May 2007 Financial News

TCL Releases First Quarter Results

May 08, 2007

Results for the First Quarter Ended March 31, 2007

For the First Quarter Ended March 31, 2007, Trinidad Cement Limited (TCL) reported Earnings Per Share (EPS) of 20 cents. This was up on the corresponding quarter of FY06 by a significant 150.00 per cent or 12 cents. While this compares favorably, it should be noted that Q106 was negatively impacted by cement quality issues at TCL’s Jamaican subsidiary, Caribbean Cement Company Limited (CCCL). Additionally, quarter on quarter, the EPS was down by 9.09 per cent from 22 cents (Q406) to 20 cents (Q107).

Revenue for the period stood at $479.61 million, up by a significant 19.33 per cent or $77.68 million on the comparable quarter for FY06. The Directors have attributed this growth in Revenue to continued strong regional demand and price adjustments to mitigate energy cost increases. Operating Profit for the quarter stood at $93.16 million, up by a considerable 81.00 per cent or $41.69 million on the comparable quarter. Additionally, there were cement claims of $15.49 million, arising from the quality issues at CCCL in Q106 which did not recur in Q107. Thus, Operating Profit after cement claims was actually up 158.90 per cent or $57.18 million on the corresponding period in the last financial year.

Net Finance Costs amounted to $25.50 million, down by 15.45 per cent or $4.66 million on the same figure for Q106. However, when compared to the last quarter (Q406), Net Finance Costs increased by 27.35 per cent or $5.48 million from $20.03 million. The Group’s Profit Before Taxation ended the three month period at $67.66 million, up an outstanding $61.84 million from $5.82 million for Q106.

The Effective Tax Rate for the period was 17.19 per cent compared to a Tax Credit of $8.85 million for the same quarter in 2006. Thus, TCL’s Profit After Taxation stood at $56.03 million, up by a significant 281.86 per cent or $41.36 million on the corresponding figure for Q106.

The Directors have stated that TCL’s profits were positively impacted by the successful launch of TCL Premium cement in Trinidad and the significantly improved results from CCCL and Readymix (West Indies) Limited over their first quarter performances for 2006. However, the cement plant in Barbados, Arawak Cement Company Limited, was negatively impacted by increased fuel costs, which the Group plans to address by the commissioning of a Petcoke fuel system in the third quarter of 2007.

Total Net Assets at the end of the quarter were $1.33 billion, an increase of 4.81 per cent over December 31, 2006.

The Group remains optimistic about its prospects for 2007, as demand is expected to remain strong in both the Caribbean domestic and export markets. The expansion and modernization programme at CCCL in Jamaica continues on schedule, with commissioning of the new kiln expected in early 2008.

TCL last closed at a price of $7.60 on the local market. In light of the recent results, we are revising our forecasted EPS upwards to $0.90. At this forecast and the current price, TCL is trading at an attractive multiple of 8.44 times. Additionally, using a multiple of 11 times and the forecasted EPS of $0.90, this share has an expected return of approximately 30 per cent at the current market price or a target price of $9.90. Thus, based on this analysis we continue to recommend TCL as a BUY.

Gia Singh
WISE Equity Research Team