A truckload of bagged cement leaves the Caribbean Cement Company's Rockfort Plant in Kingston in May 2006. - FileCaribbean Cement Company paid out just under $305 million to settle faulty cement claims in 2006 as restitution for 'non-conforming' product let loose on the market.
It anticipates the claims willeventually reach $600 million.
The payments, while not totally eroding the cement maker's profits for its financial year ending December 31, 2006, did strip away 54 per cent of the net earnings that the Rockfort, Kingston-based operation recorded in the year prior.
From after-tax profits of $168.9 million in 2005 culled from revenues of $6 billion, Carib Cement's profit in the current year, though boosted by $18 million of tax credits, was a restrained $77 million, despite improved sales of $6.7 billion from 843,295 tonnes of cement.
The year before, the cement maker sold 856,162 tonnes into the market.
"The circumstances that led to this problem have been thoroughly investigated and corrective actions have been taken to avoid a repetition," said CCCL in a statement accompanying its year-end results filed with the Jamaica Stock Exchange on the weekend.
"Since this incident, cement dispatched has consistently exceeded all international and local standards."
CCCL's parent, Trinidad Cement Limited (TCL), has also announced that all its subsidiaries, including Rockfort, have attained ISO 14001: 2004 standard for their environmental management practices.
Testing
Jamaica's Bureau of Standards also does batch-by-batch testing of cement as it rolls off the assembly line, the agency said Tuesday, noting that the tests are now done daily.
Prior to the cement crisis, it only tested on an ad hoc basis.
Carib Cement has acknowledged that generating cash for its daily operations was a challenge during the year - at the end of the review period it had net working capital of $50 million and current liabilities of $2.08 billion ? but said financial support from TCL, helped keep the plant expansion project going.
Carib Cement's balance sheet was off one per cent, resulting from a $782 million increase in its combined long and short-term liabilities to $3.45 billion.
In fact, the $6.2 billion company measured by its assets, will not be paying a dividend this year, saying it would be channelling all internally-generated funds to the project.
TCL, which reported flat year-end earnings of TT$151.8 million (2005: TT$153.8 million) based on "strong" performances of its subsidiaries, excluding CCCL, will offer its shareholders 6 cents return per share.
Carib Cement's fall-off in volume sales would have been due to the temporary lockdown to correct system faults, which the company says has now been fixed, but Carib Cement would also have faced the return of competition from imports that the Government allowed to cover market shortfalls and crank up construction projects. The monopoly cement producer, in a filing of its earnings report to the Jamaica Stock Exchange on the weekend, dismissed imports as a serious threat, saying the company continues to dominate the market, and promised to better its performance in the year ahead.
"A growing domestic market and the disruptions of our operations have resulted in the return of significant quantities of imported cement manufactured in China and Thailand," said the company in its statement to shareholders. "In this environment, the company has, however, been able to hold the dominant market share."
During the review year, Carib Cement - which has also upgraded its solid fuel firing system, leading to improved processing efficiency - not only expects to "arrest the declines of the previous two years", but also improve on its performance in 2007.
The US$120 million plant expansion and modernisation programme began with construction on Kiln 5 and Mill 5.
"Construction of the kiln line began in April 2006," said the company statement, co-signed by chairman Brian Young and TCL group CEO Dr. Rollin Bertrand.?∑
"The foundation works are substantially complete and the erection of the plant and machinery are in progress."
The plant is to be commissioned in 2008.
lavern.clarke@gleanerjm.com
Trinidad Cement Limited| Revenue | TT$1.7 billion |
| Profit | TT$151.8 million |
| Net Profit Margin | 8.9% |
Share Price | | J$76.00 |
| Market Cap | | J$19 billion |
| PE Ratio | | 126.7 |
| Total Assets | | TT$3.2 billion |
Return on Assets | 4.7% |
Current Ratio | | 1.50 |
| | (T$1=J$10.84) |
Caribbean Cement Company Revenue | | $6.73 billion |
| Profit | | $77.2 million |
Net Profit Margin | 11.5% |
Share Price | | $8.40 |
| Market Cap | | $7.6 billion |
| PE Ratio | | 92.3 |
| Total Assets | | $6.2 billion |
Return on Assets | 12.45% |
Current Ratio | | 1.02
|
