Caribbean Cement Company Limited (CCCL) is about to expand its supply markets into South America, virgin territory for the Jamaican company, which has been building out its export operations to make up for business lost to imports in its home market.
General Manager Anthony Haynes said his company expects to close a new deal with a South American company in three months.
"The new contract will represent significant business for us but I can't speak to volume," Haynes told Wednesday Business on Tuesday.
"South America is where we are seeing more growth so we have been focusing in that area," he said.
Explaining why CCCL is taking on markets in the region, instead of parent Trinidad Cement Limited (TCL), Haynes said the Jamaican operation was motivated to grow to pay back the investment in its expansion, and was inclined to look overseas because of the projected 30 per cent contraction in the domestic market last year.
"So as the demand and supply dynamics change we turn to more export markets," he said.
"... The logistics and second phase of our expansion is to look to these markets in South and Central America which are seeing much more growth than the Caribbean."
pushing market growth
Beyond the immediate contract being finalised, Caribbean Cement will be going after market share in South American countries such as Venezuela and Colombia, as well as Costa Rica and Panama in Central America.
"We are now pushing market growth in the Spanish-speaking countries," said Haynes.
Caribbean Cement increased its productive capacity from one million to 1.8 million tonnes in 2009, but currently sells less than 750,000 tonnes of cement per year.
Sales volumes last year have underperformed because of falling domestic demand; and notwithstanding export growth linked to new markets in Haiti and Dominican Republic. Exports of cement rose by 73,000 tonnes in the January to September period, but domestic sales fell by 86,000 tonnes, as did clinker reports, which fell by 40,000 tonnes. Revenue, as a result, fell from J$6.9 billion in the nine-month period of 2009 to J$6.1 billion last year.
Caribbean Cement also reported a J$1.55 billion loss on operation in the 2010 period.
Trinidad Cement, which bears the brunt of the debt acquired to expand the Caribbean Cement plant, is now touting the new supply contract as significant enough to enhance the Jamaican company's business and improve the group's near-term prospects.
The group, at last report ending September 2010, was TT$2.5 billion in debt.
Under the plan being drafted, TCL hopes to defer principal repayments on long-term loans due 2011 to 2013, and extend the maturity of short-term debt.
The debt-restructuring plan is now being crafted, based on independent adviser FTI Consulting Canada's report to a steering committee of TCL lenders — who together hold a combined 75 per cent of TCL's total debt — on TCL's financial status and future business prospects.
TCL is drafting its own debt-restructuring proposal, which it will also present for consideration by lenders.
The cement group has delayed publication of its yearend results until April 30 and potentially to May 31, as well as those of listed subsidiary companies Caribbean Cement and Readymix, "to provide the maximum possible assurance" to external auditors about the debt plan.
Publishing the financial results before the debt programme is resolved would, TCL said, leave shareholders with a distorted view of the group's "performance and state of affairs".
"In relation to its Jamaican subsidiary, Caribbean Cement Company Limited, negotiations are at an advanced stage for the implementation of a major supply contract which will significantly enhance the company's and, by extension, the group's prospects in the near term," TCL said in a market filing.
"The finalisation of this supply contract has relevance to the group's 2010 audited financial statements."
The group made a loss of about TT$30 million in the third quarter, but reported positive earnings of TT$144 million over the nine-month period on depressed revenue of TT$1.2 billion (9m 2009: TT$1.37b).
Despite the parent's touting of the new supply deal, Caribbean Cement declined comment on the terms being negotiated and just how lucrative the contract was likely to be.
"I am not in a position to share any more information," said Haynes.
more efficient
Caribbean Cement's two largest export markets are said to be Guyana and Haiti, followed by Dominican Republic.
Haynes said, inside the Caribbean, potential growth markets include Guyana and Suriname, but that these are countries better served by TCL because of proximity.
"... While CCCL, instead of shipping all the way to Guyana, would ship to these markets which are closer in terms of distance, which would be more efficient," he said, referring to South and Central America.
"Over time, I believe there will be a natural rationalisation of the markets," he told Wednesday Business.
Haynes suggested that the new contract being pursued is a demonstration of Caribbean Cement's more aggressive stance on growing revenues.
