Home' Trinidad and Tobago Guardian : July 19th 2015 Contents JULY 19 • 2015 www.guardian.co.tt SUNDAY BUSINESS GUARDIAN
COMMENTARY | SBG3
Regional cement producer,
TCL, which suffered four
years of losses between 2010
and 2014, on Friday reported
half year after-tax profit for
2015 that was more ten times
better than it produced last
year, according to the company s unadited
results for the period January to June, 2015,
which were published on Friday.
For the first six months of the year, TCL s
recorded an after-tax profit of $335.4 million,
which was substantially higher than the $32.8
million the company reported in the compa-
rable period in 2014.
The 922 per cent increase in TCL s profit
so far for 2015 was largely due to the $197 mil-
lion one-off gain that the company took for
the restructuring of its debt earlier this year.
That debt restructuring exercise involved
paying off the existing bondholders with a
new nine-month, US$245 million loan ($1.57
billion), which resulted in TCL benefitting as
a result of early repayment.
In an earlier attempt at debt restructuring,
involving an expensive, ten-day, six city road-
show in the US and Canada in May 2014, for-
mer TCL CEO Rollin Bertrand attempted to
raise US$300 million on the US junk-bond
market. That attempt ended in failure as the
potential North American investors demanded
stricter covenants and higher interest rates
than the company was paying at that time.
Bertrand was terminated by the board by letter
on September 22, 2014 following a review of
But even without the one-off gain of $197
million, TCL s earnings seem impressive. While
the company reported a marginal increase in
its revenue of 1.3 per cent to just over $1 billion,
its earnings before interest, tax, preciation,
impairment, loss on disposal of property, plant
and equipment and net debt restructuring
jumped by over 54 per cent to $319.4 million
from $207 million.
TCL s operating profit---which includes
depreciation, impairment and loss on disposal
of property, plant and equipment---soared by
86 per cent to $264.3 million for the first six
months of 2015 from $141.9 million for the
same period in 2014.
And the Claxton Bay-based company, which
has subsidiaries and operations throughout
the region, experienced a 728 per cent hike in
its profit before tax, which moved to $368.6
million in 2015 from $44.5 million in 2014.
TCL s taxation charge for the first six months
of this year was $33.4 million, which is nine
per cent of its profit before tax, while the tax-
ation charge for the same period in 2014 was
$11.7 million, which was 26.3 per cent of its
profit before tax.
In the directors statement, the company
pointed out: "In light of the fact that the
US$245 million ($1.57 billion) bridge loan has
a maturity tenor of nine months, the full
amount of this liability is reflected as current
liabilities in the statement of financial position.
"As a consequence, the working capital has
moved from a surplus of $0.6 billion at March
31st, 2015 to a deficit of $0.8 billion at June
30th, 2015. Net cash balance at the end of Q2
2015 was $529.7 million compared to $77.1
million at Q2 2014."
Contacted for comment on the company s
results on Friday night, TCL chairman Wilfred
Espinet told the Sunday BG: "The board of
directors feel very excited at the results that
have been coming out of TCL since the restruc-
turing exercise began. There is justification
for what was done at TCL as the results prove.
"We are all realistic enough to know that
there are headwinds---partly caused by the
uncertainty as a result of the imminent general
elections and also the international environ-
ment---but we feel that the company is better
equiped to handle those headwinds than it
The TCL chairman said the improved results
reflected the substantial changes in how the
company has been functioning, since the new
board took over in August 2014.
"Stakeholders should take note of two things:
the benefit that was derived from the early
payment of the debt and the haircut that the
company was afforded from our creditors.
"Secondly, we have already begun to see
the benefits from tighter management of the
company s operations. That s reflected in the
fact that we have had savings in energy costs
in both Jamaica and Barbados as we have
switched our fuel to a less expensive com-
Espinet explained that TCL was able to
leverage its more cordial relationship with
Mexican cement giant Cemex, its largest single
shareholder, to get access to less expensive
sources of petcoke.
"We are using a less expensive fuel in both
Jamaica and Barbados, which has reduced our
cost of production in both of those countries.
These better prices are as a result of Cemex s
buying power. This is one way in which the
synergy between TCL and its largest share-
holder is working."
Following a successful rights issue in March---
which resulted in TCL raising US$57.1 million
and issuing 128.8 million new shares---the
shareholding of Cemex in TCL increased from
20 per cent to 39 per cent. The total amount
of the rights issue subscribed by Cemex,
through a holding company called Sierra Trad-
ing, was US$44.8 million. That was 78.5 per
cent of the total contributed by TCL s share-
holders to the rights issue.
The decline in the cost of fuel in Barbados
and Jamaica has resulted in a reduction in the
cost of production at the Arawak Cement in
Barbados and at the Caribbean Cement oper-
ation in Jamaica. At Arawak, that reduction
in the cost of production has led to a decline
in the losses reported by the TCL subsidiary
in Barbados, said Espinet. In Jamaica, sales
have increased, which along with the reduced
cost of production has resulted in wider mar-
The TCL chairman also said that while the
company s production performance has been
better, its management of cash has improved
partly due to the fact that the company is get-
ting better terms from its suppliers.
Espinet said: "Based on the enhanced cash
flow from the better management of cash, we
have decided to pay off part (US$20 million)
of the US$245 million short-term loan. This
means that the long-term debt that we are
now looking to finance will be a maximum of
TCL entered into a bridge loan credit agree-
ment with Credit Suisse Cayman Islands
branch, Citibank International Banking Facility
and Citibank Trinidad as initial lenders. The
interest rate of the 9 month loan is LIBOR +
6.25 per cent with quarterly increments of 1
Both Credit Suisse and Citibank have indi-
cated that they are committed to take part in
the long-term debt, which would be a syn-
He said the company is focused on driving
further internal efficiency enhancement. TCL
is hoping to achieve this by the realignment
of all of the stakeholders.
"What we have done so far has been a bal-
ance sheet restructuring, but what we need
to do in the future is an operational restruc-
turing to enhance efficiencies and to satisfy
the expectations of all stakeholders: customers,
employees, creditors and the shareholders,"
Asked if the company s results would cause
the board of directors to revise its projection
of dividend payments in two years, Espinet
said: "We indicated at the special meeting in
February that by 2017 we would be back to
a dividend environment and we think that
that outlook is a prudent one."
Looking forward to Tuesday s annual meet-
ing of the company, which will be held at the
Trinidad Hilton ballroom starting at 5 pm,
Espinet said that TCL is committed to open
and transparent disclosure of information.
"We have nothing to hide and we will answer
all of the questions asked by the shareholders."
TCL's profits skyrocket from
one-off gain of 197million
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