Cemex, plans to sell its 20 per cent stake in Trinidad Cement Limited (TCL) in response to difficult times the company has been hit with during the global economic dowturn, including nationalisation of a portion of its assets held in Venezuelan.
TCL notified the Jamaica Stock Exchange (JSE) yesterday that "there have been developments in the financial fortunes of the company’s largest shareholder, CEMEX, as a consequence of the global financial crisis".
"While the board of directors of TCL, has not been officially informed of CEMEX’s plans, information has been received from credible sources that the 20 per cent shareholding in the company currently held by CEMEX will be divested as a part of its debt- restructuring exercise," said a release by TCL.
At US$80 a share, the price its closed at when last traded on the JSE, the market value of TCL would be just under US$20bn, placing Cemex’s stake at approximately US$4bn.
Cemex, through Scancem International (St Lucia) Ltd, also has a direct share in Caribbean Cement Company Limited (CCCL), which is 66 per cent owned by TCL. Carib Cement traded at US$4.06 on Tuesday placing its market value at US$3.5bn and Cemex’s five per cent stake at approximately US$171m.
CCCL’s parent did not mention the possibility of Cemex selling its stake in the Jamaican operation.
For Cemex, 2008 has been categorised by a series of challenges stemming from global economic downturn, which has translated into sharp contraction in sales volumes in the US, Spain and the UK; a significant increase in the cost of debt and difficulty in refinancing; high energy and transportation costs; and US$700m losses on derivatives in the third quarter of 2008.
Moreover, the Mexican company had to give up its assets in Venezuela, when the Hugo Chavez-led government decided to nationalise the operations. Along with a negative tax ruling back home in Mexico, the firm also saw a significant decline in its stock price - American Depository Receipts (ADRs) listed on the NYSE declined from a 52 week high of US$32.61 to low of US$4.01 as well as downgrades from rating agencies.
"Cemex’s response to these difficulties has been to initiate cost cutting measures, to seek debt remeasure, and to dispose of selected assets," said TCL in its statement to the JSE. "The Strategic Alliance Agreement between TCL and CEMEX which was implemented in 1994 expired in July 2004 and was not renewed."
Cemex, however, still holds the 20 per cent stake in TCL. TCL and Carib Cement have also felt the impact of a challenging economic climate in 2008. Both saw declines in net profit for the nine months to September 30, 2008 compared to the corresponding period last year. TCL’s net profit fell from TT$145m to TT$129m, while Carib Cement’s nine-month net profit fell from US$365m in 2007 to US$215m for the three quarters ending September 30, 2008.
"The sale of Cemex’s TCL shares will not in any way affect the TCL’s Group’s operations or its future prospects. TCL’s board is nevertheless, mindful of its responsibility to all of its stakeholders and will seek to ensure an orderly disposal of CEMEX`s interest in a manner which does not result in a loss in shareholder value. In this regard, steps have been taken to engage CEMEX and or their representative agents in discussions on the matter," added the Trinidadian-based firm.