TCL profits slide, Republic and GHL on a roll

Trinidad Cement Limited (TCL) produced disappointing results for the nine months ended September 30, 2003.  While revenue and operating profit increased marginally by 2.5 and 2.2 percent respectively, profit after tax and profit attributable to shareholders declined by 17.3 and 10.1 percent respectively.

Revenue for the nine months to September 30, 2003 was $871.9 million compared to $850.6 million in the same period in 2002.  During the same comparative periods, operating profit rose slightly to $195.2 million in 2003 from the $190.9 million recorded in 2002.  Profit after tax in 2003 was $97.7 million, a decrease of 20.5 million from the previous 2002 amount of $118.2 million.

Profit attributable to shareholders declined to $86.7 million in the nine months ended September 30, 2003; in the same period in 2002 this figure was $96.4 million. There were two significant non-recurring items that directly affected TCL’s performance during the third quarter.  In 2002, an extraordinary item of $9.8 million was paid to an independent valuator relating to the failed bid by Cemex. More significantly, a deferred tax credit of 23.8 million was written off against the provision for taxation in 2002. This reduced the provision for taxation for the nine-month period in 2002 to $5.7 million.  As the corporation tax rate was not further reduced in 2003, this tax credit did not recur, and the provision for taxation therefore in the 2003 period was $27.7 million.  This was the cause of the decline in after-tax profit. 

The Jamaican operations continued to be adversely affected by the decline in the Jamaican dollar against its US counterpart.  Even though net income for Caribbean Cement was higher for the 2003 period compared to the corresponding 2002 period in Jamaican dollars, translated into US dollars, CCL’s net profit declined 19.0 percent to US$4.7 million in 2003 from US$5.8 million in the previous 2002 nine month period. In May of 2003 CCL implemented a price increase of 21.0 percent in response to increased cost of operations and a depreciating Jamaican dollar.  This situation resulted in a negative impact on working capital due to a build up of clinker and cement inventories in Jamaica.  The Jamaican government has proposed to institute a Bound rate of 50.0 percent on cement imports which would greatly assist CCL in increasing sales in Jamaica.

Earnings per share in the nine-month period in 2003 reached 36 cents, compared to 40 cents recorded in the corresponding 2002 period.  We must express our disappointment, not only in the results, but also in the lack of guidance about the fourth quarter.  When the first quarter results were released, the Chairman projected earnings per share to be higher than in 2002.  The third quarter statement is completely silent.  This lack of consistency produces a loss of confidence by investors in the pronouncements made by the company. In the circumstances, we are reducing our forecast EPS for 2003 to 50 cents per share.