Aug 2013 Financial News

Carib Cement lands Venezuela supply deal

Aug 29, 2013

CARIBBEAN Cement Company (CCC) has finally landed a deal to supply Venezuela with 200,000 tonnes of clinker over the next 12 months.

The verbal agreement was reached between the governments of Jamaica and the South American country, according to just released statements from CCC parent company Trinidad Cement Limited (TCL).

It forms part of reverse trade flows afforded under the PetroCaribe concessionary oil agreement.
Carib started negotiations years ago to enter Venezuela but it was stalled for various reasons including the ill health and eventual death of president Hugo Chavez.

The dollar value of the order was not immediately clear as Carib's general manager Anthony Haynes was out of office when contacted by the Observer on Monday.

TCL, however, described the order as "small" but hopes it will translate into larger transactions for Carib, which produces some 800,000 tonnes of cement annually.

Contextually, Haynes in 2012 said that the Venezuela market offered vast potential to grow CCC's annual sales by 50 per cent.

Yearly revenue hit $9 billion in 2012 and export sales accounted for some 20 per cent of that, or just over US$16 million, according to graphical descriptions in its annual report.

The cement manufacturer's main export markets include Haiti, Guyana, Belize, St Kitts, Aruba, Dominican Republic, Cayman, Colombia, St Croix, Cuba and Suriname.

The deal represents the second windfall for the local company, which recently secured an effective debt write-off of some US$38 million from its parent TCL, allowing it to post its first profit in years.

Carib earned $359.5 million in net profit for its second quarter ending June 30 compared with an over half-a-billion dollar loss a year earlier.

As a consequence of the write-off, the cement manufacturer equity stands at $4.5 billion compared with negative $794 million a year earlier.

The cashflow potential of export sales became an issue of disagreement between CCC and its auditors in the 2011 annual report.

Specifically, CCC recorded a $210 million impairment loss in 2011 due to sluggish local sales in a weak economy. However, its auditors Ernst & Young indicated that would have grown by an additional $764 million if CCC excluded future export sales in its cashflow projections.

"These impairment losses were determined based on management's projections, which assumed that the group will generate significant revenue from exports to a certain market under a proposed agreement currently under active negotiation, for which the terms and conditions have not been agreed as at the date of this audit report," the auditors stated in the 2011 annual report. "We have not obtained sufficient appropriate audit evidence to support the inclusion of the cash-flows from these exports."

Concurrently, TCL made a TT$56.2 million profit for its June second quarter 2013, which reversed the TT$97- million loss a year earlier. The company blamed rising costs for its deepening troubles.


Source:
BY STEVEN JACKSON Business writer jacksons@jamaicaobserver.com
Jamaica Observer
Wednesday August 28, 2013

http://www.jamaicaobserver.com/business/Carib-Cement-lands-Venezuela-supply-deal_14952013#ixzz2dOFmq2gX