CARIBBEAN Cement Company (CCC) announced that it returned to profitability earning $359.5 million for its second-quarter ending June 30 after effectively receiving billions in support from its parent.
The profit reversed an over half-a billion dollar loss a year earlier. The company benefited from increased sales, which rose 25 per cent year on year to $3 billion. But the main driver came from a reversal of withholding tax as a consequence of a US$38 million “capital contribution” from its parent, Trinidad Cement Limited (TCL).Anthony Haynes, Carib’s general manager said that the capital contribution was more akin to debt forgiveness than an injection of cash in the operations.“We don’t have to service [the TCL] debt anymore and especially the foreign exchange losses associated with it,” Haynes said, adding that intra-company debt now stands at some US$7 million, down nearly 80 per cent.Carib owed TCL lease payments for its cement plant upgrade. These lease amounts were not repaid since 2010, management said — accumulating to some US$38 million. That amount was forgiven by the parent, Haynes explained.“This whole thing is strengthening t he financial position of the company and knocking-off the debt,” Haynes told the Business Observer. “It makes the company more attractive and has the effect of putting CCL back to a positive equity position.”Consequently, the cement manufacturer now has $4.5 billion in equity, compared with negative $794 million a year earlier.The debt forgiveness triggered other savings which resulted in profit for the group, the financials indicated. More specifically, accrued withholding tax of $591.48 million was no longer payable by the company and reversed. The company indicated that if the reversal was excluded from the three months’ and six months’ statements, the ‘net loss for the period’ for the three months and six months would have been $232 million and $728.8 million respectively.The parent company also received some US$37 million worth of preference shares from CCC.The reduction in lease servicing means that Carib will mitigate currency losses amidst a Jamaica dollar facing double-digit depreciation against its US counterpart.“With the restructuring of the intra-group debt, the threat of foreign exchange translation losses totalling $701 million year to date has been significantly mitigated,” said the company notes accompanying the financials signed by Brian Young chairman and Dr Rollin Bertrand group CEO.Carib raised cement prices four times in recent months due to the inflationary effect of currency movements. Going forward currency movements will become more manageable, said Haynes.“The dollar will continue to provide a risk to us. But the reduction of the US dollar debt that we have to service has reduced the overall impact of foreign exchange movements on us,” Haynes said while alluding to the write off of lease payments. “It is now manageable. But if the dollar goes into further dip then we will have to make adjustments.”CCC also expects to maintain the improvement in export sales and grow these even further with sales to Guyana and Suriname.“While we do not foresee any meaningful growth in the domestic market, with careful cost management and the expected growth in export earnings, we expect to maintain these favourable results over the rest of this year,” the financial notes concluded.The main driver came from a reversal of withholding tax as a consequence of a US$38 million “capital contribution” from its parent, Trinidad Cement Limited (TCL).View the original article here
Carib Cement back in the black
