eight per cent for the week at just under $77, down 3.85 per cent for the month, but up 81 per cent year to date.

Its market capitalisation now stands at $65 billion, which is around eight times the company’s book value of $7.9 billion.