Steven Jackson, Business Reporter
Caribbean Cement Company has racked up losses for three years but on Tuesday its directors emerged from the annual meeting of shareholders with a more bullish message: expect a turnaround by next January.
The new outlook comes behind disclosures out of Claxton Bay that Caribbean Cement's parent and benefactor, Trinidad Cement Limited (TCL), has finalised a debt 'reprofiling' plan with some 30 of its biggest creditors, giving the company breathing room to pay off some J$1.95 billion of debt over five years, starting from March 2013 to December 2018.
A more operationally sound Caribbean Cement increases the possibility of profit and positive working capital for the first time in three financial years.
"We are not out of the woods (but) definitely our outlook is more positive," General Manager Anthony Haynes told Wednesday Business at the close of the annual general meeting in New Kingston, from which the press was barred.
"We need to maintain careful cost containment and also be careful with our decisions," he said.
Caribbean Cement's financial troubles track back to its ambitious US$177 million expansion project that concluded just as Jamaica and the world were about to be hammered by recession, and as the market share of the Rockfort, Kingston-based plant was being tested by cheaper imports.
The debt restructuring by TCL is expected to reduce lease payments by Caribbean Cement to its parent. Under the repayment terms for US$105 million of loans obtained by TCL to finance construction of Kiln 5 and Cement Mill 5 at the Rockfort Plant, the Trinidadian parent holds the assets, which Caribbean Cement operates under lease.
Price increase on cement
Caribbean Cement is also expecting to boost revenues via a price increase implemented last month on its Carib cement product and to grow sales via the export market.
As such, Haynes expects production at the plant to rise from 50 per cent of capacity to about 70 per cent by January.
Haynes remained mum on Caribbean Cement's precarious balance sheet now sporting negative equity, but: "We expect our working capital to improve in the next six months," he said.
The cement producer recorded negative equity of J$216.2 million at its March 2012 first quarter, due to accumulated losses that hit J$4.78 billion. Three months before that, its net worth was J$409 million; a year ago, it was J$2.7 billion.
Haynes said that the result of the debt restructuring agreement sealed in May would likely lower Caribbean Cement's lease payments to TCL but was unable to quantify the saving immediately.
"The operating lease arrangement of CCCL is approximately equivalent to the debt service of TCL. The new arrangement should result in reduced debt servicing for TCL, which ought to result in reduced lease for Carib Cement," said Haynes. "That is what I am hoping."
Last year, Caribbean Cement made a net loss of J$2.6 billion. Its losses for the first quarter ending March 2012 tripled to J$625 million, pushing its accumulated deficits to J$4.8 billion.