Home' Trinidad and Tobago Guardian : May 18th 2017 Contents MAY 18 • 2017 guardian.co.tt BUSINESS GUARDIAN
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TCL prepares for better times
With Trinidad Cement
Ltd (TCL) joining the
Cemex group this year
and its subsequent
it appears that TCL
will soon be well-poised to take advantage of
the expected uptick in economic activity later
this year and into 2018.
Let us now review TCL's results to December
Total assets declined from $3.03 billion to
$2.92 billion or by 3.7 per cent.
Long-term assets increased to $2.24 bil-
lion from $2.07 billion. Property, plant and
equipment advanced to $1.81 billion from
Additions and transfers of $200.5 million
far exceeded depreciation charges of $123.1
million. Most of the increase was concen-
trated under capital work in progress ($102.7
million) and plant, machinery and vehicles of
The net deferred tax asset increased to $49.1
million from $38.4 million. The asset portion
increased to $394.1 million from $333.8 million
while the liability component advanced to $345
million from $295.5 million.
Pension plan assets soared to $37.3 mil-
lion from $5.4 million. In contrast, pension
liabilities declined to $24.9 million from $32
million. These movements allowed the plans
to improve from a deficit of $26.6 million in
2015 to a surplus of $12.3 million.
Current assets declined to $683.8 million
from $959.6 million. Inventories dropped
to $362.5 million from $480.9 million. This
change mainly reflected the write down of
both plant spares and consumables; the former
moved to $105.5 million from $153.1 million
while the latter collapsed to $75.3 million from
Receivables and prepayments weakened to
$134.7 million from $190.2 million. The bulk of
this represented lower trade receivables, which
closed at $97.4 million from $135.5 million.
Also, sundry receivables and prepayments
fell to $25.5 million from $46.3 million. Cash
at bank and on hand declined to $186.5 million
from $288.5 million.
Total liabilities decreased to $1.91 billion
from $2.08 billion or by 8.5 per cent.
Total borrowings fell by $197.6 million to
$968.5 million from $1.17 billion. Both the
long-term portion and the current element
declined; the former fell to $839.6 million
from $976.5 million while the latter closed at
$128.9 million from $189.5 million. All of this
debt was at floating interest rates while 75.2
per cent ($728.7 million) was denominated in
US dollars. The weighted effective interest rate
was 9.1 per cent (2015: 9.6 per cent).
Payables and accruals decreased to $472.6
million from $520 million. The largest reduc-
tion was shown under sundry payables and
accruals, which fell to $278.2 million from
Other post-retirement benefits comprised
mainly of retirees' medical benefits obliga-
tions; this component rose to $94.4 million
from $68.6 million.
Total equity advanced to $1.02 billion from
$951 million. Excluding non-controlling inter-
ests of $221,000., shareholders' equity closed
at $1.02 billion from $963.3 million.
Retained earnings improved to $464.5 mil-
lion from $404.3 million. The opening balance
benefitted from the current year's profit of
In addition, other comprehensive income,
which reflected re-measurement gains on
pension plans, contributed another $39.8
million. However, dividends to shareholders
of $15 million and share-based allocations of
$1.4 million restrained the closing figure.
Other reserves declined from negative $243.5
million to negative $254.3 million; this reflected
$10.8 million in additional currency translation
losses for the year.
Following the issue of $4.45 million in share-
based allocations, unallocated ESOP shares de-
clined to negative $20.8 million from negative
Share capital was unchanged at $827.7 mil-
lion and the number of issued shares was sta-
ble at 374,647,704. Net of unallocated ESOP
shares, the book value of each share improved
to $2.74 from December 2015's $2.60.
Income and profit
Total revenue declined by $228.4 million or
10.8 per cent to $1.89 billion from $2.12 bil-
lion. The largest decline of $209.6 million was
recorded in the T&T operations, where reve-
nues fell to $669 million from $878.6 million.
In contrast, Jamaican revenues rose to $771.7
million from $679.2 million.
Direct expenses fell from $1.53 billion to
$1.42 billion. Here, the largest decline was
shown under personnel costs, which closed
at $428.6 million from $479.8 million. Fuel
and electricity costs, particularly in Jamaica,
dropped to $287.8 million from $310.3 million.
Finally, operating expenses closed at $208.8
million from $237.2 million.
These movements resulted in EBITDA of
$464.2 million versus $588.4 million for 2015.
Two one-off charges lowered operating
profit. Manpower restructuring charges con-
sumed $44.5 million (2015: $31.1 million) while
stockholding and restructuring cost contrib-
uted $72 million. With a larger physical asset
base, depreciation expenses rose to $123.2
million from $110.8 million.
These changes saw operating profit close
at $224.4 million (2015: $446.3 million). Re-
duced borrowings saw finance costs contract
to $134.8 million from $164.3 million. In 2015,
there was a one-off gain of $205.8 million on
its debt refinancing exercise. No comparable
uplift was available in 2016.
Consequently, pre-tax profit ended at $89.6
million (2015: $487.5 million).
Taxation declined to $37.2 million from $58.7
million. Therefore, net profit closed at $52.4
million from $428.8 million. After allocating
$15.6 million to non-controlling interests, the
profit attributable to shareholders registered
at $36.9 million from 2015's $405.1 million.
Following the rights issue in 2015, the
weighted average number of shares increased
from 339,675,000 to 2016's 371,030,000. This
net result translated to basic EPS of $0.10 com-
pared with $1.19 for 2015.
The contraction in local sales was largely
responsible for the decline in cement sales.
This fall was mitigated by the improvement
in the Jamaican operations.
Concrete sales reflect entirely the operations
of Readymix Trinidad Ltd, which performance
was adversely affected by the depressed local
economy and restructuring initiatives.
Approximately 90 per cent of the revenues
from it packaging operations is consumed
within the group companies. Higher exter-
nal sales helped restore profits in the current
Share price and
TCL's share price closed at $3.99 on Decem-
ber 31, 2015 and ended 2016 at $4.40, reflecting
a one-year improvement of 10.3 per cent. That
year-end price was somewhat influenced by
the Cemex take-over bid, which was initiated
in December at $4.50.
After introducing a sweetener of TT$5.07 or
US$0.76 on January 9, 2017, Cemex was able
to achieve reasonable, but not total, success.
It is useful for the development of our capi-
tal market that more than 30 per cent of TCL
remains in local hands.
Interestingly, over the three-day period,
January 20 to 24, 2,555,337 shares traded at
prices ranging from $5.35 to $5.50. This sug-
gests that some traders were willing to pay
a premium above the offer price in order to
access US dollars.
Despite a spurt to $4.40 on February 17, most
of this year's trading, from February to early
May, was generally executed in the range of
$4.15 to $4.22.
After a lapse of seven years, TCL paid a divi-
dend of $0.04 in June 2016. At the recent price
of $4.20, the yield is less than one per cent.
That price also reflects a lofty P/E multiple of
42 and price to book ratio of 1.53.
There are several reasons for these high mul-
tiples. One is probably investors' confidence
that the company is now much leaner and will
be able to take full advantage of the numerous
opportunities when the local economy starts
to exhibit growth later this year, into 2018 and
beyond. The Jamaican economy is already on
a growth path. New debt arrangements and
the intended purchase of Readymix are also
As at year-end, the ratio of total debt ($968.5
million) to EBITDA ($464.2 million) was 2.09,
that is, well below the threshold of 2.75; this
suggests that there is no barrier to the pay-
ment of a dividend. Similar to last year, one
might reasonably anticipate that a dividend
recommendation, as part of "other business"
could be on the agenda at next Friday's AGM.
Following Cemex's acquisition of slightly
less than 70 per cent of TCL, the latter was
again able to renegotiate its debt arrangements
on improved terms.
On April 25, 2017, the entire August 2015
credit agreement was refinanced from three
sources. The first part was a six-months facil-
ity for TT$245 million, which was arranged by
NCB Global Finance Ltd and is guaranteed by
Cemex SAB de CV. Next, US$10 million (about
TT$67 million) was taken from its own cash
The third source of funds was a US$100
million revolving master loan agreement from
Cemex España, SA. This loan is for three years
and can be increased up to US$150 million,
which would facilitate the settlement of the
six-months local debt and any additional cap-
The interest rate is six month LIBOR plus
499 basis points, which equates to 6.426 per
cent. This will assure further savings on inter-
est costs. Most of the restrictive covenants un-
der the previous debt are no longer applicable.
The Readymix (RML) acquisition is almost
complete and its success should see additional
efficiencies within the group. In this case, the
bid price is TT$11.00 or US$1.62 per share.
Similar to the Cemex bid for TCL, some trades
were executed above the offer price. There is a
clause in this offer document that gives TCL
the right to acquire, on a compulsory basis, the
remaining RML shares once it has attained the
90 per cent ownership threshold.
TCL's Q1 2017 results reveal lower revenues
and EPS of $0.05. The revenue decline was
concentrated under cement sales. In contrast,
sales of aggregate and concrete rose by 3.30
per cent. Helped by cost containments and re-
structuring in 2016, RML reported a Q1 2017
net profit of $1.15 million and EPS of $0.10.
In next week's article, we will review ANSA
McAl Ltd's 2016 results.
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