- Contributed TCL's rights issue is one of the last planks in its financial restructuring.
WITHIN A month Trinidad Cement Limited (TCL), the parent company of the Caribbean Cement Company, will look to raise around TT$200 (J$1.36b) million in the Trinidad market largely to help cut debt taken on as a result of last year's acquisition.
The latest rights issue for shareholders of TCL has not yet been priced according to TCL chief financial officer Hollis Hosein but the company is currently briefing investors on its plan to raise TT$200 million. On Friday Mr. Hosein and Carib Cement general manager, Kelvin Mahabir, met with the Jamaican investment community at Le Meridien Pegasus Hotel, New Kingston. The move was signalled last year and is one of the last parts of the financial restructuring the TCL Group undertook in order to buy a majority stake in Carib Cement a year ago. TCL holds 74 per cent of the local cement monopoly.
In July 1999 TCL floated a US$65 million asset-backed bond on the market as part of its effort to raise US$100 million ($4.2 billion) to refinance the local company.
TCL's five-year bond was underwritten by Citibank through its Trinidad, Jamaica and New York offices, and was designed as part of a complex sale and lease back agreement that saw the company come to the market with a rights issue and float the bond in order to cut CCC's huge short term debts.
Another US$35 million of equity was also pumped into the ailing Carib Cement operation.
The acquisition helped push TCL's debt to equity ratio up to around 221 per cent, which, following the latest rights issue will fall by about half, according to Mr. Hosein. TCL's long term investments financed out of borrowing jumped to TT$442 million but will be cut in half following the rights issue, which will be underwritten by Citibank's Trinidad arm.
Buoyancy
The inclusion of Carib Cement and to a lesser extent the buoyancy of the Barbados market, resulted in a 52 per cent increase in revenue to the Trinidadian firm for the financial year ended December 31, 1999.
The acquisition of 74.1 per cent interest in the Jamaican firm has afforded the Group an opportunity to double its revenue and significantly increased its net stream, notwithstanding the financial and technical challenges associated with the venture.
TCL saw its revenue increase by TT$287.4 million (TT$6.04:J$1) to TT$836.1 million in 1999, with Carib Cement contributing TT$310.8 million, and in the Barbados market where sales increased by TT$13 million over the previous year.
But despite the increased revenue, pre-tax profit fell 12 per cent from TT$116.9 million to TT$102.9 million, reflecting the additional costs of depreciation ($21.5 million) and finance ($92.6 million).
Net interest cost from the inclusion of Carib Cement amounted to TT$44 million and the Group incurred financing expenses of TT$43 million associated with the funding of the acquisition.
Group net profit for 1999 was TT$70.2 million, an 18 per cent decline over the previous year's TT$85.2 million.
Mr. Hosein said some TT$31.4 million in potential profit was lost during the year,'as the Group was tested as it never was before', by the dumping of cement from Thailand onto its key Trinidad market. In response TCL cut cement prices by 44 per cent for more than five months as it pursued an anti-dumping complaint with the authorities.
The Carib Cement acquisition's impact on profits net of finance cost was TT$15.3 million.
