Caribbean Cement predicts big drop in annual sales
Caribbean Cement Company Limited, CCCL, expects its annual sales to drop by up to 20 per cent due to COVID-19.
The projected fall in sales comes with the economic slowdown and health measures to stem the spread of the coronavirus.
“The forecast we are seeing is a 10 to 20 per cent decline in annual terms,” said General Manager Yago Castro at a virtual Mayberry Investor Forum last week. “We are factoring the first quarter which was normal, but the second quarter we saw a drop by one-third, and the third quarter we are also expecting a decline when compared with last year,” he said.
Caribbean Cement reported $17.8 billion of sales in 2019, a fifth of which would amount to $3.6 billion. The more conservative fallout of 10 per cent of sales would equate to $1.78 billion.
The cement market was already softening before Jamaica began counting COVID cases. The cement maker reported sales of $4.5 billion in the first three months of the year, indicating a flat quarter compared with $4.4 billion of sales in the similar period in 2019.
Market conditions changed radically in April, with sales down 35 per cent year on year, and about 10 to 20 per cent lower in May.
“The impact has been quite severe,” Castro said.
Caribbean Cement in its March financials described the COVID-19 pandemic as “undoubtedly” one of the greatest challenges of our times.
“At Caribbean Cement Company Limited, we are acting decisively to properly analyse, develop, and execute measures to safeguard our company and our people, as well as our customers, suppliers, and communities,” CCCL said in its earnings report.
Castro told the virtual Mayberry forum that prior to the onslaught of COVID-19, the macroeconomics of the country were solid and the country was on a path to further construction growth. He said Caribbean Cement had the capacity to produce cement to satisfy 150 per cent of local market demand, even prior to COVID-19; and that the company would under normal circumstances “turn off the mill 30 per cent of the time every day” so that its output would not exceed local demand.
Now with reduced local sales, the Rockfort, Kingston-based plant requires new markets to take up the shortfall. Consequently, the company plans to increase exports in the second half of the year to places such as Cayman Islands, Bermuda and The Bahamas.
Last month, Cemex, the ultimate owner of Caribbean Cement, indicated that its global subsidiaries would review capital expenditures for 2020 due to the COVID-19 fallout, for the Caribbean operations that includes a review of the planned US$22 million in regional projects.
Cemex’s Caribbean capex has been declining over the past three years, from US$32 million in 2017 to US$29 million in 2018, and US$21 million in 2019. The report did not disaggregate the budgeted capex in the country markets operated under Trinidad Cement Limited, which is CCCL’s direct parent company.