Displaying items by tag: Trinidad Cement Limited

Caribbean: Michael Subratie, a minority shareholder of Caribbean Cement Company (CCC), has asked the Jamaica Stock Exchange (JSE) to investigate whether the operating lease paid to parent Trinidad Cement Limited breaches accounting rules.

Subratie is contending that the operating lease over the cement plant's assets, which are owned by TCL, distorts its profits and stifles shareholder value, that it appears to contravene Generally Accepted Accounting Principles - GAAP - and should be replaced with a finance lease arrangement.

Caribbean Cement last paid a dividend in 2005, amounting to a total distribution of around US$9.34m at US$0.01/share. Subratie holds just over four million CCC shares in his own name and is now the tenth-largest shareholder of the operation with a 0.48% stake.

In 2014, Caribbean Cement paid US$377m to TCL as an operating lease. For 2015, it is projecting payments of US$364m. In 2015 – 2018, the plant expects to pay US$87m to TCL under the lease agreement. New rates will be negotiated for January 2019 to December 2028.

"The operating lease arrangement seems completely unfair to the minority shareholders as the true situation seems to be that of a finance lease as the equipment leased are permanent structures and equipment located at CCC in Jamaica," said Subratie. He is also contending that amounts already paid by Caribbean Cement, combined with the payments scheduled to 2018, more than equal the cost of equipment and structures.

Under operating lease contracts, the owner permits use of an asset for a particular period, which is shorter than the economic life of the asset, without any transfer of ownership rights. A finance lease is a commercial arrangement where the lessee pays a series of rentals or instalments for the use of the asset and has the option to acquire ownership.

Caribbean Cement has two operating lease agreements with TCL, covering kiln 5 and cement mill 5. Those structures were part of an expansion programme financed by TCL from external sources. The operating lease charge is accounted for on Caribbean Cement's financial statements as an expense. Without that expense, Caribbean Cement's earnings before interest, taxes, depreciation and amortisation (EBITDA) would be boosted by around US$31,386/yr.

TCL owns 74% of Caribbean Cement and, as the situation now stands, it is the only shareholder benefiting from payouts from the Rockfort plant, said Subratie.

Barbados: The Barbados government has said that it stands by its decision to lower the 60% tariff rate on cement to protect Arawak Cement Limited (ACL), a subsidiary of Trinidad Cement Limited (TCL).

Commerce Minister Donville Inniss explained the rationale behind the government's decision, as both companies have expressed concerns over the decision to lower the tariff. Inniss said that the intent was not to cause any harm, but to help drive efficiencies in the system and to ensure consumers got a better price on the much-needed raw material. "We have our differences on the methodologies employed and the policies being pursued, but at the end of the day, we want to ensure that ACL remains a viable entity in Barbados," said Inniss.

Inniss said that he was supportive of the company's restructuring plans, as well as its efforts to bring its prices down, praising the company's commitment to increasing exports of Portland grey cement from Barbados. Earlier this week, ACL's Manager Rupert Greene said the company would announce the number of workers to be made redundant as part of the restructuring programme by the weekend. Greene said that at least 40 workers would be sent home and that discussions are continuing with the Barbados Workers Union (BWU) and the National Union of Public Workers (NUPW). Greene said that with a 65% drop in the Barbados market demand for cement over a 10-year period, there was a need to 'restore some balance to the equation.'

Trinidad and Tobago: Trinidad Cement Ltd (TCL) will delist from the Barbados Stock Exchange (BSE), the Guyana Association of Securities Companies and the Eastern Caribbean Securities Exchange. TCL chairman Wilfred Espinet made the announcement on 20 July 2015 at the company's annual general meeting (AGM).

Before asking the AGM for approval to delist the company, Espinet said little or no trading of the company's shares takes place on those exchanges, yet the company still incurs listing costs. TCL remains listed on the Trinidad and Tobago Stock Exchange (TTSE) and the Jamaica Stock Exchange.

TCL's revenue rose by 11% year-on-year and its cement sales grew by 8% quarter-on-quarter in the second quarter of 2015. According to its interim consolidated financial results for the six months that ended on 30 June 2015, the company made a US$573m profit.

At the AGM, new TCL CEO Jose Luis Seijo shared his plans for the company and refuted statements that TCL 'Would not make it.' He said that most difficult part of restructuring the company was now behind it. TCL completed its debt restructuring in May 2015, after the company missed its debt service payments in September 2014. Debt restructuring included an 11% debt prepayment discount and a US$15m cash prepayment, which reduced the company's outstanding debt to US$245m in May 2015 from about US$292m at the end of 2014.

"How are we planning to repay the loan? By working very hard," said Seijo. The CEO said that he was focusing on the basics of increasing revenue, reducing costs and strengthening the company's financial position. TCL will also expand beyond cement manufacturing to offer, oil well cement, concrete roads, social housing solutions and synergies with customers. Seijo said that he wants to bring efficiencies to the highest level. "We have been underperforming for the longest time." He added that he sees TCL pushing for alternative fuels and being very disciplined controlling costs.

Re-elected to the new TCL board during the AGM were chairman Espinet, Christopher Dehring, Nigel Edwards and Francisco Aguilera. New directors elected were former senate president Timothy Hamel-Smith, Ruben McSween, Jose Bavaro and Bryan Ramsumair.

Trinidad & Tobago: According to chairman Wilfred Espinet, director Nigel Edwards and new chief executive Jose Luis Seijo, Trinidad Cement Ltd (TCL) has repaid all of its previous lenders.

"TCL has been able to secure the funds to repay those lenders from short term loans in the amount of US$245m, together with cash from its recent Rights Issue and cash generated from operations," said Espinet. The company has also secured a nine-month loan facility from Citibank and Credit Suisse at an initial rate of libor plus 6.25% (a current effective interest rate of 6.53%), subject to a quarterly increase of 1% if it is still in issue.
In the coming weeks, TCL, Credit Suisse and Citibank intend to approach local and international markets to secure longer-term financing that will bring TCL to the final stage of the reorganisation of the capital structure. Some of the expected immediate benefits from the refinancing are a debt reduction from prepayment of previous lenders of US$31m, a reduction in financing costs in the form of quarterly interest savings of up to US$1.7m and a stronger balance sheet.

Jose Luis Seijo was named as TCL's new chief executive officer effective from 4 May 2015. Previously, Seijo has worked with Mexico's Cemex. Seijo's focus will be on value creation for the company and its stakeholders. "The TCL Group has huge potential. My immediate job is to tap into all our resources-essentially to mobilise the skills of our workforce against a backdrop of improved operational efficiencies and prudent investments to ensure a sustainable future," said Seijo. Former CEO Rollin Bertrand was dismissed by the TCL board in September 2014.

Trinidad & Tobago: Trinidad Cement Limited (TCL) has recorded major losses in 2014. Company CEO Alejandro Ramirez said that TCL achieved a pre-tax loss of US$15.3m in 2014, compared to a pre-tax profit of US$6.14m in 2013. TCL also recorded a post-tax loss of US$33.2m in 2014, compared to a profit of US$10.5m in 2013.

TCL's sales increased by 9% year-on-year from US$299m in 2013 to US$330m in 2014. This was mainly driven by TCL's cement and Readymix segments. Earnings before interest, tax, depreciation and amortisation (EBITDA) remained flat at US$63.4m in 2014. Despite the sales increase, EBITDA didn't increase because there were some extraordinary items that affected the results, according to Ramirez. He said that the 'extraordinary' expenses totalled US$8.97m and included the impairment of weather-damaged clinker, which was stored outside TCL's Barbados subsidiary Arawak Cement Company for several years.

Trinidad & Tobago: Cemex has struck a deal with the board of Trinidad Cement Limited (TCL) that will allow Cemex to increase its stake in TCL to at least 35%, with the option to add another 5%.

Cemex SAB de CV currently owns 20% of TCL, the maximum that was allowable per shareholder, through Sierra Trading. It has committed not to seek a stake higher than 40% of TCL under an accompanying deal to an upcoming rights issue. The deal, referred to as a Subscription Agreement, was signed by Sierra and TCL on the same day that TCL's shareholders voted to remove the cap on ownership of TCL shares.

Sierra will take up its full allowable allotment under the rights offer that gives shareholders the option to acquire one additional share for every two held. Some 124,882,568 shares will be available for subscription. If Sierra fails to reach its 35% ownership target at the close of the offer, "Then subject to receiving all required approvals, including shareholder approval, a private placement of TCL shares will be issued in favour of Sierra Trading in an amount that will permit Sierra Trading to achieve a shareholding of 35% of TCL's outstanding shares," said a Trinidad Cement spokesperson. The TCL board, under the leadership of chairman and shareholder Wilfred Espinet, also signed off on an 'exclusive' plan for Sierra to buy up the TCL shares that are not taken up during the rights offer, but under terms where Sierra's stake does not exceed 40% of the publicly traded company.

The ownership structure of TCL is undergoing changes that, according to the board, will facilitate a new debt-restructuring plan under negotiation with creditors. The loan agreements of 2012 that lengthened the maturity profile of the debt by six years were placed on hold by the current board while it negotiated a new deal. Consequently, TCL's US$315m of long-term debt was reclassified as short-term obligations.