TCL to pay TT$0.02 dividend

Although the company did not record a substantial profit in 2016 as it had in 2015 following a one-time gain from a re-financing arrangement, TCL chairman, Wilfred Espinet, said the board decided to make a dividend payment as a demonstration of their commitment to those shareholders who have been holding on to their shares “for an extremely long time”.

Espinet announced the dividend payment during TCL’s 2017 annual general meeting (AGM), held on May 26 at Hilton Trinidad and Conference Centre, Port-of-Spain.

This was in response to one shareholder asking if the company had “decided on some sort of dividend policy, given that you paid a (TT $0.04) dividend last year?” Espinet, seated at the head table, told the shareholder this was one of the matters discussed by the directors earlier that day.

“How do we continue to pay a dividend in the given environment? Is that prudent? Because you have had a reduction in the profitability of the company and the headwinds that we’re facing now, especially in Trinidad and Tobago (of) competition from Turkish cement, declining expenditure by the State and limited activity in the construction sector.” Espinet continued, “But there is also the argument that we see shareholders who have been holding on to these shares for an extremely long time and the directors agreed that they would pay a dividend of TT $0.02 per share, which we think is more of a demonstration of our commitment to the shareholders than it is, you know, a real major return (to profit). It demonstrates the directors’ commitment,” Espinet stated, to significant applause from many of the shareholders present.

Dividend payments were suspended back in 2008. Following the AGM in 2011, one shareholder told Newsday, “Even when TCL was making a profit in 2008 and 2009, we didn’t get dividends because the board said it needed the money for cash flow and for capital to construct a new kiln at CCCL in Jamaica.”Eight months later, in late March 2012, a major strike by TCL workers had entered its fifth week.

According to one article published on March 26, 2012, while this was going on, it had been 15 months since TCL’s bankers had received either interest or principal on its TT $1.8 billion debt.

Speaking with Business Day following the 2017 AGM last Friday, Espinet recalled that TCL “started off a dividend last year of TT $0.04 (which) was reflective of the fact that we had a substantial profit that came about with a one-time gain from a refinancing arrangement, where we got a gain of nearly TT $200 million.” “That’s no longer available, so that our profitability; net profit, in 2016 is considerably less than it was in 2015 because of the one-time gain. Therefore, we had to consider whether… it was prudent to make a dividend (payment) at all, given the headwinds I spoke about earlier. We thought, however, that relationships with our shareholders dictated that they, as one of the main stakeholders, would be treated equitably in the whole process of things. So that’s why we, as a board of directors, decided to pay a dividend of TT $0.02 by the middle of July.

That notice will be published in the newspaper within the next few days.” The reported impending name change from TCL to that of its majority shareholder; Cemex, was raised by another shareholder at the 2017 AGM.

The re-branding question came from shareholder, Peter Permell, who said he recalled reading about it “somewhere”.

While he gave no specifics, there was a March 2017 article; published in another local newspaper, which reported on TCL’s alleged intent to change its name to Cemex.

“Is (re-branding) a possibility? If so, I suppose there may be some advantages, in terms of brand equity, going that particular route as opposed to staying with TCL. What is the likelihood of that happening, in terms of a time frame?” Permell asked.

Espinet and TCL’s managing director, Jos? Luis Seijo Gonz?lez, both denied such a plan was in the works.

The chairman spoke first, telling Permell, “From my perspective, certainly there’s no intent to change the brand, anywhere on the table, as we speak today (May 26).” “More importantly, we’ve been spending on full-page ads in all of the newspapers. Not only here (TT) but also in Barbados, the Lesser Antilles and the Windward Islands, where we have been attacked with (imported) Turkish cement.” Espinet reminded that in all these ads, which warned against using cement more than 120 days old and which encouraged consumers to “keep it fresh” and to “keep it local”, TCL highlighted its brand of products.

“So, it would be, to me, not a very sensible thing to spend that kind of money (on ads). So, if we were doing that (re-branding), it would be very unlikely.” Echoing Espinet’s stance on the matter, Seijo told shareholders, “It would be wrong. It would be a big mistake, if we change our commercial brands. We have a very high brand equity.” The company does however make use of the Cemex name when dealing with some suppliers.

“Where Cemex has a global agreement...we try to leverage that into a bigger purchasing power. That’s why we’re trying to combine both things (TCL and Cemex brand usage).

Cement equipment is mainly produced in the US and Europe, so that’s where we take advantage of it (Cemex name),” Seijo told Business Day.

CEMEX S.A.B. de C.V. (Cemex) is a Mexican multinational building materials company headquartered in San Pedro, near Monterrey, Mexico.

As stated in Espinet’s Group Chairman’s Review in TCL’s Annual Report 2016, “Cemex now owns 69.83 percent of TCL.” He noted that this is subject to final approval by the Trinidad and Tobago Stock Exchange (TTSE).

Espinet stated that on January 9, through its wholly-owned direct subsidiary, Sierra Trading, “Cemex revised its offer price” from TT $4.50 per ordinary share to TT $5.07 per share “with the option for shareholders to be paid in US dollars at US $0.76 per share.” “Despite another recommendation to reject the offer by a special committee of the TCL board, again based on an Ernst & Young Fairness Opinion, the revised offer received overwhelming response, taking the Cemex shareholding in TCL from 39.5 percent to 69.83 percent, just short of its initial target of 74.9 percent,” Espinet stated in the Annual Report 2016. Among the other matters dealt with during the AGM was a change in auditors and an amendment to by-law #1, paragraph 4.1.

Per the request of Cemex, shareholders were asked to vote on the motion to replace Ernst and Young with KPMG as TCL’s independent auditor.

Espinet said Cemex had requested this because it uses the services of KPMG in the rest of its operations.

The vote went in Cemex’s favour, which means going forward, KPMG will be the firm writing up TCL’s Independent Auditor’s Report for its annual reports. Regarding by-law #1, paragraph 4.1, TCL secretary, Kathryna Baptiste, said unless amended, this bylaw would require that, “The majority of directors must be persons resident in the West Indies.” Baptiste told shareholders, “The TCL board has considered that the new majority shareholder should have available the option of appointing a majority of directors to the Board, if they so choose. However, based on the geographical profile of Sierra Trading...it is unlikely that the directors nominated by Sierra Trading would be resident in the West Indies.

Accordingly, the said sentence in paragraph 4.1 is unduly restrictive and no longer relevant in light of the current majority shareholder company.” After Espinet answering the questions of one shareholder about the proposed amendment, the motion was put to a vote and carried.