Caribbean Cement revenues up but restructuring costs cut earnings
Over $800 million in staff severance costs and inventory write-downs hurt the June quarterly earnings of Caribbean Cement Company Limited, a local producer of the commodity.
The group earned net profit of $220 million on revenues of $4.3 billion for the April to June 2016 quarter. That equates to quarterly earnings of 26 cents per share, down from 73 cents a year earlier.
It is the first severance charge in a year, and impairments in at least two years at the now profitable outfit. During the quarter, the company booked $420 million as staff severance costs.
"Manpower restructuring costs mainly comprise severance costs incurred during implementation of restructuring programmes. The objective of the restructuring programmes is to improve cost efficiency," stated the company in its notes accompanying the financials signed by Chairman Chris Dehring.
The company also wrote down its inventory by $402 million. The impairment followed a June review of its inventory of spares and consumables to determine the optimal stockholding and reorder levels for all companies in the group.
"As a result, the management has written down overstocked inventory items to their net realisable value in accordance with international accounting standards - IAS 2," stated the company, whose product is sold under the Carib Cement brand.
During the second quarter, Caribbean Cement Company experienced significant improvement in its liquidity position, which allowed for the repayment of long-term debt and intercompany balances. During the quarter, the extraordinary items reduced the Rockfort, Kingston-based plant's profit, but it contributed to a net loss of TT$21.8 million for its parent company Trinidad Cement Limited, based at Claxton Bay in Trinidad & Tobago.
The outlook for TCL remains positive as the overseas group continues to implement internationally competitive operating structures and procedures to ensure a sustainable and competitive level of profitability, liquidity and cash flow. The threats to its profitability are what management described as the "current construction trends" in Trinidad & Tobago and the "competitive environment in Barbados and Guyana".
Over six months ending June 2016, Caribbean Cement reported consolidated profit before tax of $1.3 billion compared to $996 million in the corresponding period of 2015, or 29 per cent higher year on year.
"This improvement was mainly due to increased revenue and reduction in costs but was tempered by stockholding and inventory restructuring costs and manpower restructuring costs," stated management, which added that despite a reduction in export cement and clinker volumes by 8.0 per cent and 77 per cent, respectively, total revenue increased by $777 million.
"This was mainly due to an increase in domestic cement volumes by 27 per cent, arising from increased projects and strong retail demand," the company stated.